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

The clause disapplies section 4(4) of the Limited Liability Partnerships Act 2000 for the purposes of both the Social Security Contributions and Benefits Act 1992 and its Northern Ireland equivalent. That will enable the reclassification of certain limited liability partnership members as employed earners for the purposes of national insurance contributions.

Existing secondary legislation will be amended to ensure that members of an LLP who satisfy certain conditions will be treated for the purposes of national insurance contributions as employees rather than as self-employed. The conditions will broadly be that the individual member of the LLP has little or no real economic interest or risk in the LLP and instead has an entitlement to a fixed salary.

Treating members of LLPs as self-employed was designed to replicate the position of traditional partnerships. The clause ensures that the tax rules are not used to create a tax advantage and creates a level playing field between those partnerships that have not sought to misuse the tax rules for LLPs and those that have. I commend the clause to the Committee.

The Minister’s introduction to the clause was helpful and answered some of the issues that arose from the final question I asked him when he gave evidence to the Committee. The impact of a complete disapplication of section 4(4) of the LLP Act was not originally clear. However, I note that the Minister returned to something originally raised in the consultation on conditionality for working out the actual status of a member of an LLP. He says that that will come through regulations, and we know that we must also wait for further legislation on partnerships, so could he set out to the Committee the sequence of those regulations and the legislation to come? How will that take the issue relating to LLPs further so that we reach a place of complete clarity about how members are to be treated and which definitions apply now that section 4(4) is disapplied? Are we looking at using the definitions from the 1992 Act permanently, or only until new regulations are introduced?

To help the hon. Lady, detailed proposals in the form of regulations will be published in draft in the autumn, when the new tax legislation will be introduced under the Finance Bill 2014. That will ensure that individuals have access to the full proposals on tax and national insurance contributions at the same time. It is also worth pointing out that I wrote to the Committee yesterday to confirm that point.

The legislation will take effect on 6 April 2014, so individuals who are affected will be treated as if they are employees from the beginning of the next tax year. That is consistent for both tax and national insurance contributions. I hope that that clarification is helpful to the hon. Lady and to the Committee.

Question put and agreed to.

Clause 13 accordingly ordered to stand part of the Bill.