§ Mrs. ButlerTo ask the Secretary of State for Social Security what assessment he has made of the Social Security Advisory Committee's report and recommendations on the draft regulations to bring non-cash vouchers into line with the treatment of cash earnings for National Insurance contribution purposes; and if he will make a statement. [76089]
§ Mr. TimmsWe have considered the Social Security Advisory Committee's report and their recommendations carefully. We are grateful to the Committee, and those interested parties who responded to the consultation exercises, for their consideration of the draft regulations and their comments on them.
We have noted the Committee's view that it is right to close any loophole which allows an employer to avoid National Insurance liability and their general support for the principle of closer alignment of tax and NICs arrangements. However, the Committee are not convinced that our proposals for non-cash vouchers meet these criteria. In particular, they suggest that we defer implementation to assess the longer term implications or, alternatively, that we increase substantially the disregard for luncheon vouchers.
We do not believe, in the light of the extensive consultation already undertaken, there would be anything to be gained by delaying the proposal beyond April 1999. It would perpetuate the unfairness of the current arrangements whereby employees who receive part of their pay in non-cash vouchers are not liable for NICs on that part, whilst other employees, who do not receive vouchers, are liable for NICs on the whole of their salary.
186WTo increase the disregard for luncheon vouchers above the long-standing 15 pence a day level for tax would undermine the aims of closer alignment and the need to ensure fairness with those paid in cash.
In addition to these proposals, my right hon. Friend the Chancellor of the Exchequer announced in last year's Budget a number of changes to the structure of the National Insurance scheme. These changes will be introduced in April 1999. The employee entry fee will be abolished, so that all employees, who pay contributions, will pay £1.32 per week less NICs. This will more than offset the increase in NICs paid by most employees on luncheon vouchers, which are the most common form of non-cash voucher.
We will therefore table shortly the Social Security (Contributions) Amendment Regulations 1999. The regulations will bring non-cash vouchers into line with the treatment of cash earnings for National Insurance Contribution purposes. A copy of the Committee's report and my right hon. Friend the Secretary of State's reply will be published with the regulations. The regulations will come into force from 6 April 1999.