Overview of the Act Power to make regulations to create a retrospective liability for National Insurance contributions etc
6.The provisions in section 1 will enable the Treasury to make regulations under specified existing powers that will have retrospective effect from dates as early as the 2 December 2004, if necessary. The new power may only be used where a provision of the Income Tax Acts which relates to income tax chargeable under the employment income Parts of ITEPA 2003 is passed which has retrospective effect and the Treasury consider it appropriate to make NICs regulations under any of those existing powers for the purpose of reflecting the whole or part of the retrospective tax provision. It must also appear expedient to the Treasury for the NICs regulations to have retrospective effect in consequence of the retrospective tax provision. The regulations can ensure that payments made under a tax and NICs avoidance scheme or arrangement, used since the 2 December 2004, can be treated as earnings for NICs purposes. The resulting NICs liability will be calculated as if a liability had existed at the time the payments were made. The Government only envisages exercising these powers where the retrospective tax provision is a provision tackling avoidance of the income tax payable on employment income.
7.Section 1 also provides for wide powers to make consequential changes or other changes that may be required through exercise of the powers described in paragraph 6 above for the purposes of contributions, contributory benefits, statutory payments, contracted-out pension rebates or other purposes. In particular it is anticipated the powers will allow for:-
	earnings that originally avoided NICs liability to count towards benefit entitlement and statutory payments (SMP, SSP, SPP and SAP);
	the NICs paid on avoidance earnings to be treated as having been paid in the year in which the avoidance occurred.
8.Section 3 introduces powers to enable the Treasury to make regulations in relation to matters affecting the law relating to Class 1A NICs where this is expedient in consequence of retrospective tax legislation which affects a person's general earnings. The regulations may have retrospective effect to dates as early as the 2 December 2004, if necessary.