Budget Resolutions

David Gauke Excerpts

1st reading: House of Commons
Tuesday 14th March 2017 Commons Chamber

[The Chief Secretary to the Treasury (Mr David Gauke)]

This is a Budget that demonstrates the Government’s determination to face up to our long-term challenges. This is a Budget that recognises that the only sustainable way to improve living standards is to improve our productivity. This is a Budget that recognises that sustainable public finances are not an impediment to prosperity but a necessary precondition.

I would like to thank my hon. Friends who participated in the debate: my hon. Friends the Members for Croydon South (Chris Philp), for Gainsborough (Sir Edward Leigh), for Telford (Lucy Allan), for Warwick and Leamington (Chris White), for South Dorset (Richard Drax), for Weaver Vale (Graham Evans) and for Faversham and Mid Kent (Helen Whately).

May I say a particular word of congratulation to the hon. Member for Stoke-on-Trent Central (Gareth Snell)? I apologise for having missed his speech, but I have heard from a number of people that it was excellent, and it proves that, in terms of his attributes as a Member of Parliament, it is not only because he is not Paul Nuttall that he will be welcome in this place.

I could probably summarise the other contributions from the Opposition Benches as saying that we are not spending enough, we are taxing too much and we are borrowing too much. Thankfully, it is not my job to reconcile all of that, and I wish the hon. Member for Bootle (Peter Dowd) the best of luck—he can say it is fiscal rectitude if he likes.

An important part of this Budget has been ensuring that this country has the skills we need to grow in the 21st century. We have to face up to the fact that tomorrow’s labour market is going to look very different from today’s. One study, for example, estimates that over a third of all jobs in the UK are at high risk of replacement in the next one to two decades, as technology and society advance. Economic, social and technological change can make certain jobs or institutions obsolete: lamplighters, handloom weavers and the Hansom Cab Company—I suppose we could add the Labour party to that list.

The job of the Government is not to stand in the way of those changes, preserving the old by stifling the new; instead, our role is to prepare the country and its people to adapt to the changes ahead, and that is what this Budget was all about: giving young people the skills they will need to get ahead in tomorrow’s world. That includes expanding the programme of free schools, investing more in schools maintenance, reforming technical education, and increasing teaching hours for further education students.

Alongside that, we also took steps to help people with the opportunities to upskill and reskill throughout their working lives, as well as to help our top researchers to develop so that our brightest can become the world’s best. We are taking forward an ambitious plan to improve education across the board for people of all backgrounds and of all ages, because that, alongside our investment in the country’s underlying infrastructure, is what will count in turning the tide on Britain’s long-standing productivity problem. Only by doing that can we increase living standards and fund world-class public services.

But as we prepare a bright future for the 21st century, we do so responsibly. This was a Budget that protected and improved our health and social services, and a Budget that invested in reform for the benefit of the next generation of workers and businesses alike, but a Budget that did so by funding all the new spending commitments it made, because, unlike Labour, we do not believe in spending and promising what we cannot deliver. That means having a tax base that is capable of funding the public services we provide, and doing so in a way that is fair.

We have heard a lot about the change we made to national insurance for the self-employed, and we are listening to hon. Members’ concerns. I think we all have to recognise that the difference between the benefits received by the employed and the self-employed have narrowed but the gap in contributions has not. This means that the employed pay a lot more for the same benefits. As self-employment grows in our economy—a welcome trend—that should not place a pressure on funding public services and deficit reduction. A Government addressing long-term challenges have to address this point, not ignore it.

This is a Budget that keeps Britain working—one that invests in our people, infrastructure and public services but does so responsibly, continuing to steer the country’s course away from Labour’s “spend what you can borrow” approach to our “spend what you can afford”. In doing so, we are once again demonstrating that we are the party that is delivering for this generation but not at the expense of the next generation. That is why the House should support the Budget in the Lobby tonight.

Question put and agreed to.

Resolved,

(1) That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.

(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—

(a) for zero-rating or exempting a supply, acquisition or importation;

(b) for refunding an amount of tax;

(c) for any relief, other than a relief that—

(i) so far as it is applicable to goods, applies to goods of every description, and

(ii) so far as it is applicable to services, applies to services of every description.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

I am now required under Standing Order No. 51(3) to put successively, without further debate, the Question on each of the Ways and Means motions numbered 2 to 46, and on the motions on procedure numbered 47 to 51, on all of which a Bill is to be brought in. These motions are set out in a separate paper distributed with today’s Order Paper.

