PARLIAMENTARY DEBATES HOUSE OF COMMONS OFFICIAL REPORT GENERAL COMMITTEES Public Bill Committee NATIONAL INSURANCE CONTRIBUTIONS (TERMINATION AWARDS AND SPORTING TESTIMONIALS) BILL First Sitting Tuesday 14 May 2019 (Morning) CONTENTS Programme motion agreed to. Written evidence (Reporting to the House) motion agreed to. Motion to sit in private agreed to. Examination of witnesses. Adjourned till this day at Two o’clock. PBC (Bill 381) 2017 - 2019 No proofs can be supplied. Corrections that Members suggest for the final version of the report should be clearly marked in a copy of the report—not telephoned—and must be received in the Editor’s Room, House of Commons, not later than Saturday 18 May 2019 © Parliamentary Copyright House of Commons 2019 This publication may be reproduced under the terms of the Open Parliament licence, which is published at www.parliament.uk/site-information/copyright/. 1 Public Bill Committee 14 MAY 2019 N.I.Contributions (Termination 2 Awards and Sporting Testimonials)Bill The Committee consisted of the following Members: Chairs: SIR HENRY BELLINGHAM,†SIR ROGER GALE,†SIOBHAIN MCDONAGH † Blackman, Kirsty (Aberdeen North) (SNP) † Russell-Moyle, Lloyd (Brighton, Kemptown) (Lab/ † Cartlidge, James (South Suffolk) (Con) Co-op) † Dodds, Anneliese (Oxford East) (Lab/Co-op) † Scully, Paul (Sutton and Cheam) (Con) † Dowd, Peter (Bootle) (Lab) † Smith, Jeff (Manchester, Withington) (Lab) † Smith, Laura (Crewe and Nantwich) (Lab) † Grant, Bill (Con) (Ayr, Carrick and Cumnock) † Tomlinson, Michael (Mid Dorset and North Poole) † Hughes, Eddie (Walsall North) (Con) (Con) † Jenrick, Robert (Exchequer Secretary to the † Walker, Thelma (Colne Valley) (Lab) Treasury) † Wood, Mike (Dudley South) (Con) † Knight, Julian (Solihull) (Con) Mike Everett, † Milling, Amanda (Cannock Chase) (Con) Committee Clerk † Morris, Grahame (Easington) (Lab) † attended the Committee Witnesses Robert Jenrick MP, Exchequer Secretary, HM Treasury Simon Smith, Senior Policy Adviser, HM Treasury Raj Nayyar OBE, Bill Manager and National Insurance Contributions Policy Adviser, Her Majesty’s Revenue and Customs Bill Dodwell, Tax Director, Office of Tax Simplification Colin Ben-Nathan, Chair, Employment Taxes Sub-committee, Chartered Institute of Taxation 3 Public Bill Committee HOUSE OF COMMONS N.I.Contributions (Termination 4 Awards and Sporting Testimonials)Bill Public Bill Committee Examination of Witnesses Robert Jenrick MP,Simon Smith and Raj Nayyar OBE Tuesday 14 May 2019 gave evidence. (Morning) 9.28 am The Chair: Good morning to those who have just [SIR ROGER GALE in the Chair] joined us. We now resume our public sitting and hear evidence from the Treasury.Before I call the first Member, National Insurance Contributions I remind all Members and witnesses that questions and (Termination Awards and Sporting answers should be limited to matters within the scope of Testimonials) Bill the Bill. Please also recognise that we must stick to the timings in the programme order that the Committee has 9.25 am agreed. The Chair: Good morning, ladies and gentlemen. The scope of the Bill is quite narrow. Essentially, the You will have noticed that I am not your Chairman, but Bill introduces a new class 1A national insurance I am for the moment; I hope the Chairman will arrive contribution on termination awards in excess of £30,000, in due course. In the meantime, I have a couple of and a new class 1A national insurance contribution on announcements before we start: please turn off your sporting testimonial payments over £100,000. Could mobile phones and anything else electronic that makes Members and witnesses try to keep their comments a noise, and please remember that tea and coffee are not focused on the scope of the Bill, which is not about allowed in the room during sittings. general reform of national insurance? We will consider first the programme motion on the Do any members of the Committee wish to declare amendment paper,then the motion to enable the reporting any interests before we proceed? of written evidence for publication, and then the motion to allow us to deliberate in private about our questions Mike Wood (Dudley South) (Con): I declare an interest before the oral evidence session. In view of the time as vice-chair of the all-party parliamentary group on available, I hope we can take those matters formally, football. without debate. I call the Minister to move the programme motion in his name, which I gather was discussed yesterday by the Programming Sub-Committee. The Chair: Thank you. The understudy will now hand over to the Chairman. Ordered, That— (1) the Committee shall (in addition to its first meeting at [SIOBHAIN MCDONAGH in the Chair] 9.25 am on Tuesday 14 May) meet— (a) at 2.00 pm on Tuesday 14 May; The Chair: I apologise to all members of the Committee (b) at 11.30 am and 2.00 pm on Thursday 16 May; for being late. Things have conspired against me! (2) the Committee shall hear oral evidence in accordance with the following Table: I call the first panel. I remind the Committee that we have until 10.25 am for this session. Will the witnesses TABLE please introduce themselves? Robert Jenrick: Good morning. It is a pleasure to Date Time Witness serve under your chairmanship. I am Robert Jenrick, Exchequer Secretary to the Treasury. Tuesday 14 May Until no later than HM Treasury 10.25 am Simon Smith: I am Simon Smith, head of national Tuesday 14 May Until no later than Office of Tax insurance contributions policy at the Treasury. 