Commentary on Sections Power to make regulations to create a retrospective liability for National Insurance contributions Section 3 – Class 1A contributions: power to make provision in consequence of retrospective tax legislation: Great Britain
42.Section 3 inserts a new section 10ZC after section 10ZB of the CBA 1992.
43.Subsection (1) of section 10ZC provides for regulations to be made if it appears to the Treasury to be expedient, for any purpose of the law relating to Class 1A contributions, to make the regulations in consequence of retrospective tax legislation which affects the amount of general earnings chargeable to income tax under the employment income Parts of ITEPA 2003. The power to make regulations also enables general provision to be made to deal with matters that may arise should such retrospective tax legislation be passed in the future. Retrospective tax provisions have an automatic effect on Class 1A liability by virtue of section 10 of the CBA 1992.
44.Subsection (2) defines "relevant retrospective tax provision".
45.Subsection (3) allows for the tax provision that triggers the use of the power in subsection (1) to have been made before or after the commencement day of this Act.
46.Subsection (4) makes it clear that the regulations can make provision modifying existing enactments (including future enactments) and applying existing enactments with or without modifications.
47.Subsection (5) provides that new regulations made under these powers cannot have retrospective effect earlier than 2 December 2004, which was the date of the Paymaster General's announcement on tax and NICs avoidance (written Ministerial Statement made on 2 December 2004 - see House of Commons Hansard Vol. 428 Col. 45 WS).
48.Subsection (6) allows for cases that have already been decided before regulations have been made under subsection (1), to be reviewed and amended where necessary.
For example, more than one employer may provide to the same employee a benefit which is chargeable to tax and which gives rise to a liability on each employer to pay a Class 1A contribution. That liability is apportioned between the employers. If a retrospective tax provision then provides for a revaluation of that benefit and alters the amount chargeable to tax in respect of it, it will be necessary to redetermine the apportionment and the amount due from each of the employers in respect of the resulting revised Class 1A liability.
49.Subsection (7)(a) prevents regulations made under subsection (1) from imposing a liability to pay a Class 1A contribution. Retrospective tax legislation which alters the amount of income tax chargeable to general earnings will normally automatically create a liability for Class 1A contributions by virtue of section 10 of the CBA 1992.
50.Subsection (7)(b) prevents regulations made under subsection (1) from increasing the amount of any Class 1A which is payable. The amount of any Class 1A will follow automatically by virtue of the retrospective tax legislation and its impact on section 10 of the CBA 1992.
51.Subsection (8)(a) ensures that the power in section 10ZC is without prejudice to any liability to pay a Class 1A contribution which arises by virtue of a relevant retrospective tax provision. Such liability will normally arise automatically under section 10 of the CBA 1992.
52.Subsection (8)(b) ensures that other powers conferred by the CBA 1992 or any other enactment are not affected by the power in section 10ZC.
53.Subsection (9) ensures that the modification of any secondary legislation by regulations made by the Treasury under section 10ZC does not prejudice any existing power that the department that made the original legislation has to amend or revoke it.
54.Subsection (10) defines “the commencement day” for the purposes of section 10ZC as the day upon which the Act received Royal Assent (30 March 2006). It also defines "enactment" for the purposes of section 10ZC as including an instrument made under an Act.
55.Section 3(2) inserts a reference to section 10ZC into subsection (1)(a) of section 176 of the CBA 1992. This provides that if regulations are made using the powers under section 10ZC a draft of the instrument has to be laid before Parliament and approved by a resolution from both the House of Commons and the House of Lords before the instrument is made.