I must inform the House that for the purposes of Standing Order No. 83U and on the basis of material put before him, Mr Speaker has certified that in his opinion the following founding motions published on 8 March 2017 and to be moved by the Chancellor of the Exchequer relate exclusively to England, Wales and Northern Ireland and are within devolved legislative competence: 3, Income Tax (main rates); and 36, Landfill tax.

The Deputy Speaker put forthwith the Questions necessary to dispose of the motions made in the name of the Chancellor of the Exchequer (Standing Order No. 51(3)).

2. Income tax (charge)

Resolved,

That income tax is charged for the tax year 2017-18.

And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

3. Income tax (main rates)

Resolved,

That for the tax year 2017-18 the main rates of income tax are as follows—

(a) the basic rate is 20%,

(b) the higher rate is 40%, and

(c) the additional rate is 45%.

And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

4. Income tax (default and savings rates)

Resolved,

That—

(1) For the tax year 2017-18 the default rates of income tax are as follows—

(a) the default basic rate is 20%,

(b) the default higher rate is 40%, and

(c) the default additional rate is 45%.

(2) For the tax year 2017-18 the savings rates of income tax are as follows—

(a) the savings basic rate is 20%,

(b) the savings higher rate is 40%, and

(c) the savings additional rate is 45%.

And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

5. Income tax (savings rate limit)

Resolved,

That—

(1) For the amount specified in section 12(3) of the Income Tax Act 2007 (starting rate for savings) substitute “£5000”.

(2) The amendment made by this Resolution has effect for the tax year 2017-18 and subsequent tax years. (3) Section 21 of the Income Tax Act 2007 (indexation), so far as relating to the starting rate limit for savings, does not apply in relation to the tax year 2017-18 (but this Resolution does not override that section for subsequent tax years).

And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968

6. Corporation tax (charge for financial year 2018)

Resolved,

That corporation tax is charged for the financial year 2018.

7. PUBLIC SECTOR OFF-PAYROLL WORKERS

Resolved,

That—

(1) The Income Tax (Earnings and Pensions) Act 2003 is amended as follows.

(2) In section 7(5)(a) (amounts treated as earnings by Chapters 7 to 9 of Part 2 are “employment income” and “general earnings”), for “9” substitute “10”.

(3) In section 48 (scope of Chapter 8 of Part 2: workers’ services provided through intermediaries)—

(a) In subsection (1), after “through an intermediary” insert “, but not where the services are provided to a public authority”, and

(b) after subsection (2) insert—

“(3) In this Chapter “public authority” has the same meaning as in Chapter 10 of this Part (see section 61L).”

(4) In section 49 (engagements to which Chapter 8 of Part 2 applies)—

(a) in subsection (1), after paragraph (a) insert—

“(aa) the client is not a public authority,”, and

(b) after subsection (4) insert—

“(4A) Holding office as statutory auditor of the client does not count as holding office under the client for the purposes of subsection (1)(c), and here “statutory auditor” means a statutory auditor within the meaning of Part 42 of the Companies Act 2006 (see section 1210 of that Act).”

(5) In section 52(2)(b) and (c) (conditions of liability under Chapter 8 where intermediary is a partnership), for “this Chapter” substitute “one or other of this Chapter and Chapter 10”.

(6) In section 61(1) (interpretation of Chapter 8), before the definition of “engagement to which this Chapter applies” insert—

““engagement to which Chapter 10 applies” has the meaning given by section 61M(5);”.

(7) In section 61A (scope of Chapter 9 of Part 2: workers’ services provided by managed service companies), after subsection (2) insert—

“(3) See also section 61D(4A) (disapplication of this Chapter if Chapter 10 applies).”

(8) In section 61D (deemed earnings where worker’s services provided by managed service company), after subsection (4) insert—

“(4A) This section does not apply where the provision of the relevant services gives rise (directly or indirectly) to an engagement to which Chapter 10 applies, and for this purpose it does not matter whether the client is also “the client” for the purposes of section 61M(1).”

