Appendix
1 S.I.
2009/695: memoranda from HM Revenue & Customs
Income Tax (Exemption of Minor Benefits) (Revocation)
Regulations 2009 (S.I. 2009/695)
Memorandum from HM Revenue & Customs on 15
April 2009
1. In its letter to the Department of 1 April
2009, the Select Committee asked:
Given that the Income Tax (Exemption of Minor
Benefits) (Amendment) Regulations 2007 have already come into
force, explain how regulation 2 of these Regulations has the effect
stated in the penultimate paragraph of the Explanatory Note.
2. The Income Tax (Exemption of Minor Benefits)
(Amendment) Regulations 2007 (SI 2007/2090) amend the Income Tax
Exemption of Minor Benefits Regulations 2002 (SI 2002/205).
As always there are different ways of indicating a legislative
intention. The same legislative result could have been achieved
by amending the 2002 Regulations and then consequentially
revoking the 2007 Regulations. But, in this case, it was considered
the best course was the more direct method of simply revoking
the 2007 Regulations. Revoking the 2007 Regulations was considered
the simplest way of removing from the 2002 Regulations the material
that the 2007 Regulations added. This is in accordance with
the principle that amending provisions are "always speaking"
(see Craies on Legislation, 9th ed. para.14.3.5).
3. The Select Committee also asked:
Explain the reasons for making these Regulations
now, given that—
(a) they appear to have no effect in practice,
(b) to have any effect they depend on an uncertain
occurrence (the amendment of existing legislation by future
legislation), and
(c) the amendment in question, if it happens,
could itself achieve (or provide for achievement of) that
effect.
Background
4. In August 2007 the Income Tax (Exemption of
Minor Benefits) (Amendment) Regulations 2007 (SI 2007/2090) and
the Social Security (Contributions) (Amendment No. 6) Regulations
2007 (SI 2007/2091) were introduced. The former inserted a new
regulation 7(1) into SI 2002/205 to exempt from tax health screening
and medical check-ups provided by employers ("medicals")
along with related definitions in regulation 2. The latter enacted
a National Insurance Contributions ("NICs") disregard
in respect of non-cash vouchers made available for these medicals
and, as is common practice, did this by cross-referring to the
tax exemption provided in SI 2002/205. Both the tax emption and
the NICs disregard were subject to a pre- condition requiring
an employer to provide the medicals to "all employees".
5. Following an informal consultation a decision
was taken to extend the tax exemption and NICs disregard with
effect from 6 April 2009 by removing the precondition, using primary
legislation for the tax exemption and secondary legislation for
the NICs disregard. This was announced on the HMRC website on
10 December 2008. A clause will be included in the Finance Bill
which if enacted will provide the required tax exemption. This
would come into effect on Royal Assent (probably in July 2009)
but be effective as from 6 April 2009.
6. The existing vires enabled us to extend the
NICs disregard in the desired way with effect from 6 April 2009.
Regulation 7 of the Social Security (Contributions) (Amendment
No. 3) Regulations 2009 (SI 2009/600) achieves this. Like regulation
7 of SI 2007/2091, regulation 7 of SI 2009/600 cross-refers to
the legislation providing tax exemptions for health screening
and medical check-ups. Paragraph (2) of regulation 7 of 2009/600
gives effect to the NICs disregard regardless of the fact that
the proposed tax exemption in the Finance Bill has not been enacted
yet
7. The Income Tax (Exemption of Minor Benefits)
(Revocation) Regulations 2009 (SI 2009/695) includes a saving
provision along with the provision revoking SI 2007/2090 to provide
for continuity. HMRC understand the 2009 Regulations to have the
following effect in practice:
(a) Once the Finance Bill comes into force it will
apply as from the beginning of the tax-year. So the 2009 Regulations
come into force on 6th April and revoke SI 2007/2090 as from the
beginning of the tax-year.
(b) But until the Finance Bill comes into force, regulation
3 secures that there is no gap in the continuity of the law by saving
SI 2007/2090 on a transitional basis. This also provides the necessary
underpinning for the continued effectiveness of the NICs regulations.