11.25 am Simplification; Raj Nayyar: I am Raj Nayyar, Bill manager for Her Chartered Institute Majesty’s Revenue and Customs, and national insurance of Taxation contributions policy adviser. (3) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00 pm on The Chair: Thank you. I call Peter Dowd. Thursday 16 May.—(Robert Jenrick.) Q1 Peter Dowd (Bootle) (Lab): Thank you. It is a The Chair: That means that all the deadlines for pleasure to see you in the Chair, Ms McDonagh. amendments to be considered during line-by-line scrutiny have now passed. Minister,on publishing its report of 14 November 2016, Resolved, the then chair of the Office of Tax Simplification, That, subject to the discretion of the Chair, any written evidence Angela Knight, said: received by the Committee shall be reported to the House for “Our independent review has demonstrated...that some will publication.—(Robert Jenrick.) gain and others will lose from any change.” Resolved, Could you tell us who gains and who loses as a result of That, at this and any subsequent meeting at which oral evidence these proposals? is to be heard, the Committee shall sit in private until the witnesses Robert Jenrick: Are you speaking in relation to are admitted.—(Robert Jenrick.) termination payments? 9.27 am The Committee deliberated in private. Peter Dowd: Yes, termination payments. 5 Public Bill Committee 14 MAY 2019 N.I.Contributions (Termination 6 Awards and Sporting Testimonials)Bill Robert Jenrick: First, the most important point to I know that, on Second Reading, you raised the make is that we have chosen only to apply national question of whether we could have chosen an alternative insurance contributions class 1A to employers’ national class, or created a new class altogether. We chose not to insurance contributions, not to employees, although I create a new class altogether because that would have appreciate the argument that could be put forward that gone against the grain of what we were trying to do. Far that will impact on the total settlement made to employees from simplifying national insurance in a modest way, when an employer looks at the package they are to that would have made it more complicated. Class 1 receive on termination. The evidence we have seen national insurance contributions are somewhat different, suggests that it will have a very limited impact on wages, because that is both employers and employees. which was a point that you raised on Second Reading, As I said in answer to your first question, we specifically Mr Dowd—around 0.01% impact. chose to apply only employers’ national insurance in In terms of who will bear the cost, the vast majority this situation, not employees’ as well, which, of course, of termination payments will be exempt. Around 80% of we could have done. That would have simply been an individuals receiving a termination payment will not be additional charge that individuals had to pay. We chose affected by the measure. There is already a generous not to do that. We gave it considerable thought and threshold of £30,000, which compares very favourably came to the conclusion that class 1A was the most internationally. There is no income tax payable before logical one to apply this through. I think that has been that point, and even with this measure, there will be no widely recognised. I do not know whether Raj has employers’ national insurance payable—it will only be anything to add. on payments above that. Because of that, we anticipate Raj Nayyar: The only thing I would add is that when that the proposals will affect higher income groups. there is a cash payment—a termination award—for The best estimate that Her Majesty’s Revenue and income tax, it is currently collected through pay-as-you-earn. Customs and the Treasury have made is that it will It is reported in real time and paid either monthly or impact the top two or three income deciles. It will have a quarterly, depending on the size of the employer. For a very limited impact on low or middle-income earners. 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.