National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill (First sitting)

Bill Grant Excerpts

Tuesday 14th May 2019 Public Bill Committees

[Anneliese Dodds]

Q It would be very helpful if the Committee could have that. It would have been useful to have it before the sitting, because the description given previously by a Minister—not this Minister, I hasten to add—suggested that “customary” might apply if there was a testimonial every year for a departing player or a particular group of players. Anybody who understands a little about football—I should declare that I am the partner of a referee, so, sadly, I know it inside out—knows that it is fairly unlikely that one player would retire every year; that would be slightly strange, so it would be useful to have that guidance.

Robert Jenrick: It is in the public domain, so it was available to all Committee members, but I am happy to supply that.

[Bill Grant (Ayr, Carrick and Cumnock) (Con)]

Q It is a pleasure to serve under your chairmanship, Ms McDonagh. Testimonials are common among sports groups, and they are not necessarily confined to football—they occur in cricket, rugby and so on. One would assume that there was consultation or engagement with clubs or representative bodies. What feedback did you get from them about the changes you propose?

Robert Jenrick: our interest in reforming national insurance contributions for sporting testimonials is long-standing, as is our interest in reforming termination payments, so this measure has been considered for some time. We consulted on it. Inevitably, in the course of that, we got representations from a number of sporting bodies, and Treasury officials and Ministers met some of them. For example, my predecessor, David Gauke, who was then Financial Secretary to the Treasury and is now Lord Chancellor, met the England and Wales Cricket Board, which took a particular interest in this measure. As a result, we took the decision to increase the threshold from £50,000 to £100,000. That is a significant change. Evidence we produced in 2013 suggested that the average applicable testimonial raised around £72,000 a year, so the change will take the vast majority of testimonials out of this measure, which applies only to testimonials that bring in significant receipts.

As far as I am aware, we have not received any representations from sporting bodies since we made the changes to income tax two years ago, and we have received no further representations from sporting bodies since I introduced the Bill a few weeks ago, so I think it has been received reasonably well.

[Peter Dowd]

Q May I follow up on a point that Mr Wood made? I felt a certain amount of ambivalence about the statement that the impact on the charity sector would be minimal. Any pound whatever lost to the charity sector is a loss to the charity sector and to the community, so I am slightly worried that the attitude seems to be, “It’s not much.” It will be something. In today’s society, given austerity, any loss to the charity sector is crucial, so it would help if we firmed up at some point what we believe the loss will be.

Robert Jenrick: Perhaps I can firm that up now. If the sportsperson used payroll giving, the loss would be zero. The individual and the sporting testimonial committee need to register for payroll giving, which is available without limit. In that case, there will be no loss to the charity whatever.

--- Later in debate ---

[Kirsty Blackman]

Q Mr Ben-Nathan, have you anything to add?

Colin Ben-Nathan: Whether it is this Government or any Government, there is a need to look not just at national insurance and income tax, but—speaking as chairman of the employment taxes sub-committee—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.

We have to look at these questions; I think that the Government are looking at that. The sooner we can do that, the better, but obviously other matters are occupying us at the moment.

Bill Dodwell: The OTS is about to publish a report—on Thursday, I hope, subject to everything going well—that I think will allude to some of that difference. The biggest financial part of the equation is, of course, employers’ national insurance, which is levied on employment but clearly does not apply where there is self-employment or qualifying freelance work. That is such a major and material issue that going from zero to a lot of money would not—for any Chancellor, I am sure—be a simple solution.

[Bill Grant]

Q In relation to termination awards, the Chartered Institute of Taxation has made some negative 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?

Colin Ben-Nathan: We, as the Chartered Institute of Taxation, make points and the Government then decide what the policy will be. We have the Bill in front of us; I am sure that guidance will be issued, and I hope it is helpful. It is useful to have examples in guidance—we might come on to that in relation to other matters as well. 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.

[Bill Grant]

Q One supplementary question: will that guidance be timeously delivered to the employers or those responsible, rather than as an afterthought?

Colin Ben-Nathan: It is very much for HMRC to answer on the timing. All I would say is that if guidance is prepared in draft, the Chartered Institute of Taxation will be very happy to comment on it.

[Anneliese Dodds]

Q I am grateful to our experts for their very helpful testimony. I am sorry to return to testimonials and the concept of “customary”, but our previous witnesses suggested that there was a body of case law around it and that the concept was well understood. However, I understand that there is some concern about lack of clarity in the scope of how “customary” is defined—whether it relates to a particular team and its previous practice, or to sport as a whole. I note that there have been some high-profile football players recently who have not received testimonials when one might have been expected. I wonder whether, on your understanding, the concept is sufficiently fleshed out, or whether additional guidance might be useful.

Colin Ben-Nathan: Again, I am happy to comment from the CIOT point of view. That is 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. All those issues were raised in Reed v. Seymour in 1927, which was mentioned.

That is a difficult area and in our evidence, we made the point that if we do not legislate along those lines, it would be really helpful—I am not suggesting that it would be easy, but that is why we need to do it—to have at least some examples of what HMRC believes is and is not customary. For example, if something regularly happens to somebody and they know and expect it to happen after they have served 10 years, maybe that is customary, but what if it is not 10 years? What if it is eight years, seven years or five years? We make that point because we think it is very difficult when it comes down to it.