National Insurance Contributions Bill (HL Bill 65)

Employment allowance

1 Employment allowance for national insurance contributions

(1) A person qualifies for an employment allowance for a tax year if, in the tax
year—

(a) 5the person is the secondary contributor in relation to payments of
earnings to, or for the benefit of, one or more employed earners, and

(b) in consequence, the person incurs liabilities to pay secondary Class 1
contributions,

under SSCBA 1992 or SSCB(NI)A 1992 (or both).

(2) 10The person’s employment allowance for the tax year is—

(a) £2,000, or

(b) if less, an amount equal to the total amount of the liabilities mentioned
in subsection (1)(b) which are not excluded liabilities.

(3) Subsection (1) is subject to sections 2 and 3 (and Schedule 1).

(4) 15Sections 2 and 3 (and Schedule 1) set out cases in which a person cannot qualify
for an employment allowance for a tax year.

(5) Section 2 also sets out the cases in which liabilities to pay secondary Class 1
contributions are “excluded liabilities”.

(6) Section 4 provides for a person who qualifies for an employment allowance for
20a tax year to receive it by way of deductions or a repayment under that section.

(7) In this Act references to “the employment allowance provisions” are to this
section, sections 2 to 4 and Schedule 1.

(8) In the employment allowance provisions and section 5 terms used which are
also used in Part 1 of SSCBA 1992 or SSCB(NI)A 1992 have the same meaning
as they have in that Part.

2 Exceptions

5Public authorities

(1) A person cannot qualify for an employment allowance for a tax year if, at any
time in the tax year, the person is a public authority which is not a charity.

(2) In subsection (1)—

• “charity” has the same meaning as in the Small Charitable Donations Act
  102012 (see section 18(1) of that Act), and

• “public authority” includes any person whose activities involve, wholly
  or mainly, the performance of functions (whether or not in the United
  Kingdom) which are of a public nature.

Personal, family or household affairs

(3) 15Liabilities to pay secondary Class 1 contributions incurred by a person (“P”) are
“excluded liabilities” if they are incurred in respect of an employed earner who
is employed (wholly or partly) for purposes connected with P’s personal,
family or household affairs.

Workers supplied by service companies etc

(4) 20Liabilities to pay secondary Class 1 contributions are “excluded liabilities” if
they are incurred by virtue of regulations made under section 4A of SSCBA
1992 or SSCB(NI)A 1992 (earnings of workers supplied by service companies
etc).

Transfers of businesses

(5) 25Subsection (6) applies if a business, or a part of a business, is transferred to a
person (“P”) in a tax year.

(6) Liabilities to pay secondary Class 1 contributions incurred by P in the tax year
are “excluded liabilities” if they are incurred in respect of an employed earner
who is employed (wholly or partly) for purposes connected with the
30transferred business or part.

(7) For the purposes of subsection (5) a business, or a part of a business, is
transferred to P in a tax year if, in the tax year—

(a) another person (“Q”) is carrying on the business or part, and

(b) in consequence of arrangements involving P and Q, P begins to carry
35on the business or part on or following Q ceasing to do so.

(8) In subsection (7)(b) “arrangements” includes any agreement, understanding,
scheme, transaction or series of transactions (whether or not legally
enforceable).

(9) In subsections (5) to (7) “business” includes—

(a) 40anything which is a trade, profession or vocation for the purposes of the
Income Tax Acts or the Corporation Tax Acts;

(b) a property business (as defined in section 263(6) of the Income Tax
(Trading and Other Income) Act 2005);

(c) any charitable or not-for-profit undertaking or any similar
undertaking;

(d) functions of a public nature.

Anti-avoidance

(10) 5A person cannot qualify for an employment allowance for a tax year if, apart
from this subsection, the person would qualify in consequence of avoidance
arrangements.

(11) In a case not covered by subsection (10), liabilities to pay secondary Class 1
contributions incurred by a person (“P”) in a tax year are “excluded liabilities”
10if they are incurred by P, or are incurred by P in that tax year (as opposed to
another tax year), in consequence of avoidance arrangements.

(12) In subsections (10) and (11) “avoidance arrangements” means arrangements
the main purpose, or one of the main purposes, of which is to secure that a
person benefits, or benefits further, from the application of the employment
15allowance provisions.

(13) In subsection (12) “arrangements” includes any agreement, understanding,
scheme, transaction or series of transactions (whether or not legally
enforceable).

3 Connected persons

(1) 20This section applies if—

(a) at the beginning of a tax year, two or more companies which are not
charities are connected with one another, and

(b) apart from this section, two or more of those companies would qualify
for an employment allowance for the tax year.