(9) In section 61J(1) (interpretation of Chapter 9), before the definition of “managed service company” insert—

““engagement to which Chapter 10 applies” has the meaning given by section 61M(5),”.

(10) In Part 2 (employment income: charge to tax), after Chapter 9 insert—

“Chapter 10

workers’ services provided to public sector through intermediaries

61K Scope of this Chapter

(1) This Chapter has effect with respect to the provision of services to a public authority through an intermediary.

(2) Nothing in this Chapter—

(a) affects the operation of Chapter 7 of this Part (agency workers), or

(b) applies to payments or transfers to which section 966(3) or (4) of ITA 2007 applies (visiting performers: duty to deduct and account for sums representing income tax).

61L Meaning of “public authority”

(1) In this Chapter “public authority” means—.

(a) a public authority as defined by the Freedom of Information Act 2000,

(b) a Scottish public authority as defined by the Freedom of Information (Scotland) Act 2002 (asp 13),

(c) the Corporate Officer of the House of Commons,

(d) the Corporate Officer of the House of Lords,

(e) the National Assembly for Wales Commission, or

(f) the Northern Ireland Assembly Commission.

(2) An authority within paragraph (a) or (b) of subsection (1) is a public authority for the purposes of this Chapter in relation to all its activities even if provisions of the Act mentioned in that paragraph do not apply to all information held by the authority.

61M Engagements to which Chapter applies

(1) Sections 61N to 61R apply where—

(a) an individual (“the worker”) personally performs, or is under an obligation personally to perform, services for another person (“the client”),

(b) the client is a public authority,

(c) the services are provided not under a contract directly between the client and the worker but under arrangements involving a third party (“the intermediary”), and

(d) the circumstances are such that—

(i) if the services were provided under a contract directly between the client and the worker, the worker would be regarded for income tax purposes as an employee of the client or the holder of an office under the client, or

(ii) the worker is an office-holder who holds that office under the client and the services relate to the office.

(2) The reference in subsection (1)(c) to a “third party” includes a partnership or unincorporated association of which the worker is a member.

(3) The circumstances referred to in subsection (1)(d) include the terms on which the services are provided, having regard to the terms of the contracts forming part of the arrangements under which the services are provided.

(4) Holding office as statutory auditor of the client does not count as holding office under the client for the purposes of subsection (1)(d), and here “statutory auditor” means a statutory auditor within the meaning of Part 42 of the Companies Act 2006 (see section 1210 of that Act).

(5) In this Chapter “engagement to which this Chapter applies” means any such provision of services as is mentioned in subsection (1).

61N Worker treated as receiving earnings from employment

(1) If one of Conditions A to C is met, identify the chain of two or more persons where—

(a) the highest person in the chain is the client,

(b) the lowest person in the chain is the intermediary, and

(c) each person in the chain above the lowest makes a chain payment to the person immediately below them in the chain.

(See section 61U for cases where one of Conditions A to C is treated as being met.).

(2) In this section and sections 61O to 61S—

“chain payment” means a payment, or money’s worth or any other benefit, that can reasonably be taken to be for the worker’s services to the client,

“make”—

(a) in relation to a chain payment that is money’s worth, means transfer, and

(b) in relation to a chain payment that is a benefit other than a payment or money’s worth, means provide, and”

“the fee-payer” means the person in the chain immediately above the lowest.

(3) The fee-payer is treated as making to the worker, and the worker is treated as receiving, a payment which is to be treated as earnings from an employment (“the deemed direct payment”), but this is subject to subsections (5) to (7) and sections 61T and 61V.

(4) The deemed direct payment is treated as made at the same time as the chain payment made by the fee-payer.

(5) Subsections (6) and (7) apply, subject to sections 61T and 61V, if the fee-payer—

(a) is not the client, and

(b) is not a qualifying person

(6) If there is no person in the chain below the highest and above the lowest who is a qualifying person, subsections (3) and (4) have effect as if for any reference to the fee-payer there were substituted a reference to the client.

(7) Otherwise, subsections (3) and (4) have effect as if for any reference to the fee-payer there were substituted a reference to the person in the chain who—

(a) is above the lowest,

(b) is a qualifying person, and

(c) is lower in the chain than any other person in the chain who—

(i) is above the lowest, and

(ii) is a qualifying person.

