SOCIAL SECURITY BILL
(continued)
Details of the delegated powers,
by Clause
Part II - Contributions
Clause 48
201. Clause 48
amends Section 3 of the Social Security Contributions and Benefits
Act 1992 to introduce a new power to provide for regulations to
apportion payments made to or for the benefit of two or more earners.
The intention is to provide for a new method of apportioning earnings
where a payment is made or benefit provided to or for the benefit
of two or more earners (for example payments into a Funded Unapproved
Retirement Benefit scheme or a voucher). The regulations would
also provide for the calculation or valuation of the portion attributed
to each earner. This will enable contributions to be paid on such
payments.
202. It is intended
to consult business on the details of the regulations to ensure
that the method devised is workable and does not impose undue
burdens on business. The Department considers that regulations
are the appropriate vehicle for this technical provision, so that
it can be adjusted to take into account experience gained in practical
operation and to ensure its smooth operation for business.
Clause 49
203. Clause 49
inserts two additional subsections into section 3 of the Social
Security Contributions and Benefits Act 1992. Regulations already
made under section 3 (2) ensure that national insurance liability
arising from a director's earnings is calculated by reference
to an annual earnings period. This requirement can mean that directors'
are only liable to pay contributions in the part of the year in
which their earnings are between lower and upper earnings limits.
Many directors and their companies prefer to spread their national
insurance payments throughout the year, but this practice involves
making some payments before liability exists.
204. Regulations
made under Subsection (5)(a) will make provision for companies
and directors to make "payments on account" if they
wish to do so, and those under subsection (5)(b) will ensure that
such payments are included when existing regulations refer to
contributions.
205. These delegated
powers apply to arrangements which are currently set out in regulations
made under subsection 3(2) of the Social Security Contributions
and Benefits Act 1992 (special rules for directors). It is therefore
the Department's view that additional extensions and modifications
to these arrangements should also be in secondary legislation.
Clause 52
206. Clause 52
inserts a new section 10A into the Social Security Contributions
and Benefits Act 1992 which introduces a new Class of national
insurance contribution - Class 1B. Class 1B contributions will
be payable where an employer enters into a PAYE settlement agreement
(PSA) with the Inland Revenue for settling the tax liability on
certain minor benefits and expenses in a lump sum. They will
enable the contributions due on items covered by a PSA to be dealt
with in a similar way.
207. The Clause
contains one delegated power. Subsection (7) enables regulations
to provide for persons to be excepted, in prescribed circumstances,
from liability to pay Class 1B contributions. This mirrors for
Class 1B contributions the existing provision for Class 1A contributions
in section 10(9) of the Social Security Contributions and Benefits
Act. It is intended that the regulations will be used to exempt
employers from liability to pay Class 1B contributions in relation
to employees who are working in Great Britain but who remain subject
to the social security legislation of another country with which
there is a reciprocal agreement or which is another EC Member
State. The regulations will allow such employers to make payment
in respect of these employees if they wish but will not impose
it.
Clause 53
208. Clause 53
inserts a new section 19A into the Social Security Contributions
and Benefits Act 1992. This section will provide that where a
Class 1, 1A or 1B contribution has been paid in error because
the earner was not an employed earner, then after the end of the
tax year immediately following that in which those earnings were
paid, the earner shall be treated as having been an employed earner
at the time of their payment. It will have the effect of limited
the period for claiming refunds on grounds of incorrect employment
status to the end of the tax year immediately following that in
which the relevant payment of earnings was made.
209. It contains
one delegated power. Subsection 19A(2) contains the power to
prescribe circumstances where a person shall not be treated
as having been an employed earner, at the time the payments were
made. It is anticipated that this power will be used to limit
the application of the Clause to cases where the error is an unwitting
one so far as the earner is concerned. The Department considers
this is appropriate for secondary legislation to ensure that modifications
can be made in the light of changing circumstances.
