National Insurance Bill passes committee stage

20 May 2019

A committee of MPs passed the National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill without amendment on Tuesday (May 14th), including an evidence session with witnesses from CIOT among others.

The committee stage for the short bill lasted two sittings. The first of these took evidence from government and tax experts (including CIOT). The second debated the bill’s five clauses and proposed amendments. These are summarised below.

The second reading debate was summarised here. That report also summarises the Bill’s main contents.

NICs Bill committee stage – 1st sitting – 14 May 2019 – 9.25am

After agreeing to publish written evidence to the committee (only one submitted, from CIOT), this sitting was divided into two parts. 

The first saw evidence from Robert Jenrick MP (Exchequer Secretary to the Treasury), Simon Smith (head of national insurance contributions policy at the Treasury) and Raj Nayyar (Bill manager and national insurance contributions policy adviser for HMRC).

Government evidence – termination payments

The sitting began with questions about the termination payments clauses. Peter Dowd (Shadow Chief Secretary to the Treasury, Labour) asked who the winners and losers of the changes would be. The minister, Robert Jenrick, said that the vast majority of termination payments will be exempt. “Around 80% of individuals receiving a termination payment will not be affected by the measure. There is already a generous threshold of £30,000, which compares very favourably internationally. There is no income tax payable before that point, and even with this measure, there will be no employers’ national insurance payable—it will only be on payments above that. Because of that, we anticipate that the proposals will affect higher income groups.” It will have a very limited impact on low or middle-income earners, he added.

Dowd then turned to the issue of collection, noting that the legislation does not set out the way in which the class 1A charge will be collected, stating that that will be covered by secondary legislation. He asked the minister whether he accepted the criticism from tax accountants that that is a break from practice and that it will be confusing for employers, as well as adding to administrative burdens? The minister replied that the government did not agree with that. The purpose of the policy is tax simplification and greater alignment with income tax, he said. The government chose class 1A “as the most logical class of national insurance on which to apply the charge, because it is the class that applies to benefits received by employees, and is paid by employers.” Raj Nayyar added that “when there is a cash payment—a termination award—for income tax, it is currently collected through pay-as-you-earn. It is reported in real time and paid either monthly or quarterly, depending on the size of the employer. For a class 1A contribution, where it is a cash award, it will be reported and paid in the same way as pay-as-you-earn income tax.”

Dowd asked the government representatives whether they accepted that payment in real time would require additional boxes on the PAYE real-time information submission, and a new process by HMRC for monthly or weekly PAYE reductions for employers. “Would that not place an administrative burden on employers that is not factored into the policy note produced by Treasury officials? It does not appear to be as simple as you are suggesting, in the round.” Nayyar replied that employers are already doing that for income tax: “They already have to report and pay in near-real time, so it will not add much to what they already have to do for income tax.” He added that when the termination award comprises a benefit in kind the class 1A payment will be made after the year-end. For example, if an employee is allowed to keep a car for a specific period, that is a benefit in kind, and that will continue to be reported after the end of the year.

Kirsty Blackman (Treasury spokesperson, SNP) asked the government to confirm that this is the only class 1A liability that will arise on cash earnings. The minister confirmed this. She suggested the government was creating “a different class within a class with these 1A contributions. They are still going be termed 1A contributions, but they will be treated totally differently and arise on different classes of stuff from current 1A contributions.” The minister replied that it was distinct from the others, but if the choice was about which of the classes is the most logical to apply this to, this would remain the most logical. “If your argument is that because this is somewhat different, you could have created an additional class of NICs, you could have done that, but we took the view that that would have added more complexity than simply having a somewhat different situation within class 1A.” Nayyar added that HMRC is working to minimise any additional administrative burden there may be, making sure that guidance for employers is ready in good time.

Anneliese Dodds (Shadow Financial Secretary, Labour) asked what kind of communication exercise will be undertaken with those who may be affected. Nayyar replied that HMRC has regular stakeholder events with tax professionals and software providers in which they will be communicating how this will happen. “We will be issuing guidance in due course to explain what we would like employers to do and what they need to be aware of. We will be supplying specifications for third-party software providers about what changes they need to make to their software, so all of that will be ongoing.”