(c) The result is that from the beginning of the
tax year (and while the Finance Bill is being enacted) tax-payers
are on formal notice of what the law will be as from the beginning
of the tax year once the Finance Bill comes into force, and are
able to see how the Bill and the 2002 Regulations are intended
to relate to each other. The Explanatory Note expressly
refers to the provisions to be made by the Finance Bill so as
to put the revoking regulations into context for the taxpayer.
8. It is true that the relevant provisions of
the Finance Bill might fail to pass into law but drafting the
tax Regulations in this way ensures continuity irrespective of
what happens to the Finance Bill.
9. The Finance Bill could of course make the
revocation itself: but as a general rule there are advantages
in keeping primary and subordinate legislation distinct.
15th April 2009
Memorandum from HM Revenue & Customs on 12
May 2009
1. In its letter to the Department of 6 May 2009,
the Select Committee asked:
"Paragraphs 4 to 7 of the memorandum of 15
April 2009 set out the reason for including the saving in regulation
3 from the effect of regulation 2 (and also set out why, if the
expected provision of the Finance Bill comes into force, there
will not be any need to make further provision with respect to
S.I. 2007/2090), but they do not appear to identify how the coming
into force of these Regulations as a whole on 6 April 2009 changes
the position in any way for payers of tax or of National Insurance
Contributions from what it would have been had the Regulations
not been made at all. Explain whether there is such a change and
if so—
(a) what it is, and
(b) how it is achieved."
2. We believe that SI 2009/695 should be considered
in the light of the Finance Bill provision and SI 2009/600. All
three measures, considered as a package, are designed to secure
for employers a tax exemption and National Insurance Contributions
(NICs) disregard with effect from 6 April in wider terms than
the existing Regulations provide. By containing the prospective
revocation, SI 2009/695 will change the position for taxpayers
should the Finance provision become law and assist in ensuring
the NICs disregard will be aligned with the tax position in these
circumstances. At the same time SI 2009/695 serves a number of
practical purposes bearing on the efficacy of the reforms more
generally.
(a) If enacted, the Finance Bill provision will
provide a tax exemption effective from 6 April 2009 for health
assessments and medical check ups ("medicals") in wider
terms then is specified in SI 2007/2090, by making the exemption
available to employers irrespective of whether they provide the
medicals to all their employees. SI 2009/695 was made in the expectation
that this clause would be enacted. In the absence of SI 2009/695,
if the Finance Bill provision were to be enacted, SI 2007/2090
would still need to be revoked otherwise there would be two different
provisions dealing with the tax position in relation to the medicals—SI
2007/2090 and the Finance Bill provision. This could cause uncertainty
in the minds of the taxpayer. Regulation 2 of SI 2009/695 removes
this potential source of uncertainty and enables taxpayers and
their advisers to see our plan of action as from 6 April, i.e.
the intention is that SI 2007/2090 will cease to have effect if
and once the Finance Bill provision has been enacted.
(b) While it would have possible to include a
provision in the Finance Bill to revoke SI 2007/2090 upon the
Finance Bill gaining Royal Assent, it was thought that this would
be undesirable as it would have made it harder for taxpayers and
their advisers to ascertain the changes being made to secondary
legislation.
(c) Regulation 7 of the Social Security (Contributions)
(Amendment No 3) Regulations 2009 (SI 2009/600), which came into
effect on 6 April, provides a NICs disregard for non-cash vouchers
made available for medicals. We wanted to ensure consistency between
the tax and NICs legislation if the Finance Bill provision became
law, while at the same time ensuring that employers would be able
to enjoy the wider form of NICs disregard provided by SI 2009/695
as from 6 April should the Finance Bill provision fail. This made
it necessary to draft the NICs disregard set out in regulation
7 by reference to the tax Regulations, while including the essential
modification as set out in regulation 7(2). We could have drafted
the NICs disregard without reference to the tax position but,
because of the policy preference for alignment, further amendments
may have been necessary once the Finance Bill clause was passed,
if the clause had changed during the passing of the Bill. By including
the revoking and saving provision in SI 2009/695 we were able
to achieve the desired policy outcome while minimising the risk
of needing further NICs regulations. Regulation 7 of SI 2009/600
works because it is tied into and feeds off SI 2009/695.
3. We hope that the Committee finds this memorandum
helpful. Should you require any further information, please do
not hesitate to let us know.
HMRC
12 May 2009
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