NICs Act passes as peers step back from confrontation over amendments

Opening a short debate in the House of Lords on Monday 14 March, government whip Viscount Younger of Leckie explained to peers that the Commons had rejected both amendments on the grounds of ‘financial privilege’. This refers to the special right of the Commons to decide public taxes and public spending. It may be used by the Commons as grounds for overruling any House of Lords proposal that has cost implications.

The first of the amendments was a Lib Dem-sponsored proposal that freeport national insurance contributions (NICs) relief would be available only if the freeport governance body maintained a public record of beneficial ownership of businesses operating in the freeport tax site.

Younger said that this amendment was unnecessary because a separate Economic Crime Bill to crack down further on illicit money and corrupt elites in the UK, which includes a register of overseas entities’ beneficial ownership of UK property and reform of unexplained wealth orders, was going through Parliament. (This also passed into law on Monday.) He also said there are further legislation planned which includes fundamental reform of Companies House and separate new dedicated ‘kleptocracy’ cell in the National Crime Agency.

Younger insisted that freeports are secure from money laundering, fraud and other illicit activities because freeport customs sites remain under customs control and freeports will have to adhere to the OECD code of conduct for clean free trade zones and to UK money laundering regulations. Also the Government requires each freeport governance body to undertake ‘reasonable efforts’ to verify the beneficial owner of businesses operating within the freeport tax site and to make the information available to HMRC, law enforcement agencies and other relevant public bodies.

Lib Dem Lords Treasury spokesperson Baroness Kramer countered that if there is to be a register of beneficial ownership of businesses in a freeport, uploading that to a public website rather than the internal site essentially has no cost difference. Her argument was that the amendment would have reduced the demand on the public purse and it would have reduced the demand for public spending. She was confused as to ‘why denying to criminals and money launderers various tax exemptions and reductions in national insurance payments is considered to be an issue of public revenue and therefore a reason for not including this particular measure’?

The other amendment overturned by the Commons was from Labour and would have provided the Treasury with an additional power to amend the period in which an employer can apply a zero rate of secondary class 1 NICs to a veteran’s employment. Viscount Younger said this was unnecessary because there are existing levers within the Bill, such as increasing the upper secondary threshold and extending the overall period of the relief.

A disappointed Labour Treasury spokesperson Lord Tunnicliffe said: “Our amendment did not compel the Government to do anything. It merely gave ministers the option of extending the 12-month relief, if that would have had a beneficial impact on veterans’ employment and retention.” In that light, he could not understand why government MPs voted against it.

However, Tunnicliffe said, the House of Lords had fulfilled its scrutiny role and, having done so, he suggested the time had come to let the elected House prevail on these matters.

Peers agreed without a vote not to insist upon their two amendments. The Bill passed and gained Royal Assent later the same day.

The transcript of the short session is  here.

By Hamant Verma, CIOT Senior External Relations Officer