(8) In subsections (5) to (7) a “qualifying person” is a person who—

(a) is resident in the United Kingdom or has a place of business in the United Kingdom,

(b) is not a person who is controlled by—

(i) the worker, alone or with one or more associates of the worker, or

(ii) an associate of the worker, with or without other associates of the worker, and

(c) if a company, is not one in which—

(i) the worker, alone or with one or more associates of the worker, or

(ii) an associate of the worker, with or without other associates of the worker,

has a material interest (within the meaning given by section 51(4) and (5)).

(9) Condition A is that—

(a) the intermediary is a company, and

(b) the conditions in section 61O are met in relation to the intermediary.

(10) Condition B is that—

(a) the intermediary is a partnership,

(b) the worker is a member of the partnership,

(c) the provision of the services is by the worker as a member of the partnership, and

(d) the condition in section 61P is met in relation to the intermediary.

(11) Condition C is that the intermediary is an individual.

(12) Where a payment, money’s worth or any other benefit can reasonably be taken to be for both—

(a) the worker’s services to the client, and

(b) anything else,

then, for the purposes of this Chapter, so much of it as can, on a just and reasonable apportionment, be taken to be for the worker’s services is to be treated as (and the rest is to be treated as not being) a payment, or money’s worth or another benefit, that can reasonably be taken to be for the worker’s services.

61O Conditions where intermediary is a company

(1) The conditions mentioned in section 61N(9)(b) are that—

(a) the intermediary is not an associated company of the client that falls within subsection (2), and

(b) the worker has a material interest in the intermediary.

(2) An associated company of the client falls within this subsection if it is such a company by reason of the intermediary and the client being under the control—

(a) of the worker, or

(b) of the worker and other persons.

(3) The worker is treated as having a material interest in the intermediary if—

(a) the worker, alone or with one or more associates of the worker, or

(b) an associate of the worker, with or without other associates of the worker,

has a material interest in the intermediary.

(4) For this purpose “material interest” has the meaning given by section 51(4) and (5).

(5) In this section “associated company” has the meaning given by section 449 of CTA 2010.

61P Conditions where intermediary is a partnership

(1) The condition mentioned in section 61N(10)(d) is—

(a) that the worker, alone or with one or more relatives, is entitled to 60% or more of the profits of the partnership, or

(b) that most of the profits of the partnership derive from the provision of services under engagements to which one or other of this Chapter and Chapter 8 applies—

(i) to a single client, or

(ii) to a single client together with associates of that client, or

(c) that under the profit sharing arrangements the income of any of the partners is based on the amount of income generated by that partner by the provision of services under engagements to which one or other of this Chapter and Chapter 8 applies.

(2) In subsection (1)(a) “relative” means spouse or civil partner, parent or child or remoter relation in the direct line, or brother or sister.

(3) Section 61(4) and (5) apply for the purposes of this section as they apply for the purposes of Chapter 8.

61Q Calculation of deemed direct payment

(1) The amount of the deemed direct payment is the amount resulting from the following steps—

Step 1

Identify the amount or value of the chain payment made by the person who is treated as making the deemed direct payment, and deduct from that amount so much of it (if any) as is in respect of value added tax.

Step 2

Deduct, from the amount resulting from Step 1, so much of that amount as represents the direct cost to the intermediary of materials used, or to be used, in the performance of the services.

Step 3

Deduct, at the option of the person treated as making the deemed direct payment, from the amount resulting from Step 2, so much of that amount as represents expenses met by the intermediary that would have been deductible from the taxable earnings from the employment if—

(a) the worker had been employed by the client, and

(b) the expenses had been met by the worker out of those earnings.

Step 4

If the amount resulting from the preceding Steps is nil or negative, there is no deemed direct payment. Otherwise, that amount is the amount of the deemed direct payment.

(2) For the purposes of Step 1 of subsection (1), any part of the amount or value of the chain payment which is employment income of the worker by virtue of section 863G(4) of ITTOIA 2005 (salaried members of limited liability partnerships: anti-avoidance) is to be ignored.

(3) In subsection (1), the reference to the amount or value of the chain payment means the amount or value of that payment before the deduction (if any) permitted under section 61S.

