The government has published the National Insurance Contributions Bill, which legislates reliefs for employers of veterans and those operating in Freeports, as well as for the self-employed isolating due to COVID-19. The Bill will also enable upcoming changes to the DOTAS scheme to apply to national insurance avoidance.
Announced in the Queen’s speech, the National Insurance Contributions Bill was laid before the House of Commons on 12 May as HMRC published guidance on its measures.
The Bill legislates reliefs on employers’ national insurance contributions (NIC) aimed at encouraging businesses to operate in the UK’s new Freeports and boosting the employment of UK military veterans.
Measures also align NI treatment of COVID isolation payments for the self-employed with those that are employed and will enable the changes to the Disclosure of Tax Avoidance Schemes (DOTAS) regime outlined in Finance Bill 2021 to apply to cases of NI avoidance.
NIC holiday for employers of veterans
Delivering a Budget 2020 pledge, the Bill confirms in law that organisations employing former UK military personnel in the first 12 months of their civilian career can claim an NIC holiday on secondary Class 1 NICs on earnings above the Secondary Threshold.
The relief was introduced on 6 April 2021 but claims in the first year must be made manually.
Reliefs for employers in Freeports
Announced in February 2020, eight Freeports are being created across the UK as post-Brexit trade hubs. Following consultations in 2020, the Chancellor announced in his 2021 Budget that employers within Freeports would benefit from NIC reliefs.
The Bill confirms that from April 2022, organisations with employees spending 60% or more of their time in a Freeport site will be eligible for relief on secondary Class 1 NICs for 36 months. The relief will be available to new employees earning up to £25,000 per annum.
The Bill also ensures that where an employer makes no secondary NI contributions in respect of an employee because of the Freeports or veterans relief, the employee’s earnings are nevertheless taken into account for the purposes of calculating apprenticeship levy.
COVID support for self-employed
Following action by the UK government and devolved administrations to ensure that support payments made to employees isolating due to coronavirus were not subject to Class 1 or 1A NICs, the NIC Bill aims to broaden this approach to the self-employed.
Measures in the Bill will ensure that self-employed individuals throughout the UK receiving COVID-19 isolation payments do not pay Class 2 and Class 4 NICs on the amounts received.
The measure will be retrospective and apply to the 2020/21 tax year.
Expansion of two-stage DOTAS to tackle NI avoidance
Following consultation in 2020 on tackling promotors of tax avoidance schemes, the Finance Bill 2021 includes measures to enable HMRC to extract information from promotors of tax avoidance schemes more quickly.
The measures introduce a new two-stage process within DOTAS. The first enables HMRC to issue notices to a broader range of promoters and intermediaries, the second stage is triggered if information is not forthcoming and allows HMRC to take remedial action faster.
The measures in the NIC Bill mirror that in the Finance Bill and will enable the new DOTAS process to apply to promoters of NI avoidance schemes.
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