Other questions in this area covered the total amount that affected employees would lose, the impact on business start-ups (because people often set up new businesses with their redundancy payments), how the UK’s approach compares internationally and the impact on wages and salaries. There were also a number of questions about the extent to which the measure has an anti-avoidance purpose.

Government evidence – sporting testimonials

Kirsty Blackman asked about the consistency of the language in parts 1 and 2 of the bill. “Part 1 defines the amount received in relation to the income of the earner under section 403 of the Income Tax (Earnings and Pensions) Act 2003, whereas the sporting testimonial section, instead of defining it on the basis of an ITEPA category—I think section 226E is the key one for sporting testimonials—talks about about general income. It does not define it in terms of the ITEPA eligibility threshold. Why is there a difference in language between the two parts of the Bill? When part 2 talks about general earnings, does it actually mean ITEPA section 226E?” Raj Nayyar said he thought it does, “but it might be helpful if we wrote and explained the difference.” It was intentional that there was a difference, he added.

Anneliese Dodds asked whether the panel knew of any other uses of the concept of “customary” in tax law, and how that is operationalised?. Nayyar replied they would have to look at that and get back to her. Dodds said that underlined her “most significant concern about this measure, which is that the term “customary” appears to be an empty category. Perhaps panel members believe that cases will fall into that category, but it seems that unless the testimonial is contractual, it is likely that it will not be “customary”. A testimonial is a bit like a leaving present: every player would hope to have one, but they cannot necessarily expect it. I am concerned about this woolly language creeping into tax law”. Nayyar said HMRC has received guidance on that, and will ensure that it is clear and properly signposted, so that employers and testimonial committees can work out what it means in their circumstances. The minister said a body of case law helps to identify what we mean by “customary”. “There are cases of testimonials that would be considered non-contractual but customary; an example would be if it was the custom that once a player had played for a club for 10 years, they automatically received a testimonial, although that was never written into their contract. A cadre of testimonials would fall into that category, and have done so historically.”

Other questions covered how much people typically pay to attend a testimonial, what post-legislative scrutiny there would be, the impact on charitable giving through testimonials, the revenue impact of the measure, how much consultation there had been with sporting clubs and whether the changes to income tax in the Finance Act 2016 had achieved their purpose.

Expert evidence – termination payments

The second half of the sitting saw evidence given by Bill Dodwell (tax director of the Office of Tax Simplification) and Colin Ben-Nathan (chairman of the employment taxes sub-committee of the Chartered Institute of Taxation).

Peter Dowd asked whether the witnesses would characterise the new class 1A NIC charge as an anti-avoidance measure, or as a measure designed to simplify the tax code and raise revenue? Bill Dodwell replied that he thought it was both. 

Dowd then asked Colin Ben-Nathan about the time it has taken the government to bring forward the proposals, noting that the original announcement was made in 2016. Ben-Nathan replied that the genesis of the changes was an OTS report where it was part of a much wider set of proposals that ultimately has not been taken forward. “As we [CIOT] said at the time, we thought the proposals that were put forward by the Office of Tax Simplification had a lot of merit in trying to simplify a very difficult area, which has occupied the courts, employers, employees and HMRC for many years. Proposals were put forward and consulted on at the time, and we responded to that consultation. Views varied, but ultimately the government decided that they did not wish to take forward a broad simplification platform and focused on the points that I mentioned previously. Obviously, that was a government decision. Simplification can still be effected if there is the will and consensus on how to do it.”

Dowd also asked whether the new charge adequately addressed employees’ current confusion about national insurance and tax treatment of termination awards. Ben-Nathan replied that he understood the government’s rationale for wishing to impose a charge in the first instance in relation to employers only, and that is what class 1A national insurance does. However, “you have to ask how easily employers are going to relate to class 1A being imposed in relation to a cash payment—and the way in which it is being imposed. Typically, class 1A will apply to benefits in kind, which are made during the year, though the actual contribution itself is paid after the end of the year, following a submission on form P11D(b), and so on. There will have to be a communication exercise in relation to employers now having to apply class 1A during the year—that is the point that we make about this particular measure being unusual.”