(4) If the actual amount or value of the chain payment mentioned in Step 1 of subsection (1) is such that its recipient bears the cost of amounts due under PAYE regulations or contributions regulations in respect of the deemed direct payment, that Step applies as if the amount or value of that chain payment were what it would be if the burden of that cost were not being passed on through the setting of the level of the payment.

(5) In Step 3 of subsection (1), the reference to expenses met by the intermediary includes—

(a) expenses met by the worker and reimbursed by the intermediary, and

(b) where the intermediary is a partnership and the worker is a member of the partnership, expenses met by the worker for and on behalf of the partnership.

(6) In subsection (4) “contributions regulations” means regulations under the Contributions and Benefits Act providing for primary Class 1 contributions to be paid in a similar manner to income tax in relation to which PAYE regulations have effect (see, in particular, paragraph 6(1) of Schedule 1 to the Act); and here “primary Class 1 contribution” means a primary Class 1 contribution within the meaning of Part 1 of the Contributions and Benefits Act.

61R Application of Income Tax Acts in relation to deemed employment

(1) The Income Tax Acts (in particular, Part 11 and PAYE regulations) apply in relation to the deemed direct payment as follows.

(2) They apply as if—

(a) the worker were employed by the person treated as making the deemed direct payment, and

(b) the services were performed, or to be performed, by the worker in the course of performing the duties of that employment.

(3) The deemed direct payment is treated in particular—

(a) as taxable earnings from the employment for the purpose of securing that any deductions under Chapters 2 to 6 of Part 5 do not exceed the deemed direct payment, and

(b) as taxable earnings from the employment for the purposes of section 232.

(4) The worker is not chargeable to tax in respect of the deemed direct payment if, or to the extent that, by reason of any combination of the factors mentioned in subsection (5), the worker would not be chargeable to tax if—

(a) the client employed the worker,

(b) the worker performed the services in the course of that employment, and

(c) the deemed direct payment were a payment by the client of earnings from that employment.

(5) The factors are—

(a) the worker being resident or domiciled outside the United Kingdom or meeting the requirement of section 26A,

(b) the client being resident outside, or not resident in, the United Kingdom, and

(c) the services being provided outside the United Kingdom.

(6) Where the intermediary is a partnership or unincorporated association, the deemed direct payment is treated as received by the worker in the worker’s personal capacity and not as income of the partnership or association.

(7) Where—.

(a) the client is the person treated as making the deemed direct payment,

(b) the worker is resident in the United Kingdom,

(c) the services are provided in the United Kingdom,

(d) the client is not resident in the United Kingdom, and

(e) the client does not have a place of business in the United Kingdom,

the client is treated as resident in the United Kingdom.

61S Deductions from chain payments

(1) This section applies if, as a result of section 61R, a person who is treated as making a deemed direct payment is required under PAYE Regulations to pay an amount to the Commissioners for Her Majesty’s Revenue and Customs (the Commissioners) in respect of the payment.

(But see subsection (4)).

(2) The person may deduct from the underlying chain payment an amount which is equal to the amount payable to the Commissioners, but where the amount or value of the underlying chain payment is treated by section 61Q(4) as increased by the cost of any amount due under PAYE Regulations, the amount that may be deducted is limited to the difference (if any) between the amount payable to the Commissioners and the amount of that increase.

(3) Where a person in the chain other than the intermediary receives a chain payment from which an amount has been deducted in reliance on subsection (2) or this subsection, that person may deduct the same amount from the chain payment made by them.

(4) This section does not apply in a case to which 61V(2) applies (services-provider treated as making deemed direct payment).

(5) In subsection (2) “the underlying chain payment” means the chain payment whose amount is used at Step 1 of section 61Q(1) as the starting point for calculating the amount of the deemed direct payment.

61T Information to be provided by clients and consequences of failure

(1) If the conditions in section 61M(1)(a) to (1)(c) are met in any case, and a person as part of the arrangements mentioned in section 61M(1)(c) enters into a contract with the client, the client must inform that person (in the contract or otherwise) of which one of the following is applicable—

(a) the client has concluded that the condition in section 61M(1)(d) is met in the case;

(b) the client has concluded that the condition in section 61M(1)(d) is not met in the case.

