Clause 11 - Oil and gas workers on the continental shelf: secondary contributors etc

National Insurance Contributions Bill – in a Public Bill Committee am 2:45 pm ar 21 Tachwedd 2013.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Question proposed, That the clause stand part of the Bill.

Photo of David Gauke David Gauke The Exchequer Secretary 3:00, 21 Tachwedd 2013

The clause introduces a power for the Treasury to make regulations to ensure that national insurance contributions are paid where persons are working on the UK continental shelf and their employer is outside the UK. It allows the Treasury to make regulations for a certification scheme whereby someone other than the specified employer for NICs purposes accounts for all the NICs obligations in full.

The clause is part of a wider policy to prevent offshore employers from being used to avoid employment taxes when the workers are engaged in the UK. The wider policy and the clause will take effect from April 2014. The clause relates specifically to the oil and gas industry. It introduces a power for regulations to be made ensuring that national insurance contributions are paid in full when persons are working on the UK continental shelf and their employer is located outside the UK. It also introduces a system of certification whereby someone other than the person specified in legislation meets the national insurance obligations.

For oil and gas workers on the UK continental shelf, such avoidance is best targeted through tailored legislation, taking account of the many legitimate reasons why the employers are based outside the UK. Furthermore, the oil and gas industry has a uniquely complex structure for contracts that is not present in other sectors. This tailored legislative approach is in line with other legislation relating to the oil and gas industry in which there are specific oil and gas tax provisions.

We published the draft regulations associated with the clause for technical consultation on 19 November. At its simplest, the regulations will mean that if a UK continental shelf worker is employed by a company outside the UK, the employer’s UK associated company will be treated as the employer for national insurance purposes. The regulations will also mean that when there is no such UK associated company, the oilfield licensees will be treated as the employer for national insurance purposes. In such cases, a certificate can be applied for and issued to confirm that the offshore employer is making the correct national insurance payments.

For the certificate to remain valid, the non-UK employer will need to make all relevant national insurance payments, including those associated with statutory payments such as sick pay. The oilfield licensees will not be liable for any underpayments of national insurance by the non-UK employer while there is a valid certificate. In the case that the non-UK employer does not make all relevant payments, HMRC will withdraw the certificate and the oilfield licensees will be responsible for all future national insurance payments from the date they are notified that the certificate is withdrawn.

Representatives from the oil and gas industry have been consulted about the design of this measure. They have been broadly supportive that national insurance should be paid for workers on the UK continental shelf. The clause has support from the industry and allays many of the concerns that they presented during the consultation. In fact, the certification scheme introduced through the clause was requested by the industry. This change will allow the industry to gain assurances that when national insurance is due, it is being paid for those people engaged on their oilfields.

Photo of Ian Swales Ian Swales Democratiaid Rhyddfrydol, Redcar

It is a pleasure to serve under your chairmanship, Mr Streeter. I support clause 11. I have a number of constituents who work offshore and there are many other such people around the country. As the Minister said, this is a uniquely complex area. The Library note on this is almost six closely-typed pages complete with diagrams—it takes quite a bit of getting through.

I make a plea on two issues to do with communication. First, there should be clear communication with employees themselves about their national insurance status. I know from constituency case work of offshore workers who, when they come to claim their pension, find to their shock that they were not in the national insurance scheme in the way that they expected. That is to do with the fact that a typical employee does not really get updated on their national insurance status unless they make special requests. As I said in the oral evidence sessions, I would ask HMRC to consider ensuring that employees are kept aware. Doing so will help to provide a check that the new system is working.

Another communication point is that the local payroll companies of which I am aware that deal with offshore workers do not always get clear help from HMRC. Even now, there are some internal inconsistencies on the HMRC website. Will the Minister pay special attention to training HMRC staff in the new arrangements to ensure that those who are involved in the administration of offshore workers get clear guidance and help when they need it?

Finally, the impact assessment shows that the value of the measure is £80 million to £90 million, which is a great deal of money. That prompts the question of whether there are any other avoidance techniques that might raise their head, given that such a sum appears to be at stake.

Photo of David Gauke David Gauke The Exchequer Secretary

I am grateful to my hon. Friend for his questions. He raises an important point about clear communication with employees regarding their status and history of national insurance contributions, and I refer him back to what I said in the evidence session. Communication is a wider issue, but he is right to raise it in this context because a good example of where problems can arise is when people think that national insurance contributions have been paid, but they have not. The best way to address that is by looking more widely at how to make the tax system more up to date and suitable for the 21st century, with a more digital tax system through which we can provide additional information to taxpayers, in an easily accessible and digestible format, so that they can understand the taxes they have paid, the contributions they have made and how that money is being spent. As we move towards individuals having personal online tax accounts—similar to the way in which millions of people have online bank accounts—that is the type of information that we can cover.

On help for payroll companies and for HMRC in understanding everything, I can tell my hon. Friend that, on 10 December, HMRC will be publishing guidance on how everything will operate to ensure that people are aware. I am sure that will be of great interest to payroll companies in his constituency.

My hon. Friend also made a good point about how avoidance behaviour will change. As we try to address one artificial or contrived behaviour, we always need to  think about the behavioural impact of that and how people will seek other areas in our tax code to exploit. I assure him that we are focused on that issue and are constantly looking for ways to address it. Again, one should look at the good record of our Government on that front, because our willingness and determination to try to address these difficulties is very strong.

I will be grateful for the Committee’s support for clause 11.

Question put and agreed to.

Clause 11 accordingly ordered to stand part of the Bill.