Clause 54
210. Clause 54
amends paragraph 3 of Schedule 1 to the Contributions and Benefits
Act 1992 to provide for a power to make regulations which would
prescribe a method for recovering primary contributions (those
which are usually paid by employees), where earnings are paid
in non-monetary form - for example by voucher or share options
- and there is insufficient cash pay from which to deduct contributions
which would be due. The intention is that regulations would
set out a new method for recovering the primary contributions
in such circumstances.
211. Regulations
made under this power would assist employers making non-monetary
payments, who are not in a position to structure their pay practices
to enable recovery of primary contributions from other monetary
earnings. This is mainly where earnings are paid to employees
in the form of shares and options after the employee has left
the company. It also enables vouchers to be dealt with in a similar
way.
212. It is our
intention to consult business on the details of the regulations
to ensure that the method devised is workable and does not impose
undue burdens on business. The Department considers that regulations
are the appropriate vehicle for this technical provision, so that
it can be adjusted to take into account experience gained in practical
operation, to ensure that it runs as smoothly as possible for
businesses.
Clause 55
213. Clause 55
inserts a new paragraph 7A in Schedule 1 to the Social Security
Contributions and Benefits Act 1992. Paragraph 7A enables the
Secretary of State to impose penalties for omissions or errors
relating to national insurance contributions in PAYE/contributions
returns, in the same way as the Inland Revenue without limiting
the powers of the Inland Revenue.
214. Subsection
(2) enables regulations to provide for the Secretary of State
to impose penalties in respect of a person who, in making a contributions
return, fraudulently or negligently
(a) fails to provide
any information or computation he is required to provide; or
(b) provides any such
information or computation which is incorrect.
215. Subsection
(3) sets out that regulations under (2) above shall do the following:
- prescribe the rates
of penalty, or provide for how they are to be ascertained.
- provide for the penalty
to be imposed by the Secretary of State within six years after
the date on which the penalty is incurred
- provide for determining
the date on which, for the purposes of paragraph 9(b) above, the
penalty is incurred
- prescribed the means
by which the penalty is to be enforced; and
- provide for enabling
the Secretary of State, in her discretion, to mitigate or remit
the penalty, or to stay, or to compound any proceedings for it.
216. It is our
intention to prescribe identical penalties to those in the Taxes
Management Act section 98 et seq. These penalties will be administered
by the Contributions Agency in the same way as they are by the
Inland Revenue.
217. The penalties
provision is in regulations to enable the Department to keep up
to date with the Inland Revenue's regime and avoid the risk of
gaps opening up as Inland Revenue.legislation changes. Changes
to the Taxes Management Act are generally made through the annual
Finance Act and, as a similar vehicle is not available to amend
Social Security primary legislation, details need to be in secondary
legislation in order to maintain a seamless penalties provision
across the Contributions Agency and the Inland Revenue.
218. One further
penalty will be available to the Contributions Agency. This will
be a penalty for submitting a return with many inaccuracies even
if this does not lead to an underpayment of contributions.
The regulations will need to deal with different sorts of end-of-year
returns (large or small employers, on paper or magnetic media.).
The details may need to be refined as pay practices and recording
mechanisms evolve.
Clause 56
219. Clause 56
introduces a new paragraph 7B into Schedule 1 to the Social Security
Contributions and Benefits Act 1992. It deals with the collection
of contributions by the Secretary of State, rather than the Inland
Revenue.
220. The intention
is that all contributors shall be treated in a similar manner
whether they submit national insurance contributions on returns
to the Inland Revenue or the Contributions Agency, and, if errors
are found, to be treated in a similar manner, whichever organisation
find the errors.