(2) 25This section also applies if—

(a) at the beginning of a tax year, two or more charities are connected with
one another, and

(b) apart from this section, two or more of those charities would qualify for
an employment allowance for the tax year.

(3) 30Only one of the companies or charities mentioned in subsection (1)(b) or (2)(b)
(as the case may be) can qualify for an employment allowance for the tax year.

(4) It is up to the companies or charities so mentioned to decide which of them that
will be.

(5) Part 1 of Schedule 1 sets out the rules for determining if two or more companies
35are “connected” with one another for the purposes of subsection (1).

(6) Part 2 of Schedule 1 sets out the rules for determining if two or more charities
are “connected” with one another for the purposes of subsection (2).

(7) In this section and Schedule 1—

• “charity” has the same meaning as in the Small Charitable Donations Act
  402012 (see section 18(1) of that Act), subject to paragraph 8(5) of Schedule
  1, and

• “company” has the meaning given by section 1121(1) of the Corporation
  Tax Act 2010 (meaning of “company”) and includes a limited liability
  partnership.

4 How does a person who qualifies for an employment allowance receive it?

(1) Her Majesty’s Revenue and Customs (“HMRC”) must (from time to time)
make such arrangements as HMRC consider appropriate for persons who
qualify for an employment allowance for a tax year to receive it by making
5deductions from qualifying payments which they are required to make under
regulations made under paragraph 6 of Schedule 1 to SSCBA 1992 or
SSCB(NI)A 1992 (regulations combining collection of contributions with tax).

(2) In this section “qualifying payment”, in relation to a person who qualifies for
an employment allowance for a tax year, means a payment in respect of any of
10the person’s liabilities mentioned in section 1(1)(b) which are not excluded
liabilities (see section 2).

(3) If under HMRC’s arrangements a person is permitted to make a deduction
from a qualifying payment, the person must make the deduction and must
make it before any other deductions which the person is permitted to make
15from the payment under any other legislation.

(4) HMRC’s arrangements may (in particular)—

(a) require deductions to be made at the earliest opportunity in a tax year;

(b) provide that deductions may not be made in specified cases;

(c) place limits on the amounts of deductions;

(d) 20provide that a person is not permitted to make deductions unless the
person has first given notice to HMRC in such form and manner, and
containing such information, as HMRC may require.

(5) Subsections (6) to (8) apply in relation to a person who qualifies for an
employment allowance for a tax year if the person has not deducted under this
25section the full amount of the employment allowance by the end of the month
of April in which the tax year ends.

(6) The person may apply to HMRC for a repayment, up to the outstanding
amount of the employment allowance, of qualifying payments made by the
person; and HMRC must make the repayment.

(7) 30The person’s application must be made in such form and manner, and contain
such information, as HMRC may require.

(8) The person’s application must be made before the end of the 4th tax year after
the tax year mentioned in subsection (5).

(9) In the application of section 102 of the Finance Act 2009 (repayment interest on
35sums to be paid by HMRC) in relation to a repayment under this section, the
repayment interest start date is the date on which HMRC receive the person’s
application.

(10) A repayment under this section, and any interest in respect of it under section
102 of the Finance Act 2009, are to be paid out of the National Insurance Fund
40or the Northern Ireland National Insurance Fund.

(11) A person who qualifies for an employment allowance for a tax year may not
receive it otherwise than by way of deductions or a repayment under this
section.

5 Power to amend the employment allowance provisions

(1) The Treasury may by regulations amend the employment allowance
provisions—

(a) so as to increase or decrease a person’s employment allowance for a tax
5year, or

(b) so as to add to, reduce or modify the cases in which a person cannot
qualify for an employment allowance for a tax year or in which
liabilities to pay secondary Class 1 contributions are “excluded
liabilities”.

(2) 10Section 175(3) to (5) of SSCBA 1992 (various supplementary powers) applies to
the power to make regulations conferred by this section.

(3) The power conferred by section 175(4) of SSCBA 1992, as applied by subsection
(2), includes (in particular) power to make the provision mentioned in section
175(4) by way of amendments to the employment allowance provisions.

(4) 15Regulations under this section must be made by statutory instrument.

(5) A statutory instrument containing (with or without other provision)—

(a) regulations falling within subsection (1)(a) which decrease a person’s
employment allowance for a tax year, or

(b) regulations falling within subsection (1)(b),

20may not be made unless a draft has been laid before, and approved by a
resolution of, each House of Parliament.

(6) A statutory instrument—

(a) which contains regulations falling within subsection (1)(a) which
increase a person’s employment allowance for a tax year, and

(b) 25which does not have to be approved in draft under subsection (5),

must be laid before Parliament after being made.