(2) If the contract is entered into on or after 6 April 2017, the duty under subsection (1) must be complied with—

(a) on or before the time of entry into the contract, or

(b) if the services begin to be performed at a later time, before that later time.

(3) If the contract is entered into before 6 April 2017, the duty under subsection (1) must be complied with on or before the date of the first payment made under the contract on or after 6 April 2017.

(4) If the information which subsection (1) requires the client to give to a person has been given (whether in the contract, as required by subsection (2) or (3) or otherwise), the client must, on a written request by the person, provide the person with a written response to any questions raised by the person about the client’s reasons for reaching the conclusion identified in the information.

(5) A response required by subsection (4) must be provided before the end of 31 days beginning with the day the request for it is received by the client.

(6) If—

(a) the client fails to comply with the duty under subsection (1) within the time allowed by subsection (2) or (3),

(b) the client fails to provide a response required by subsection (4) within the time allowed by subsection (5), or

(c) the client complies with the duty under subsection (1) but fails to take reasonable care in coming to its conclusion as to whether the condition in section 61M(1)(d) is met in the case,

section 61N(3) and (4) have effect in the case as if for any reference to the fee-payer there were substituted a reference to the client, but this is subject to section 61V.

61U Information to be provided by worker and consequences of failure

(1) In the case of an engagement to which this Chapter applies, the worker must inform the potential deemed employer of which one of the following is applicable—

(a) that one of conditions A to C in section 61N is met in the case,

(b) that none of conditions A to C in section 61N is met in the case

(2) If the worker has not complied with subsection (1), then for the purposes of section 61N(1), one of conditions A to C in section 61N is to be treated as met.

(3) In this section, “the potential deemed employer” is the person who, if one of conditions A to C in section 61N were met, would be treated as making a deemed direct payment to the worker under section 61N(3).

61V Consequences of providing fraudulent information

(1) Subsection (2) applies if in any case—

(a) a person (“the deemed employer”) would, but for this section, be treated by section 61N(3) as making a payment to another person (“the services-provider”), and

(b) the fraudulent documentation condition is met.

(2) Section 61N(3) has effect in the case as if the reference to the fee-payer were a reference to the services-provider, but—

(a) section 61N(4) continues to have effect as if the reference to the fee-payer were a reference to the deemed employer, and

(b) Step 1 of section 61Q(1) continues to have effect as referring to the chain payment made by the deemed employer.

(3) Subsection (2) has effect even though that involves the services-provider being treated as both employer and employee in relation to the deemed employment under section 61N(3).

(4) “The fraudulent documentation condition” is that a relevant person provided any person with a fraudulent document intended to constitute evidence—

(a) that the case is not an engagement to which this Chapter applies, or

(b) that none of conditions A to C in section 61N is met in the case.

(5) A “relevant person” is—

(a) the services-provider;

(b) a person connected with the services-provider;

(c) if the intermediary in the case is a company, an office-holder in that company.

61W Prevention of double charge to tax and allowance of certain deductions

(1) Subsection (2) applies where—

(a) a person (“the payee”) receives a payment or benefit (“the end-of-line remuneration”) from another person (“the paying intermediary”),

(b) the end-of-line remuneration can reasonably be taken to represent remuneration for services of the payee to a public authority,

(c) a payment (“the deemed payment”) has been treated by section 61N(3) as made to the payee,

(d) the underlying chain payment can reasonably be taken to be for the same services of the payee to that public authority, and

(e) the recipient of the underlying chain payment has (whether by deduction from that payment or otherwise) borne the cost of any amounts due, under PAYE regulations and contributions regulations in respect of the deemed payment, from the person treated by section 61N(3) as making the deemed payment.

(2) For income tax purposes, the paying intermediary and the payee may treat the amount of the end-of-line remuneration as reduced (but not below nil) by any one or more of the following—

(a) the amount (see section 61Q) of the deemed payment;

(b) the amount of any capital allowances in respect of expenditure incurred by the paying intermediary that could have been deducted from employment income under section 262 of CAA 2001 if the payee had been employed by the public authority and had incurred the expenditure;

(c) the amount of any contributions made, in the same tax year as the end-of-line payment, for the benefit of the payee by the paying intermediary to a registered pension scheme that if made by an employer for the benefit of an employee would not be chargeable to income tax as income of the employee.