Kirsty Blackman asked Ben-Nathan if he shared her slight concern “that employers who currently do not use any benefits in kind, so do not have any liability for class 1A, will potentially be brought into liability by this change?” Ben-Nathan replied that it is true they would be brought into paying class 1A. 

Blackman asked Bill Dodwell whether the OTS had suggested using class 1A contributions to tackle this issue. Dodwell replied that the report did not specifically suggest class 1A. Blackman asked whether using class 1A contributions liability to make this change will be simpler for employers, or might it make it more complex for them? Dodwell replied that “arguably it makes it more complex. But it has been done specifically to preserve an employee relief. That is the logic. If we had no reliefs at all, it would be a simpler system, but reliefs are there for a purpose. We do not just want to argue purely for the simplest system always.”

Blackman asked both experts whether, in relation to tax simplification, generally and also specifically around income tax and national insurance changes, they were comfortable that they knew “where the government are looking to get to and how they are looking to get there”. Dodwell replied that he did not think there is evidence that the current government have a plan to align the income tax and national insurance base completely. Differences in collection and enforcement mechanisms have to be preserved unless the government go for a full-blown merger. Ben-Nathan said there was a need to look at the whole question of employment, self-employment and the gig economy. “Matthew Taylor’s work and the government’s response are ongoing and very important. We need a road map—I think that would help us. There have been attempts to move towards some sort of coalescence, for example around national insurance, employees and employers. It is a difficult area and there are strong views one way and the other, but further moves in that direction would be really helpful, because the gig economy is here and we have to deal with it.”

Bill Grant (Conservative) questioned Ben-Nathan on the CIOT’s comments about collection methodology and timing of collection. “It suggests that there is an administrative burden and that it is quite complex—colleagues have touched on some of that. Is the institute justified in its concerns? Can they be overcome by information or guidance from you to employers?” Ben-Nathan responded that it is useful to have examples in guidance. “Yes, ultimately employers will follow the rules as set down. We simply make the point that it is unusual for a class 1A charge to be imposed under real-time information, because normally that is not the case; the charge is paid after the end of the year.” He added that CIOT would be very happy to comment on any draft guidance.

Other questions covered the winners and losers from the change, the evidence base for the change, the extent of NI avoidance and the £30,000 threshold.

Expert evidence – sporting testimonials

Kirsty Blackman asked Colin Ben-Nathan about the different language used in the two parts of the Bill. Ben-Nathan explained that while the termination payment part of the Bill was ‘pretty clear’ in terms of what should and should not be subject to class 1A national insurance, “[w]hen we look at sporting testimonials, it is not so clear because we are effectively saying that the amount of general earnings should be subject to class 1A national insurance. The question therefore is: is it all the general earnings that are brought in by section 226E, which is effectively everything that is coming in, or is it those earnings, less the £100,000 reflected in section 306B, which is the exempting section? It is simply a question for the draftsmen to clarify that we have actually got that right. I cannot believe it has not been thought about, but it did occur to us in looking at the Bill.”

Anneliese Dodds returned to her concern about the lack of clarity in how “customary” is defined—whether it relates to a particular team and its previous practice, or to sport as a whole. “I wonder whether, on your understanding, the concept is sufficiently fleshed out, or whether additional guidance might be useful.” Ben-Nathan replied that this was a “really difficult area, because one is effectively trying to look at whether something is either contractual or quasi-contractual by way of customary expectation, and is taxable because it is earned from employment, or if it is not such, and is to do with personal esteem and so on.” CIOT had made the point in its evidence “that if we do not legislate along those lines, it would be really helpful… to have at least some examples of what HMRC believes is and is not customary.” 

Questions also covered the comparison with the treatment of tips in restaurants, loss to the charity sector and whether the proposal adds bureaucracy.

NICs Bill committee stage – 2nd sitting – 14 May 2019 – 2pm

The clauses, amendments and proposed new clauses were divided into four groups for debate in this sitting.