(7) Regulations contained in a statutory instrument which is required to be laid
before Parliament under subsection (6) cease to have effect at the end of the
period of 40 days after the day on which the instrument is made unless, before
30the end of that period, the instrument is approved by a resolution of each
House of Parliament.

(8) If regulations cease to have effect as a result of subsection (7), that does not—

(a) affect anything previously done by virtue of the regulations, or

(b) prevent the making of new regulations to the same or a similar effect.

(9) 35In calculating the period of 40 days for the purposes of subsection (7), no
account is to be taken of any time during which Parliament is dissolved or
prorogued or during which either House is adjourned for more than 4 days.

6 Decisions and appeals about entitlements to make deductions etc

(1) In Part 2 of the Social Security Contributions (Transfer of Functions, etc) Act
401999 (decisions and appeals), in section 8(1) (decisions of officers of Revenue
and Customs), after paragraph (e) insert—

“(ea) to decide whether a person is or was entitled to make a
deduction under section 4 of the National Insurance
Contributions Act 2014 (deductions etc of employment

allowance) and, if so, the amount the person is or was entitled
to deduct,

(eb) to decide whether a person is or was entitled to a repayment
under that section and, if so, the amount of the repayment,”.

(2) 5In Part 3 of the Social Security Contributions (Transfer of Functions, etc)
(Northern Ireland) Order 1999 (S.I. 1999/671S.I. 1999/671) (decisions and appeals), in
Article 7(1) (decisions of officers of Revenue and Customs), after paragraph (e)
insert—

“(ea) to decide whether a person is or was entitled to make a
10deduction under section 4 of the National Insurance
Contributions Act 2014 (deductions etc of employment
allowance) and, if so, the amount the person is or was entitled
to deduct,

(eb) to decide whether a person is or was entitled to a repayment
15under that section and, if so, the amount of the repayment,”.

7 Retention of records etc

(1) In Schedule 1 to SSCBA 1992 (supplementary provisions relating to national
insurance contributions), in paragraph 8(1) (general regulation-making
powers), after paragraph (a) insert—

“(aa) 20for requiring persons to maintain, in such form and manner
as may be prescribed, records of such matters as may be
prescribed for purposes connected with the employment
allowance provisions (within the meaning of the National
Insurance Contributions Act 2014), and to retain the records
25for so long as may be prescribed;”.

(2) In Schedule 1 to SSCB(NI)A 1992 (supplementary provisions relating to
national insurance contributions), in paragraph 8(1) (general regulation-
making powers), after paragraph (a) insert—

“(aa) for requiring persons to maintain, in such form and manner
30as may be prescribed, records of such matters as may be
prescribed for purposes connected with the employment
allowance provisions (within the meaning of the National
Insurance Contributions Act 2014), and to retain the records
for so long as may be prescribed;”.

(3) 35In paragraph 26 of Schedule 4 to the Social Security (Contributions)
Regulations 2001 (S.I. 2001/1004S.I. 2001/1004) (retention of records), after sub-paragraph
(4) insert—

“(4A) Sub-paragraph (4B) applies in relation to an employer who makes
deductions, or applies for a repayment, under section 4 of the
40National Insurance Contributions Act 2014 on account of an
employment allowance for which the employer qualifies for a tax
year (or who intends to do so).

(4B) So far as they are not otherwise covered by sub-paragraph (4),
“contribution records” includes any documents or records relating
45to—

(a) the employer’s qualification for the employment allowance,
or

(b) the calculation of any amount that has been, or could be,
deducted or repaid under section 4 of the National Insurance
Contributions Act 2014 on account of the employment
allowance.”

(4) 5The amendment made by subsection (3) is to be treated as having been made
by the Treasury using the powers conferred by paragraph 8(1)(aa) of Schedule
1 to SSCBA 1992 (as inserted by subsection (1)) and paragraph 8(1)(aa) of
Schedule 1 to SSCB(NI)A 1992 (as inserted by subsection (2)).

(5) In section 110ZA of the Social Security Administration Act 1992 (powers to call
10for documents etc), in subsection (2)(a), after “Benefits Act” insert “or the
National Insurance Contributions Act 2014”.

(6) In section 104ZA of the Social Security Administration (Northern Ireland) Act
1992 (powers to call for documents etc), in subsection (2)(a), after “Benefits Act”
insert “or the National Insurance Contributions Act 2014”.

8 15Commencement of the employment allowance provisions etc

Sections 1 to 7 and Schedule 1 come into force on 6 April 2014.

Introduction of age-related secondary percentage

9 Reduction of secondary Class 1 contributions for certain age groups

(1) SSCBA 1992 is amended as follows.

