1 Statutory Instrument Reported - Statutory Instruments Committee Contents


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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Prepared 17 July 2014