Termination payments (Clause 1, Clause 2, New Clause 1 [Blackman], New Clause 4 [Dowd])

Exchequer Secretary Robert Jenrick introduced these clauses, explained their history (the OTS’s 2013-14 review) and the consultation that had been undertaken. He noted the OTS’s statement that “the well-advised can often end up better off than the unadvised, as they are more able to structure their employment contract (or, indeed, their termination payment) to achieve the better tax treatment.” One reason why businesses had an incentive to do so, the minister explained, was the absence of any employer’s NI on termination awards of any size. “My officials and I outlined some examples of that this morning during questions, which I think was supported by the interesting evidence from Bill Dodwell of the OTS.”

The minister stressed that clauses 1 and 2 do not introduce a NICs liability on the employee, and do not reduce or seek new powers to change the existing £30,000 threshold, below which termination awards are entirely tax-free and NICs-free. They do not introduce any legislation that goes beyond mirroring the effect of the income tax rules with respect to the scope of the change, he told the committee. “Instead, by virtue of the clause, the rules that determine liability to income tax will apply directly in calculating the amount of employer class 1A NICs payable on termination awards above £30,000. Therefore, clauses 1 and 2 simplify the tax system and reduce the incentive for manipulating payments to achieve tax advantage.”

He said new clauses 1 and 4 were unnecessary “because they seek to force the government to report on a narrowly prescribed set of issues, most of which have been considered during the detailed consultation that has already been completed and that I have outlined, ahead of new information becoming available. The government are already committed to reviewing the measures and being transparent about the impact that they are expected to have.”

The minister noted that, as with all legislation, the Treasury is also required to carry out post-legislative scrutiny of Acts within three to five years of their implementation. The Treasury may well do that before that deadline, he said. He explained that, as part of the review process to meet those obligations, “HMRC and HM Treasury will speak to stakeholders to gauge their views on how the policy is operating. There are well established lines of communication between HMRC and representative groups, as one would expect, that will provide the basis for a continuous review of the effect of this policy.” 

Peter Dowd, for Labour, ranged widely in his remarks, jousting with Conservative MPs on job creation, wage inequality and tax enforcement before turning to the clauses in the bill. He noted that CIOT and other tax experts have raised concerns around the lack of information in the Bill about how this new class 1A charge will be collected. He continued: “We did not get a great deal of clarity on that today. Currently, Ministers plan to leave it up to secondary legislation, as alluded to earlier. That is not only a break from normal practice, but looks set only to confuse employers even more, rather than simplifying the national insurance treatment of termination awards. The people who came to speak to us today were probably a bit too polite to say that.”

Dowd was also concerned that the provision would “add additional administrative burdens to HMRC at a time when it is hamstrung by what can only be described as the disastrous reorganisation of their estate by the Government… the introduction of Making Tax Digital, which has added to the problem, and of course the preparations for a no-deal Brexit, which have compounded it even further. Taken in the round, that is a challenge.”

He highlighted that the government’s impact assessment notes that this measure will present an “additional cost to employers” that will be “reflected in lower wages and profit margins with a reduction in total wages and salaries of 0.1%” within the first year of its adoption. “To put it simply, this new NICs charge will lead to added costs to employers, some of whom will be small and medium-sized business owners, and less generous termination payments to employees as a result.” This was why he had tabled new clause 4, which seeks a review of the measure’s impact on the level of termination payments that employees receive and the cost to employers, and a distributional analysis of the new class 1A charge. “Without such a review, which will provide a wealth of information and further evidence of the likely effect on wages, termination payments and employers, the Opposition will not support this part of the Bill,” he concluded.

Kirsty Blackman, for the SNP, began by commenting that it was good to be part of a Bill Committee that has taken evidence. “We do not take evidence on Finance Bills and we are less knowledgeable and less good at scrutinising the information provided to us as a result. I hope the Minister agrees that the evidence sessions were incredibly useful this morning, even though he was in the hot seat and had questions asked of him. It meant that we will ask fewer stupid questions during this part of the scrutiny process, as well as being in a better position to drill down on some of the issues raised by different individuals.” Blackman has tabled amendments to the timetabling motion for the last two Finance Bill committee stages seeking to get the committee to take oral evidence from CIOT and others, but these have been opposed and voted down by the government.