(2) 20In section 9 (calculation of secondary Class 1 contributions)—

(a) in subsection (1) for “the secondary percentage” substitute “the relevant
percentage”, and

(b) after subsection (1) insert—

“(1A) For the purposes of subsection (1) “the relevant percentage” is—

(a) 25if section 9A below applies to the earnings, the age-
related secondary percentage;

(b) otherwise, the secondary percentage.”

(3) After section 9 insert—

“9A The age-related secondary percentage

(1) 30Where a secondary Class 1 contribution is payable as mentioned in
section 6(1)(b) above, this section applies to the earnings paid in the tax
week, in respect of the employment in question, if the earner falls
within an age group specified in column 1 of the table in subsection (3).

(2) For the purposes of section 9(1A)(a) above, the age-related secondary
35percentage is the percentage for the earner’s age group specified in
column 2 of the table.

(3) Here is the table—

(4) 5The Treasury may by regulations amend the table—

(a) so as to add an age group in column 1 and to specify the
percentage in column 2 for that age group;

(b) so as to reduce (or further reduce) the percentage specified in
column 2 for an age group already specified in column 1
10(whether for the whole of the age group or only part of it).

(5) A percentage specified under subsection (4)(a) must be lower than the
secondary percentage.

(6) For the purposes of this Act a person is still to be regarded as being
liable to pay a secondary Class 1 contribution even though the amount
15of the contribution is £0 because the age-related secondary percentage
is 0%.

(7) The Treasury may by regulations provide that, in relation to an age
group specified in the table, there is to be for every tax year an upper
secondary threshold for secondary Class 1 contributions.

20That threshold is to be the amount specified for that year by regulations
made by the Treasury.

That threshold is to be the amount specified for that year by regulations
made by the Treasury.

(8) Subsections (4) and (5) of section 5 above (which confer power to
25prescribe an equivalent of a secondary threshold in relation to earners
paid otherwise than weekly), and subsection (6) of that section as it
applies for the purposes of those subsections, apply for the purposes of
an upper secondary threshold in relation to an age group as they apply
for the purposes of a secondary threshold.

(9) 30Where—

(a) a secondary Class 1 contribution is payable as mentioned in
section 6(1)(b) above,

(b) the earner falls within an age group in relation to which
provision has been made under subsection (7), and

(c) 35the earnings paid in the tax week, in respect of the employment
in question, exceed the current upper secondary threshold (or
the prescribed equivalent) in relation to the age group,

this section is not to apply to the earnings so far as they exceed that
threshold (or the prescribed equivalent); and for the purposes of section
409(1) above the relevant percentage in respect of the earnings so far as
they exceed that threshold (or the prescribed equivalent) is,
accordingly, to be the secondary percentage.

(10) In subsections (7) to (9) references to an age group include a part of an
age group.”

(4) 45In section 122(1) (interpretation of Parts 1 to 6), at the appropriate place

insert—

• ““age-related secondary percentage” is to be construed in
  accordance with section 9A(2) above;”.

(5) In section 176(1)(a) (parliamentary control: instruments subject to affirmative
5procedure) after “section 4C;” insert—

“(None) section 9A(7);”.

(6) SSCB(NI)A 1992 is amended as follows.

(7) In section 9 (calculation of secondary Class 1 contributions)—

(a) in subsection (1) for “the secondary percentage” substitute “the relevant
10percentage”, and

(b) after subsection (1) insert—

“(1A) For the purposes of subsection (1) “the relevant percentage” is—

(a) if section 9A below applies to the earnings, the age-
related secondary percentage;

(b) 15otherwise, the secondary percentage.”

(8) After section 9 insert—

“9A The age-related secondary percentage

(1) Where a secondary Class 1 contribution is payable as mentioned in
section 6(1)(b) above, this section applies to the earnings paid in the tax
20week, in respect of the employment in question, if the earner falls
within an age group specified in column 1 of the table in subsection (3).

(2) For the purposes of section 9(1A)(a) above, the age-related secondary
percentage is the percentage for the earner’s age group specified in
column 2 of the table.

(3) 25Here is the table—

(4) 30The Treasury may by regulations amend the table—

(a) so as to add an age group in column 1 and to specify the
percentage in column 2 for that age group;

(b) so as to reduce (or further reduce) the percentage specified in
column 2 for an age group already specified in column 1
35(whether for the whole of the age group or only part of it).

(5) A percentage specified under subsection (4)(a) must be lower than the
secondary percentage.

(6) For the purposes of this Act a person is still to be regarded as being
liable to pay a secondary Class 1 contribution even though the amount
40of the contribution is £0 because the age-related secondary percentage
is 0%.