HC Deb 30 July 1997 vol 299 cc359-60W
Mr. Fitzpatrick

To ask the Secretary of State for Social Security what plans she has to extend the scope of national insurance contributions to employee relocation allowances. [12159]

Mr. Denham

As part of looking for areas in which tax and national insurance could be brought closer together, it has become necessary to examine the national insurance liability of some relocation expenses. Subject to Parliament's approval of regulations, from 6 April 1998, national insurance contributions will be collected on those relocation allowances that do not qualify for tax relief.

In the large majority of cases, national insurance contributions are currently not collected on the relocation allowances paid by employers. By comparison, some allowances do not qualify for any tax exemption whatsoever, while some do. For example, the allowances on which tax is payable include those for additional housing costs incurred if the employee moves to a higher cost area. Other allowances such as legal and estate agents' fees, stamp duty and removal expenses are exempt from tax up to a maximum of £8,000 for each relocation.

This change will bring the two systems closer together over these payments while recognising the important differences between them. The new rules will exclude from national insurance contributions only those allowances that could qualify for tax relief as listed in tax legislation.

This is a fairer way of dealing with the national insurance position on these allowances which are paid to the approximately 120,000 employees who receive help from their employers in work-related moves every year.

The extra revenue to the national insurance fund will amount to about £50 million a year once the charge is fully in place. The fund pays for all contributory benefits. These benefits are extremely important to the people who receive them, including some of the nation's poorest pensioners, and we must ensure that employers and employees pay their fair share.

To assist employers with relocations already planned, these changes will not affect employees who start a job in a new location before 6 April 1998 or their employers. The current treatment will continue to apply for all their relocation payments.