Blackman said that her new clause, new clause 1, was similar in parts to Labour’s new clause 4. The first part of her new clause asks for a report including the amount of money that individuals receive in termination payments. The second part of the new clause asks for the report to include the average net value of termination payments. The final part of the new clause asks for the report to look at the number of business start-ups using termination payments as funding in their first year in each region of the United Kingdom and the impact the clauses will have on that. “An awful lot of people use termination payments to begin a new business. The Minister is talking about increases in the number of people employed, but we would not see those increases if we did not have new businesses starting and people having the funding to start them,” she argued. 

Blackman said that it was her understanding from the evidence given this morning “that the Government could have chosen to have termination awards as class 1 contributions, not class 1A contributions, with employee contributions exempted in the same way that those for pensioners are exempted. That would have been a much clearer situation for employers than deciding to do it as a class 1A liability. An awful lot of employers will have a liability as a result of these changes, whereas far fewer would have liability if it was a class 1 liability.”

On collection methods, Blackman said she has “real concerns about this being a real-time collection measure. Less than a year out from implementation, employers may not be aware of the correct computer system or understand correctly how it will work. Obviously, if an employer is making future projections, it is going to be looking at what upgrades it will need for its IT system and be planning that as far in advance as possible. On top of all the uncertainty of Brexit, the government are adding more complexity and future uncertainty: they are not able to say, “This is exactly how the real-time collection measure will work.” They are not able to provide that information to businesses far enough out.”

Responding to the debate Robert Jenrick, the minister, said the government was clear that introducing this change using class 1A contributions was the right choice. “We gave the matter careful consideration. There are a couple of central arguments. The choice of class 1A and, therefore, payment in real time was central to alignment with income tax. If we want to have greater alignment and simplicity, that is the way to deliver it. Secondly, as we heard in evidence this morning, class 1A is a category of national insurance contributions that focuses on the employer. Because we have chosen not to introduce this from an employee NICs perspective, that was the most logical category.” Additionally, “if there were an intention in future to add employees’ national insurance contributions, one would perhaps have chosen class 1 national insurance as the most logical. By choosing class 1A, we made a clear statement that we had no intention of doing that.”

Peter Dowd had commented earlier on the discrepancy between the £400 million a year figure previously quoted as the anticipated revenue to be raised from this measure and the £200 million cited today. “[T]hat discrepancy arises from the fact that the £400 million figure includes the income tax changes that have been legislated for separately. The £200 million figure is exclusively for the NICs changes,” the minister explained.

The minister briefly responded to queries from both Dowd and Blackman about why the government was taking forward a more reduced set of national insurance reforms than was originally envisaged. “We as a Government, like others before us, have been interested for some time in how we could reform national insurance; it is an area of the tax arena ripe for reform and further simplification. However, as we heard in evidence this morning, those simplifications are inherently complex and involve both winners and losers. The original proposal to abolish class 2 national insurance created a small tax advantage for a large number of individuals: about 3 million self-employed people would receive a reduction of just over £100 a year in taxes paid. However, it would have created a substantially higher rate to be paid by several hundred thousand self-employed people who earned less than £8,000 a year. On balance, thinking carefully about the consequences, we took the view, which I hope would be supported by Members from both sides, that a very modest tax break for 3 million people was outweighed by the cost of a significantly increased rate of national insurance for low earners. That was announced in September last year, and there was relatively little comment thereafter; I think most people agreed that it was a sensible and fair decision.”

Clauses 1 and 2 were passed without opposition.

Sporting testimonials (Clause 3, Clause 4, amendment 2 [Dowd], new clause 2 [Blackman], new clause 5 [Dowd])

Robert Jenrick began by explaining the background to this measure, explaining that, prior to 2017, HMRC effectively operated an extra-statutory concession, which was not sustainable over the long term. The government had consulted widely – with sporting bodies as well as tax professionals. The relevant income tax changes that form the first half of this package came into force from April 2017, following legislation in the Finance Act 2016, he told the committee. “This confirmed that, while income from non-contractual, non-customary sporting testimonials would become taxable, there would be a generous £100,000 exemption to ensure that the change had a limited impact in most cases.” He said that the value of the measure “comes in the alignment and simplification of the tax and NICs treatment of sporting testimonials. I cannot emphasise enough that our motivation here is not to raise revenue but to provide greater alignment and simplification. As has been said repeatedly, this measure will bring in only a negligible sum, as certified by the OBR.”

