National Insurance Avoidance
Originally sent: November 24, 2005National Insurance avoidance schemes are under attack again. This time with some quite draconian measures in the National Insurance Contributions Bill, which is currently being debated.
This Bill, if passed, will include National Insurance in the Tax Avoidance Reporting Regulations. It will also allow the Revenue, without further recourse to Parliament, to backdate any anti-avoidance measures to 2nd December 2004.
In other words, if you are using a scheme that works, you have to tell the Revenue about it, and they can then simply say it no longer works and, in fact, has never worked! Or, at least, has not worked since 2nd December 2004. So you will now have to pay all of that National Insurance you thought you had avoided. Every penny of it!
Nasty? Very! Sneaky? Well, yes - although the Bill is quite open that this is the intent. A breach of European law? Quite probably. After all, it is overtly retrospective, which is a contravention of the Human Rights Act 1998, which itself was enacted in response to the requirements of the European Convention on Human Rights. Article 1 of the First Protocol, if you want to be accurate.
The Chancellor, however, does not appear to agree with this analysis. At the beginning of the Bill he has made the statement that "in [his} view the provisions of the National Insurance Contributions Bill are compatible with the Convention rights."
If you agree with me that the Chancellor is wrong in his interpretation of the law, perhaps you could mount a challenge the first time the Revenue uses its new powers against a client. Then again, perhaps not! In 2000, shortly after the Human Rights Act 1998 came into force (yes, it DID take two years for that to happen!) it was noted that only around 23% of tax-related cases brought before the European Court of Human Rights were successful. Well, the other 77% were successful too - but only if you are a tax inspector! And if you ARE successful, what then? The government should note the decision and change the law. But they are not obliged to, and if they don't make their new law retrospective it presumably won't help your client anyway! Not to mention what it will have cost your client to get that far in the first place.
It pays to keep up to date with moves of this kind. Especially if you had planned to implement a scheme caught by the new legislation and maybe were unaware of how it might be effected.
If you want to keep your ear to the ground, make sure you keep reading my e-mails. And perhaps get in touch with us to see how else we can help you and your practice achieve your objectives.
Adviser Breakthrough Training Solutions Ltd. takes no responsibility for loss occasioned by any person acting or refraining from action, or in consequence of any other person acting or refraining from action, as a result of the material in this article.
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