(3) Subsection (2)(c) does not apply to—

(a) excess contributions paid and later repaid,

(b) contributions set under subsection (2) against another payment by the paying intermediary, or

(c) contributions deductible at Step 5 of section 54(1) in calculating the amount of the payment (if any) treated by section 50 as made in the tax year concerned by the paying intermediary to the payee.

(4) For the purposes of subsection (3)(c), the contributions to which Step 5 of section 54(1) applies in the case of the particular calculation are “deductible” at that Step so far as their amount does not exceed the result after Step 4 in that calculation.

(5) In subsection (1)(d) “the underlying chain payment” means the chain payment whose amount is used at Step 1 of section 61Q(1) as the starting point for calculating the amount of the deemed payment.

(6) Subsection (2) applies whether the end-of-line remuneration—

(a) is earnings of the payee,

(b) is a distribution of the paying intermediary, or

(c) takes some other form.

61X Interpretation

In this Chapter—

“associate” has the meaning given by section 60;

“company” means a body corporate or unincorporated association, and does not include a partnership;

“engagement to which Chapter 8 applies” has the meaning given by section 49(5).”

(11) In section 339A (travel for employment involving intermediaries), after subsection (6) insert—

“(6A) Subsection (3) does not apply in relation to an engagement if—

(a) sections 61N to 61R in Chapter 10 of Part 2 apply in relation to the engagement,

(b) one of Conditions A to C in section 61N is met in relation to the employment intermediary, and

(c) the employment intermediary is not a managed service company.

(6B)This section does not apply in relation to an engagement if—

(a) sections 61N to 61R in Chapter 10 of Part 2 do not apply in relation to the engagement because the circumstances in section 61M(l)(d) are not met,

(b) assuming those circumstances were met, one of Conditions A to C in section 61N would be met in relation to the employment intermediary, and

(c) the employment intermediary is not a managed service company.

(6C) In determining for the purposes of subsection (6A) or (6B) whether one of Conditions A to C in section 61N is or would be met in relation to the employment intermediary, read references to the intermediary as references to the employment intermediary.”

(12) The amendments made by paragraphs 2 to 9 and 11 of this Resolution have effect for the tax year 2017-18 and subsequent tax years.

(13) The amendment made by paragraph 10 of this Resolution has effect in relation to deemed direct payments treated as made on or after 6 April 2017, and does so even if relating to services provided before that date.

And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

8. Optional remuneration arrangements

Resolved,

That—

(1) In Part 3 of the Income Tax (Earnings and Pensions) Act 2003 (employment income: earnings and benefits etc treated as earnings), in Chapter 2 (taxable benefits: the benefits code), after section 69 insert—

“69A Optional remuneration arrangements

(1) Subsections (2) to (7) have effect for the purposes of the benefits code.

(2) A benefit provided for an employee is provided under “optional remuneration arrangements” so far as it is provided under arrangements of type A or B (regardless of whether those arrangements are made before or after the beginning of the person’s employment).

(3) “Type A arrangements” are arrangements under which, in return for the benefit, the employee gives up the right (or a future right) to receive an amount of earnings within Chapter 1 of Part 3.

(4) “Type B arrangements” are arrangements (other than type A arrangements) under which the employee agrees to be provided with the benefit rather than an amount of earnings within Chapter 1 of Part 3.

(5) A benefit provided for an employee is to be regarded as provided under optional remuneration arrangements (whether of type A or type B) so far as it is just and reasonable to attribute the provision of the benefit to the arrangements in question.

(6) Where a benefit is provided for an employee under any arrangements, the mere fact that under the arrangements the employee makes good, or is required to make good, any part of the cost of provision is not to be taken to show that the benefit is (to any extent) provided otherwise than under optional remuneration arrangements.

(7) Where a benefit is provided for an employee partly under optional remuneration arrangements and partly otherwise than under such arrangements, the benefits code is to apply with any modifications (including provision for just and reasonable apportionments) that may be required for ensuring that the benefit is treated—

(a) in accordance with the relevant provision in the column 2 of the table so far as it is provided under optional remuneration arrangements, and

(b) in accordance with the relevant provision in column 1 of the table so far as it is provided otherwise than under such arrangements.