In response to a question from Kirsty Blackman the minister said it was his understanding that this measure applies only to sportspersons. “Although there might be arguments for it, it does not apply to managers and auxiliary staff, just as it would not apply to other people who, as I said in answer to a question this morning, are also engaged in careers that can be cut short, such as a ballet dancer, a performing artist or a Minister, and who might deserve it, but who are not sportspeople.”

He reassured the committee that the government would “continue to keep these issues under review once this measure is in force. The published TIIN—tax information and impact note—commits the government to reviewing the policy through communication with taxpayers’ groups affected by the measure, and the government are committed to carrying out post-legislative scrutiny three to five years after an Act has been passed, as I have said on a number of occasions today.”

Anneliese Dodds, for Labour, said that Labour’s amendment 2 and the SNP’s new clause 2 ask for additional information about how the Bill would affect charities, and individual sportspeople and charities, respectively. “There are quite a few elements that still remain unclear, even after the discussions we have had. I am sorry to drag us back yet again to the topic of what is customary and what is not, but, surely, when we are looking at the design of tax measures, we need to ensure that there is crystal clarity about what every concept could mean, particularly when there might be manipulation of some of those different concepts.”

Dodds noted evidence from the England and Wales Cricket Board, “which states explicitly that there must be no pattern to the granting of testimonials and no specific connection with the player’s number of years’ service at the club, and that there is no specific period of time that should be seen as an automatic trigger for a testimonial. It appears, in the case of that organisation, that it is not possible for there to be a customary testimonial.”

Concluding her remarks, Dodds said that new clause 5 asks for an assessment of the Bill’s impact on testimonial payments made to professionals from different sports, including footballers, cricketers, rugby league players, rugby union players and other sportspeople. “It is important that all varieties of sport receive adequate support and it would be helpful to have a better understanding of the likely incidence of the charge in that regard—for example, whether there is a similar rate of use in other sports to that provided by the PFA for professional football, and whether a similar proportion of those testimonials are contractual or non-contractual. As I said before, the implication of the information provided by the England and Wales Cricket Board is that there would be no customary non-contractual testimonials. Is that the case in other sports? We do not know. It would be useful to understand that. We also need that information because favourable tax treatment is still being provided for that first £100,000 of non-contractual, non-customary testimonial payments.”

Kirsty Blackman, for the SNP, said she was concerned about the effect on donations to charities that would result from the sporting testimonial changes contained in the Bill. “New clause 2 requests a report on the assessment of the expected impact of “the total amounts received by individuals from sporting testimonials” which is the other concern here, and also “the donations made to charity from sporting testimonial proceeds.” If the Government are contending that there will be no change in the amount of money given to charity from sporting testimonial proceeds, it would be useful if they said that. If they believe it is unquantifiable, it would be useful if they said that too, so that we are clear what the Government expect—or what they think they expect—from the changes they are putting forward in the Bill.”

Blackman said she shared Dodds’ concern on issues around “customary”. “We could end up with people being caught by this who should not be caught, just because every single person who has played striker and spent over 10 years in that role at that club has always received a testimonial, although there might have been only two of them.”

Responding to the debate, the minister said the government expected this measure to have a minimal impact on charities. “Where the sporting testimonial committee and the sportsperson make use of payroll giving, there would be no impact whatsoever. Were an individual to receive the money themselves and then pay tax and take advantage of gift aid, there would be a different tax treatment. Obviously, that would be the choice of the individual. The sportsperson and the sporting testimonial committee could and should choose to use payroll giving, which is a very generous and unlimited relief.”

