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National Insurance Contributions

Volume 109: debated on Saturday 2 May 1987

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asked the Secretary of State for Social Services how he proposes to counter the avoidance of national insurance contributions by earnings being paid through discretionary trusts.

Since the abolition of the upper earnings limit for employers' national insurance contributions announced in the 1985 Budget, there has been an increase in the practice of earnings being paid through trust funds, thereby avoiding NIC liability. To allow this to continue would result in a growing loss of the revenue needed to finance pensions and other contributory benefits. I will therefore shortly ask the Social Security Advisory Committee to consider draft regulations to end the exemption from liability for NICs on earnings paid through trust funds. I propose that these should take effect from 6 October 1987. I recognise that some employers used trusts to pay part of earnings before 1985 for reasons unconnected with the Budget and to give these more time to adapt, I propose that the present exemption should continue until 5 April 1990 for trusts established before 6 April 1985.