221. Subsection
(1) enables regulations to provide that, in such cases or circumstances
as may be prescribed, contributions shall be paid to the Secretary
of State; and that she shall be responsible for collection and
administration of such contributions. These include Class 1A contributions
where employers choose to pay directly to the Contributions Agency;
Class 1 and 1A contributions from Government Departments, HM Forces
etc. and Class 2 contributions paid by the self-employed. Setting
out the details of these returns in regulations will allow for
the imposition of interest and penalties on these contributions
as on all others paid to the Inland Revenue and allow equity of
treatment. The Department considers that the use of delegated
legislation is appropriate as the regulations will cover the detail
of administrative arrangements for the collection of contributions
at some length. Furthermore the use of regulations gives flexibility
to make incremental improvements to the administration in the
light of lessons learnt from operational experience.
222. Subsection
(2) makes clear that regulations under paragraph 7B may do the
following:
- provide for returns
to be made to the Secretary of State by such date as may be prescribed
- prescribe the form
in which returns are to be made, or provide for them to be made
in such form as the Secretary of State may approve
- prescribe the manner
in which contributions are to be paid, or provide for them to
be paid in such manner as the Secretary of State may approve
- prescribe the due
date for the payment of contributions
- provide for interest
to be charged on contributions that are not paid by the due date,
and for enabling such interest to be remitted or repaid
- provide for interest
to be paid (by the Contributions Agency) on contributions that
fall to be repaid to the contributor
- provide for determining
the date from which interest referred to above is to be calculated
- provide for penalties
to be imposed in respect of a person who
(i) fails to submit
an appropriate contributions return within the time allowed
(ii) fails to provide
any information or computation require
(iii) provides any
incorrect information or computation
(iv) fails to pay Class
2 contributions by the due date
223. Subsection
(4) makes clear that regulations under subparagraph (2)(h) which
concern the imposition of penalties may do the following:
- prescribe the rates
of penalty, or provide for how they are to be ascertained
- provide for determining
the date on which the penalty is incurred
- prescribe the means
by which the penalty is to be enforced
- provide for the mitigation
or remission of penalties, and the staying or compounding of proceedings
for a penalty.
224. The penalty
regime will mirror that already operated by the Inland Revenue
under provisions in the Taxes Management Act. The use of delegated
powers will enable the regime operated by the Contributions Agency
to maintain parity with the Inland Revenue.
Clause 59
225. Clause 59
inserts an additional paragraph (hh) in section 5(1) of the Social
Security Administration Act 1992 thereby adding a regulation-making
power to the claims and payments regulations. It enables regulations
to be made for requiring such person as may be prescribed to furnish
any information or evidence needed for a determination whether
a decision on an award of benefit should be revised or superseded.
226. There are
currently regulation-making powers under Section 5(1) of the Administration
Act for Secretary of State to require customers to provide information
or evidence to determine a claim. However, there is no
equivalent power which explicitly allows the Secretary of State
to seek information on either a change of circumstances or to
support the continuing payment of benefits once an award has
been made. This Clause provides that power.
227. With respect
to the persons prescribed, it is our intention to prescribe categories
of claimant who will be required to provide information (for example
those where there has been no contact for some time), and in certain
cases, third parties such as landlords in receipt of direct payment
of Housing Benefit. In most cases the onus will generally be
on the claimant to make the approach where the information required
is held by a third party. If there are difficulties in getting
the third party to respond this will, of course, be taken into
account when consideration is being given to suspending payment
of benefit or terminating entitlement under Clause 23.
Clause 60
228. Clause 60
replaces section 113 of the Social Security Administration Act
1992. It makes breaches of regulations relating to national insurance
contributions a civil rather than a criminal offence.
229. Subsection
(1) deals with regulations made under any of the Acts listed in
section 110 of the Administration Act. It enables those regulations
to provide that any person who breaches regulations made under
those Acts shall be liable to a civil penalty, if the offence
relates to contributions, and in any other case to be guilty of
a criminal offence.
230. Subsection
(2) makes clear what any regulations or scheme under subsection
(1) shall do in making provision for the imposition of a civil
penalty. It contains regulation-making powers to:
- prescribe the rates
of penalty, or provide for how they are to be ascertained
- provide for determining
the date on which the penalty is incurred
- prescribe the means
by which the penalty is to be enforced
- provide for the mitigation
or remission of penalties, and the staying or compounding of proceedings
for a penalty.