On the debate around the definition of ‘customary’, he said the guidance issued by HMRC (in relation to income tax) was thorough. “It sets out that while the concept of “customary” is not defined in legislation, it has its ordinary, everyday meaning. The guidance says that in general, “customary” means a practice that is recognisable as the norm and where a failure to observe it would be exceptional. I think that is pretty clear. That suggests that if it is normal practice, a sportsperson would have a legitimate expectation of that as part of their employment at the club, and if the sportsperson did not receive the testimonial that they were expecting, that would be an exceptional occurrence.” In response to an intervention from Dodds he said he would be happy to review the guidance and see whether more examples can be given, in relation to what the norm is defined with reference to (the norm for a whole sport, the norm for a particular club, the norm for one year, etc). Also in response to Dodds he said there are other examples of the use of the customary test in tax law and case law, one being employer accommodation.

Clauses 3 and 4 were agreed without opposition.

Extent and commencement (clause 5, amendment 1 [Blackman])

Kirsty Blackman spoke to her amendment 1, which states that the measure may not come into effect until the government has made a statement on how it intends to raise public awareness of the provisions of this Act, including awareness among people who may attend sporting testimonials that their donations may generate a National Insurance liability. “I certainly do not think that fans going through the turnstiles at such events imagine that some of their potential donations will go to HMRC,” she said. Blackman mused that, having thought of a clause on public awareness, “I might table it in every Bill Committee I sit on.” 

Robert Jenrick, replying, said it was worth remembering that any contractual testimonial is already subject to income tax, and also to employers’ and employees’ NICs, as a result of prior legislation. “Unless it was specifically advertised by the organisation holding the testimonial, there is no way today that an individual would know which of these categories their particular testimonial would fall into. I am not sure that there would be any value in specifically advertising to members of the public that we have made this change. If anything, the changes we are making in the Bill increase alignment and simplicity, and increase the number of occasions when some tax will be paid to the Exchequer when a member of the public goes to a testimonial that raises a significant sum of money.” He added that, without knowing the feelings of all sports fans, “in many cases I think they would expect that a particularly well-paid sportsperson holding the testimonial likely to raise in excess of £100,000 at the end of a successful career would be paying their fair share of tax, and that their sporting testimonial committee would be paying employers’ national insurance.” 

On the wider point of HMRC’s communication, the minister said the government regularly communicate with stakeholder groups, including representative bodies and employers, and are currently in consultation with software providers to advise them of these changes, should they become law. 

Blackman withdrew her amendment. Clause 5 was passed without opposition.

Report on Exchequer impact (new clause 3 [Blackman])

Having not been debated with any of the existing clauses, there was a short separate debate on new clause 3 at the end of the sitting. This states that the government must, within three years of this Act receiving Royal Assent, lay before Parliament a report on its Exchequer impact.

Kirsty Blackman, the proposer, explained: “When it comes to tax reliefs and such like, the Treasury says, “This is going to generate x amount of revenue for the Treasury.” We have no recourse to see whether that amount has been generated for the Exchequer. The government say they constantly keep things under review. At one point, I asked the Library to provide me with a list of the reviews that it could find for the tax relief measures that had been put in place through Finance Acts to see whether they had generated the level of revenue that was expected. A number of them had not been reviewed.”

The review she seeks should be sent to the Treasury Committee for examination, said Blackman. She  observed that she has previously criticised the lack of a link between the Treasury Committee and those who sit on Finance Bill Committees. “The Treasury Committee does a lot of very good scrutiny, but those of us on Finance Bill Committees may not see or be part of that scrutiny, and therefore, unless we go and dig out the evidence, which we find out from a colleague was given six months ago, we do not necessarily know that it exists. I have criticised the lack of a link previously. It is important that any reporting that is done is not just to the Treasury Committee. I do not suggest for a moment that the Committee is not incredibly competent and very good at its job; I am just suggesting a lack of link-up and communication.”

For Labour, Peter Dowd said he and his colleagues supported the new clause.

The minister, replying, repeated that the long-standing tradition that a new piece of legislation will be reviewed within three to five years will apply. “The review’s outcome will be in the public domain. It will be sent to the Treasury Committee. Ordinarily, it would be published on its website, and the hon. Lady or any other interested Members would be able to view it there. It will not be a private document only for the consumption of members of the Committee. I hope that will reassure her that we intend carry out a review in due course and that will be available for those who take an interest in it.”

None of the new clauses was pressed to the vote.

The committee concluded and rose at 4.01pm.

The full committee Hansard can be read here. Links to separate reports and other bill documents can be found here.