Instrument
reported
At the Committee's meeting on 9 July
2014 it scrutinised a number of instruments. It was agreed that
the special attention of the House of Commons should be drawn
to one of those considered in accordance with Standing Orders.
The Instrument and the ground for reporting it is given below.
The relevant Departmental memorandum is published as an appendix
to this report.
S.I. 2014/1283: Reported
for requiring elucidation and for failure to comply with Statutory
Instrument Practice
Finance Act 2009, Sections 101 and 102
(Interest on Late Payments and Repayments) (Consequential Amendments)
Order 2014 (S.I. 2014/1283)
1.1 The Committee draws the special
attention of the House to this Order on the grounds that it requires
elucidation and that there has been a failure to comply with Statutory
Instrument Practice.
1.2 This Order was made on 16 May 2014,
was laid before the House of Commons on 19 May 2014 and comes
into force on 20 May 2014 in relation to payments in respect of
Class 1 national insurance contributions, and construction industry
scheme payments ("CIS payments"), made on or after that
date.
1.3 In relation to payments of income
tax deducted at source, Class 1 national insurance contributions
and CIS payments, the Treasury appointed 6 May 2014 as the date
on which sections 101 and 102 of the Finance Act 2009 come
into force: see S.I. 2014/992, which also contains consequential
amendments to primary legislation. As a result, if any such payments
are not paid to HMRC by the due date (which is set out in the
relevant legislation) they are liable to late payment interest
under the regime in section 101. And any amount which is overpaid
will attract repayment interest under the single repayment interest
regime in section 102 when repaid by HMRC.
1.4 This Order makes further consequential
amendments to primary legislation. As a result of the amendments,
where an employer or a contractor fails to make a payment of Class
1 national insurance contributions or a CIS payment, the employer
or contractor will not be entitled to take any interest paid on
those sums into account when computing income, profits or losses
for tax purposes. And, in addition, where an officer of a company
is made personally liable in respect of an amount of Class 1 contributions,
interest will apply at the rate applicable under section 101 or
102.
1.5 The Committee, assuming that these
consequential amendments were an unintended omission from S.I.2014/992,
wondered why it was considered justifiable to make good the omission,
which it presumed was financially favourable to taxpayers, from
a date giving rise to non-compliance with the 21-day rule mentioned
in section 4.13 of Statutory Instrument Practice, which
requires that instruments subject to annulment should not normally
be brought into force until at least 21 days after being laid.
It accordingly asked HMRC to explain that and also why, given
that the Order appears to be correcting an error, there is no
headnote indicating that the Order is issued free of charge to
known recipients of S.I. 2014/992.
1.6 In a memorandum printed in the Appendix
the Department apologises for having omitted the consequential
amendments from S.I. 2014/992 through oversight. The Department
points out that, without these consequential amendments being
in force, interest would have become deductible in computing income,
profits or losses for tax purposes (which was neither so before
the coming into force of S.I. 2014/992 nor intended to be so afterwards).
The due dates in question are 19 and 22 May so that, if the amendments
had been brought into force not on 20 May but (so as to secure
compliance with the 21-day rule) on a date nearly 3 weeks later,
interest payable in respect of that period would have been deductible.
Such a change in the law for a short time would have led to confusion
and an administrative burden for both taxpayers and HMRC. Bringing
the amendments to secure the non-deductibility of interest into
force as soon as possible obviated that unintended change in the
law because no interest is due on payments made after 6 May until
at earliest 19 May. Breaching the 21 day rule thereby in practice
avoided any break in the continuity of the law.
1.7 In its memorandum the Department
explains the absence of a headnote indicating that it is being
issued free to all known recipients of a defective instrument
on the ground that S.I. 2014/992 was not defective, in the sense
of containing an error or mistake, and so did not trigger the
obligation to issue the Order free of charge: see 3.4.11 to 3.4.14
of Statutory Instrument Practice.
1.8 The Committee is grateful to the
Department for explaining the reason for non-compliance with the
21 day rule which it finds satisfactory - in particular it accepts
that it was legitimate to balance any temporary financial benefit
to taxpayers against the complications of discontinuity caused
by an omission that was clearly an oversight. The Committee however
considers that the omission of the consequential amendments needed
to complete the changes in the law brought into force by S.I.
2014/992 did constitute a defect by omission so that the Order
should have been issued free and carried the appropriate headnote.
1.9 The Committee draws the special
attention of the House to this Order on the ground that it requires
the elucidation provided in the Department's memorandum as amplified
in this report and for a breach of Statutory Instrument Practice.
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