National Insurance Contributions Act 2006

National Insurance Contributions Act 2006

2006 CHAPTER 10

Commentary on Sections

Power to make regulations to create a retrospective liability for National Insurance contributions

Section 1 – Power to make provision in consequence of retrospective tax legislation: Great Britain

16. Subsection (1) provides for new sections 4B and 4C to be inserted after section 4A of the CBA 1992.

17. Subsection (1) provides for a new power at New Section 4B – Earnings: power to make retrospective provision in consequence of retrospective tax legislation. Section 4B enables the existing regulation making powers mentioned in subsection (3) of that section to be exercised with retrospective effect. The power can only be exercised where there have been retrospective tax enactments relating to those Parts of ITEPA 2003 dealing with employment income. The Treasury must also consider it appropriate to make the regulations for the purpose of reflecting in whole or in part the provision made by the retrospective tax provision. Subsection (2) provides that it also must appear to the Treasury to be expedient in consequence of the retrospective tax provision for the regulations to have retrospective effect.

18. Subsection (3) specifies the relevant NICs regulation making powers, which are to be extended to allow NICs legislation to be made that can take effect back to 2 December 2004. They are the powers in sections 3, 4(6) and 4A of the CBA 1992.

19. Subsection (4) provides for retrospective tax provisions which were made before the Act received Royal Assent (30 March 2006) to also trigger the use of the power in subsection (1).

20. Subsection (5) limits how far back the NICs changes can be backdated. It provides that the new regulation-making powers cannot take effect earlier than 2 December 2004, which was the date of the Paymaster General's announcement on tax and NICs avoidance.

21. Subsection (6) provides that regulations made retrospectively through extension of the powers at sections 3, 4(6) and 4A of the CBA 1992 will be able to affect payments of earnings made to or for the benefit of employees prior to the date when the regulations are made.

22. Subsection (7) provides for definitions of “relevant contributions legislation”, “the relevant time” and “the revised earnings ” in section 4B.

23. Subsections (8), (9) and (10) provide that, where regulations that are made by virtue of subsection (2) have the effect described in subsection (6), the contributions legislation is to be applied to the revised earnings figure and liability is to be re-determined by reference to the revised earnings or amount of those earnings as if the revised position applied at the time.

24. Subsection (11) provides that subsections (7) to (10), which provide for liability to be re-determined, are to be subject to any exceptions which are specifically provided.

25. Subsection (12) makes it clear that the new power in section 4B(2) does not affect any other power in the CBA 1992 or other enactments.

26. Subsection (13) provides for the meaning of “contributions legislation” in section 4B.

27. Subsection (1) of new section 4C – Power to make provision in consequence of provision made by or by virtue of section 4B(2) etc – provides for the Treasury to make regulations which it considers expedient for any of the purposes mentioned in subsection (2) in consequence of any provision made by or by virtue of the powers in section 4B(2). The regulations require the concurrence of the Secretary of State. Subsection (2) identifies the purposes for which it may be necessary to make regulations where earnings are re-determined. Subsection (2)(f) also allows for additional purposes to be prescribed in future by the Treasury with the concurrence of the Secretary of State.

28. Subsection (3)(a) provides for the regulations to make changes to primary and secondary legislation, including provisions which came into force on or after the day this Act received Royal Assent (30 March 2006).

29. Subsection (3)(b) provides for the regulations to apply primary and secondary legislation with or without modifications.

30. Subsection (4) provides that any regulations under section 4C(1) cannot have effect earlier than 2 December 2004, which was the date of the Paymaster General's announcement on tax and NICs avoidance.

31. Subsection (5) gives a non-exclusive list of examples of matters which may be affected by regulations under section 4C(1) having retrospective effect.

32. Subsection (6) provides that, where matters specified under subsection (5) have already been determined, regulations can be made under section 4C(1) that will allow for re-determination of these matters.

33. Subsection (7) ensures that where “the operative provisions” could remove past or future entitlement to contributory benefit, contribution-based jobseeker's allowance or statutory payments or reduce the amount of such payments those provisions are to be read with such modifications as are necessary to ensure that they do not have that effect.

34. Subsection (8) defines “the operative provisions” and “entitlement” for the purposes of subsection (7).

35. Subsection (9) ensures that other powers conferred by the CBA 1992 or any other enactment are not affected by this new power.

36. Subsection (10) provides that further amendments and revocations can be made to provisions modified by regulations under section 4C(1), and these do not need to be made under the section 4C(1) powers.

37. Subsection (11) provides the meaning of “the commencement day” “enactment”, and "statutory payment" in section 4C.

38. Subsection (2) of the section amends section 176 of the CBA 1992

39. Subsection (2)(a) inserts references to section 4B(2) and 4C into section 176(1)(a). This provides that if regulations are made using the powers under sections 4B(2) and 4C a draft of the instrument has to be laid before Parliament and approved by a resolution from both the House of Commons and the House of Lords, before the instrument is made.

40. Subsection (2)(b) inserts section 176(2A) and (2B) which provide that regulations made by virtue of section 4B(2) should be laid before Parliament within 12 months of the corresponding tax provision being passed. Where the corresponding tax provision was passed or made before Royal Assent of the Act, the regulations should be laid within 12 months of that Act being passed. Subsection (2)(b) also inserts section 176(2C), which defines some of the terms used.