Overview

This bill amends the law regarding National Insurance Contributions (NICs) on termination awards and sporting testimonials. It clarifies who is responsible for paying Class 1A NICs in these situations, aiming to ensure fairness and consistency in the tax system.

Description

The bill has two main parts:

Termination Awards

The bill changes the rules on Class 1A NICs for termination awards paid to employees (or their dependents) upon the termination of employment. Currently, these awards are often subject to income tax but not always NICs. This bill makes Class 1A NICs payable on those portions of termination awards that are also subject to income tax, ensuring consistency in tax treatment. The employer (or the person who would be liable for secondary Class 1 contributions if it were normal earnings) becomes responsible for paying these NICs.

Sporting Testimonials

The bill addresses NICs for payments made to sportspeople from testimonial funds. It makes the individual or organization controlling the testimonial fund liable for paying Class 1A NICs on these payments instead of the player's employer. This change also affects tax payments relating to the amounts set aside to cover income tax on those testimonials payments, treating these sums as if they were part of the testimonial payment itself for Class 1A NIC purposes.

Government Spending

The bill is expected to increase government revenue through the collection of additional Class 1A NICs on termination awards and sporting testimonials. Specific figures are not provided in the bill text.

Groups Affected

• Employers: May face increased NIC liabilities for termination awards paid to employees.
• Employees: Will not directly pay more NICs but the overall tax burden may shift depending on the specifics of their termination packages.
• Sportspeople: The impact on sportspeople will be indirect, as the liability for paying NICs on testimonial funds shifts to the testimonial fund controllers.
• Organisations controlling sporting testimonial funds: Will have to pay Class 1A NICs on funds paid to sportspeople and amounts set aside to cover their income tax.

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