Scotland Bill

Anne McGuire Excerpts

Monday 14th March 2011 Commons Chamber

[Mr Gauke]

The Scottish Parliament has made it clear that it supports the proposals. We are setting them out some years in advance. My understanding is that there is a consensus on the proposals, and it is for the Scottish Government to ensure that there is no gap after 2015. We have made it clear that we will work closely with the Scottish Government as we move towards full implementation of the measures set out in the Bill. This engagement will ensure that the Scottish Government can keep the Scottish Parliament apprised of implementation work in good time. I consider the additional requirements to be unnecessary, and I therefore urge the hon. Member for Dundee East to withdraw the amendments.

I shall deal briefly with Government amendments 61 to 66, and new clause 18. These are minor and technical and ensure that we have a proper parliamentary process attached to the provisions that bring into effect the provisions of the Bill. Government amendments 61 to 64 amend the existing provisions in the Bill to bring into effect the provisions in clauses 26, 29 and 31. The amendments make it explicit that the days or tax years appointed by the Treasury under these clauses will be appointed in orders made by the Treasury. New clause 18 ensures that these Treasury orders are classed as statutory instruments and are therefore printed and published.

Government amendments 65 and 66 both amend the existing provisions in clause 38 relating to commencement. These should be read in conjunction with new clause 18, which ensures that the order-making powers provided for by the Bill are all statutory instruments and therefore subject to the applicable parliamentary process. The amendments do not have any substantial effect on the provisions in the Bill, and are simply drafting amendments. I commend them to the Committee.

A number of hon. Members asked about the definition of a Scottish taxpayer. Let me say at the outset that the Bill sets out a definition of Scottish taxpayers, as opposed to Scottish residents, and can therefore apply, notwithstanding the absence of a statutory residence test. It might be of help if I set out how that will work. The definition of a Scottish taxpayer will determine which individuals are liable to pay income tax at the rate set by the Scottish Parliament. It is based on the definition included in the Scotland Act 1998 for introducing legislation on the Scottish variable rate, a point made by my hon. Friend the Member for Carlisle (John Stevenson). However, we have taken the opportunity to review the definition to make it easier to administer and simpler to apply, and to remove some of the potential unfairness that could arise from the application of the definition provided for the purposes of the Scottish variable rate.

Following the recommendation of the Scottish Parliament Committee that examined the Bill, which was endorsed by the Scottish Parliament on 10 March, we also intend to table a new clause on Report to apply the new definition of a Scottish taxpayer for the purposes of the Scottish variable rate. The new definition is structured as a series of conditions that will enable an individual to see whether they are a Scottish taxpayer. Where they meet any one of these conditions, they can simply disregard the remainder. As I will explain in a moment, this means that relatively few people will need to consider every condition. In other words, the definition will produce an answer in only a few steps, avoiding the need for the majority of people to record and count the number of days spent in Scotland.

A Scottish taxpayer will be someone who meets two tests in a tax year. The first test is that the individual in question is UK resident for tax purposes. It is important to emphasise that the definition does not disturb those rules or increase their complexity, but merely sits on top of them. We are not replacing the underlying rules of UK tax residence with an entirely new concept of Scottish tax residence. The second test is whether the individual meets any one of three conditions—A, B or C.

Condition A is that the individual has a “close connection” with Scotland, which is defined in proposed new section 80E. For the majority of people, it will be a straightforward question of whether they have a close connection with Scotland. If they have one place of residence in the UK and it is in Scotland, they will have a close connection with Scotland and will therefore be a Scottish taxpayer, provided that they live there for at least part of the year. This last condition—that the individual lives in the place of residence—is a crucial part of the definition and ensures that it is simple to operate. Someone may stay in a place of residence which is not their home, perhaps while on holiday or as part of their work, but such nights away are disregarded because those are not places where the person lives, but merely places where they stay.

Let us consider the example of sales reps who have one home in England in which they live with their family at weekends, but who spend their working week in Scotland. While they are away, they stay in a variety of hotels. Because the family home in England is the only place in which they live, they will not have a close connection with Scotland and will therefore not be a Scottish taxpayer, even though they physically spend more nights in Scotland than they do in England. That is all they need to do; there is no requirement for them to keep a detailed record of the number of nights they spend in each part of the UK. This is one way in which we have sought to improve on the definition of a Scottish taxpayer set out in the 1998 Act, which would have required people in such a position to keep records of the days they spend in each part of the UK.

[Mrs Anne McGuire (Stirling) (Lab)]

I want to offer the Minister a note of caution, as the understanding of where a person lives and where they stay is slightly different in Scotland. I hope he will come up with something that is legally a little more robust than the simple distinction between staying and living. The nods from Scottish Members, who understand the vernacular, verify the advice that I am trying to give him.

--- Later in debate ---

This debate has shown up the complexities regarding residency. My right hon. Friend the Member for Stirling (Mrs McGuire) was right to point out how the interpretation of where someone stays or lives can have different connotations. Those of us who have represented a constituency for a number of years will recognise the complex personal lives that some of our constituents have. They may sometimes be a bit reluctant to tell people where they are staying or living at any particular time of the week or month of the year.

[Mrs McGuire]

Does my hon. Friend recognise that the situation can be further complicated if one asks where they come from?

[Ann McKechin]

Yes, indeed.

That brings us to how the questions are phrased on any self-assessment form and the guidance that is provided to individual taxpayers and to their employers. Obviously, employers will have a high level of responsibility in advising their staff about whether they will be covered. The Minister cited the example of a travelling salesman, but there are many other examples of staff who travel the country from time to time. Some people’s lives are entirely peripatetic—entertainers, for instance. I remember many years ago, when I was a lawyer, acting for entertainers who spent the summer season living down in Blackpool and then came back up to Scotland for the winter season.