The purpose of the Bill is to make amendments to the National Insurance (NI) treatment of termination awards and income from sporting testimonials. Termination awards are payments received in connection with the termination of a person’s employment. Sporting testimonials are matches often held to mark the end of a sportsperson’s playing career, the proceeds from which are paid over to the sportsperson. The Bill will align the way these income sources are charged National Insurance contributions (NICs) with the way they are subject to income tax.

These provisions were included in a draft National Insurance Contributions Bill, published in December 2016. Neither provision appears to have been controversial at that time. In the Spring 2017 Budget the Government announced that, in addition to these changes, it would make wider reforms to the structure of NI as paid by the self-employed: to abolish the flat rate Class 2 NICs charge, and to increase the rate of Class 4 NICs.[1] However, the Government cancelled the proposed increase in Class 4 NICs soon after the Budget,[2] and subsequently announced it would not scrap Class 2 NICs.[3] In the 2018 Budget the Government confirmed that it would introduce legislation to amend the NICs treatment of termination payments and income from sporting testimonials, to take effect from April 2020.[4] This is the purpose of the current Bill.

The Bill received a second reading on 30 April. The Bill was considered in Committee over two sessions on 14 May, when it was agreed, unamended, without a division. The Bill completed its report stage and third reading on 10 June, without amendment. The Bill was considered in the House of Lords over 11 June to 23 July, and agreed without amendment. The National Insurance Contributions (Termination Awards and Sporting Testimonials) Act 2019 received Royal Assent on 24 July.

The text of this legislation, explanatory notes on the Bill, and the stages of the Bill’s scrutiny in the House are set out on the Bill’s page on the Parliamentary site. HM Revenue & Customs published a note on the Bill at the time of its publication,[5] and had previously published tax information notes on both measures.[6]

This note gives a short explanation of the purpose of this legislation. A second Library paper examines the way the self-employed are charged NICs, and the history to the Government’s proposals to reform this aspect of National Insurance.[7]

Notes : 

[1]    Spring Budget 2017, HC 1025, March 2017 para 3.5

[2]    HC Deb 15 March 2017 cc420-1

[3]    Written statement HCWS944, 6 September 2018. In November 2017 the Government had proposed delaying the abolition of Class 2 NICs for a year (Written Statement HCWS220, 2 November 2017).

[4]    Budget 2018, HC 1629, October 2018 para 3.12; HMT, Overview of Tax Legislation and Rates, October 2018 para 2.14

[5]    National Insurance contributions (termination awards and sporting testimonials) Bill, updated 1 May 2019

[6]    Income Tax and National Insurance contributions: treatment of termination payments, updated 4 April 2018; Income Tax: update to – treatment of income from sporting testimonials, updated 9 November 2017

[7]    National Insurance contributions (NICs) and the self-employed, Commons Briefing paper CBP7918, 21 December 2018

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