Clause 84 exempts from income tax payments made under the Employment Zones programme from 6 April 2000. It complements an exemption from National Insurance Contributions for these payments which takes effect in April 2000.

Subsection (1) of Clause 84 provides for payments to people taking part in the Employment Zone programme to be exempt from income tax and to be disregarded in arriving at the amount of income to be taxed.

Subsection (2) defines the Employment Zone programme as the programme established under section 60 of the Welfare Reform and Pensions Bill 1999 designed to help the unemployed in one or more areas to find work.

Subsection (3) provides for the exemption to take effect for payments made on or after 6 April 2000.

Employment Zones (EZ) is a programme set up by the Department for Education and Employment (DfEE) and is aimed at helping the long-term unemployed in specified areas to get and keep work, using innovative methods. EZ will be supported by public, private and voluntary sector organisations. Funds that would be available to participants in the programme, for example, through entitlement to benefits, (Jobseeker’s Allowance (JSA)), training funds (Work Based Learning for Adults) and European Support, are pooled and focused on individual need and local flexibility. Participants and their advisers will be able to set up Personal Job accounts to use the funds which are available for support.

EZ will run from April 2000 to the end of March 2002 in 15 areas in England, Scotland and Wales that suffer from particularly high level of unemployment. The programme aims to help around 50,000 long-term unemployed people, aged over 25, back into work.

The EZ programme consists of three steps. In Step 1, participants - will continue to claim (taxable) JSA in the usual way. In Step 2 participants will retain a nominal JSA entitlement of 50p per week (again this will be taxable) but will also receive a payment under EZ equivalent in amount to the balance of JSA. In Step 3, participants will be in employment or self-employment but may still receive cash or other benefits under EZ.

Payments under the EZ programme might be chargeable to income tax or National Insurance Contributions depending on the circumstances. To clarify the tax treatment, Clause 82 exempts from income tax payments to Employment Zone participants other than JSA. Employment income and trading profits of the self-employed in Step 3 will be chargeable to tax and liable to NICs in the normal way.

S.I. 2000 No. 723 (The Social Security (Contributions) (Amendment No. 2) Regulations 2000) providing for exemption from National Insurance Contributions was laid on 13 March 2000.