231. It is intended
that these regulations will be used to impose penalties on self-employed
people who fail to pay a quarterly bill for Class 2 contributions
on time, and for the failure to notify the Contributions Agency
of the commencement of self-employment.
232. Making this
provision in delegated legislation will enable the Department
to update the amount of penalty when appropriate; to be responsive
to changes in business or employment practices; and to take account
of practical experience.
Clause 61
233. Clause 61
replaces section 114 of the Social Security Administration Act
1992 to introduce a new criminal offence of fraudulent evasion
of national insurance contributions. It also inserts a new section
114A which introduces a civil penalty for failure to pay contributions.
In new section 114A:
234. Subsection
(1) sets out that a person shall be liable to a penalty if he
fails to pay a contribution for which he is liable at or within
the time prescribed for the purpose. The relevant
time limits are already specified in the Social Security Contributions
Regulations 1979 [SI 1979/591] in relation to Schedule 1 paragraph
6 and will continue in force.
235. Subsection
(3) contains four regulation-making powers with regard to penalties
imposed under subsection (1) above: Regulations shall
- prescribe the amount
or rate of penalty, or provide for how it is to be ascertained
- provide for determining
the date on which the penalty is incurred
- prescribe the means
by which the penalty is to be enforced
- provide for enabling
the Secretary of State, in her discretion, to mitigate or to remit
any such penalty, or to stay, or to compound any proceedings for
a penalty.
It is intended that these penalty
powers will be principally used in cases where the Inland Revenue
may have already imposed a penalty on a PAYE/contributions return,
and then further underpayments of contributions are later discovered
by the Contributions Agency.
236. As for all
penalties, the Department considers that secondary legislation
is more appropriate, as it enables the amount of penalty and arrangements
for applying the penalty to be altered as circumstances change,
for example as payment methods develop.
Clause 63
237. Clause 63
introduces new sections 121A and 121B into the Social Security
Administration Act 1992. Section 121A provides for the enforcement
of unpaid national insurance debts through distraint of goods,
with a magistrate's warrant where forcible entry to premises is
required. Section 121B relates to the recovery of unpaid national
insurance debts in Scotland, and enables an application to the
sheriff for a summary warrant authorising recovery by a poinding
and sale of goods, an earnings arrestment or an arrestment and
action of furthcoming or sale.
238. Subsection
(5) provides that any costs or charges in connection with levying
of distress shall be borne by the person in default. Subsection
(8) of section 121A contains a regulation-making power to make
provision with respect to (a) the fees chargeable on or in connection
with the levying of distress; and (b) the costs and charges recoverable
where distress has been levied. These regulations will set out
the detail of what a person whose goods have been distrained will
be expected to pay in different specific circumstances. They will
replicate the equivalent set of Inland Revenue regulations - Distraint
by Collectors (Fees, Costs and Charges) Regulations. The Department
considers it appropriate to make provision for the Contributions
Agency using a similar legislative vehicle.
Clause 64
239. Clause 64
introduces new section 143A into the Social Security Administration
Act. Section 143A provides for the Secretary of State to alter
the rate of the new Class 1B contributions introduced by Clause
51 and for the amount raised to be allocated to the National Insurance
Fund and the National Health Service in the normal way.
240. Subsection
(1) provides for the alteration of the rate of Class 1B contributions
by the making of an order. This mirrors for Class 1B contributions
the existing provision contained in section 143 for other classes
of contributions.
241. Any orders
made in accordance with new section 143A will be subject to the
affirmative resolution procedure. This will be achieved
through paragraph 93(1) of Schedule 6 which will extend section
190 of the Administration Act (which provides the power for certain
statutory instruments to be subject to the approval of Parliament)
to the new provision.
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