Scotland Bill

Debate between Charles Walker and Ann McKechin

Monday 14th March 2011 Commons Chamber

[Ann McKechin]

I beg to move amendment 68, page 18, line 11, after ‘may’, insert

‘after consultation with such persons as Scottish Ministers consider appropriate’.

[The Temporary Chair (Mr Charles Walker)]

With this it will be convenient to discuss the following:

Amendment 69, page 20, line 5, after ‘may’, insert

‘after consultation with (a) Scottish Ministers, (b) the Scottish Parliament and (c) such persons as it considers appropriate’.

Amendment 70, page 20, line 21, leave out subsection (4).

Government amendments 61 and 62

Amendment 43, page 20, line 35, after ‘Treasury’, insert

‘, with the consent of the Scottish Parliament,’.

Amendment 44, line 38, at end insert—

‘(6A) For the purposes of subsections (4) and (5)—

(a) reference to the consent of the Scottish Parliament means consent by resolution, and

(b) standing orders must provide that only a member of the Scottish Government may move a motion for such a resolution.’.

Government amendment 63

Amendment 47, clause 29, page 23, line 12, after ‘Treasury’, insert

‘, with the consent of the Scottish Parliament,’.

Amendment 48, line 28, at end add—

‘(7) For the purposes of subsection (4)—

(a) reference to the consent of the Scottish Parliament means consent by resolution, and

(b) standing orders must provide that only a member of the Scottish Government may move a motion for such a resolution.’.

Government amendment 64

Amendment 49, clause 31, page 24, line 8, after ‘Treasury’, insert

‘, with the consent of the Scottish Parliament,’.

Amendment 50, line 8, at end add—

‘(5) For the purposes of subsection (4)—

(a) reference to the consent of the Scottish Parliament means consent by resolution, and

(b) standing orders must provide that only a member of the Scottish Government may move a motion for such a resolution.’.

Government amendments 65 and 66

Government new clause 18—Orders

[Ann McKechin]

I am speaking to amendments 68, 69 and 70 and I wish to put it on record that the wording of those amendments was suggested by the Law Society of Scotland. I shall speak to the amendments first and then to the clause stand part—with your agreement, Mr Walker. I have a substantial number of questions to put to the Government about the implementation of this important clause.

On amendment 68, new section 80C empowers the Scottish Parliament to set by resolution the Scottish rate of income tax. This is an important power that is required to be exercised in accordance with the principles set out by the consultative steering group report published by the Scottish Office in 1999. These principles include accountability, openness and accessibility with a view to making possible “a participative approach” to “policy and legislation”. Accordingly, Scottish Ministers should, we believe, be required to consult those considered to be appropriate when proposing the resolution for the Scottish rate—much in line with existing practice of the Treasury here.

On amendment 69, new section 80G enables the Treasury to disapply or modify section 6 of the Income Tax Act 2007. This could involve issues such as gift aid relief or pensions relief. The order would be introduced in the UK Parliament and debated and passed or rejected in the UK Parliament. However, it could substantially affect the Scottish rate and Scottish taxpayers, as well as Scottish charities and pension funds, so we believe that Scottish Ministers and the Scottish Parliament should be specifically consulted prior to any amendment of these reliefs.

Finally, amendment 70 takes out subsection (4). We have concerns about the provision. Section 80G(4) provides that an order made under that section

“may, to the extent that HM Treasury consider it to be appropriate, take effect retrospectively”.

We believe that HM Treasury should, at a minimum, consult Scottish Ministers and the Scottish Parliament if retrospectivity is required. The Minister will not be surprised to hear me say that I think all Governments should avoid retrospective legislation whenever possible—unless there is a proven and specified need. We think that the case for retrospective application in this instance has not yet been made out.

The amendment is designed to probe this issue. The Scotland Office has indicated that the power would be used to make tax reliefs applicable retrospectively, but I suggest that this could be done either by regulation or statutory instrument. The clause enables a charging order to be made by the Treasury, which is a matter of concern to us. Any retrospective action by the Treasury could—I stress could—have a detrimental impact on individual taxpayers and on the Scottish parliamentary budget. I hope that when the Minister responds he will provide some assurance about the circumstances in which and when the Government intend to use this power. I hope he will confirm how limited the power will be when it comes to its practical exercise.

Paragraph 673 of the report by the Holyrood Committee asked a number of questions about residence. The question of residence is one about which most of the tax experts we consulted expressed some concern. I understand that there is no statutory definition of a UK resident taxpayer. This legislation, however, attempts to define by statute a Scottish resident taxpayer. Given that that is, in a purely technical sense, a subset of a UK resident taxpayer, I think the Minister would accept that it is unusual to have a fixed statutory definition within a floating definition. I would like to question him a bit further about how this will work in practice and what the levels of risk are in respect of the current application of the law.

Paragraph 673 of the Holyrood Committee report asks what “place of residence” means, as defined in clause 26, as it appears to be different from how residence is understood in other areas of tax law such as capital gains tax. Does place of residence imply ownership when juxtaposed against “main place of residence” in new section 80E(a), (b) and (c)? Place of residence and main place of residence are not defined in that new section, which I fear could present problems of interpretation. I would be grateful if the Minister clarified his understanding of the interpretation in this case.

How the tax is to be applied in practice is an important issue. The vast majority of Scottish taxpayers live the whole period of their lives in Scotland or live there for very substantial periods, and it is relatively easy to define who those people are. What about people working on board ships or on oil rigs, for example? What about members of our armed forces and what about those who are neither UK resident nor employed by non-UK employers? As I said, the Scottish taxpayer is defined by reference to an individual who is resident in the UK for income tax purposes. The current definition of UK residency lies in 86 pages of guidance that are the subject of frequent revision by HMRC. How, then, can the Government be confident that this definition is going to work? Do the Government agree with the Chartered Institute of Taxation that the introduction of a possible statutory residence test for the UK is now essential? Experts in, for instance, the Institute of Chartered Accountants of Scotland, the Chartered Institute of Taxation, the Federation of Small Businesses and CBI Scotland have expressed concern about the lack of a concrete definition. What are the Government doing to address those concerns expressed by professional experts? I understand that they are considering the issue. Will the Minister tell us whether they are likely to attempt to provide a better definition of a UK resident taxpayer in the Finance Bill that will follow next week’s Budget statement?