INCOME TEST (Hansard, 26 June 2002)

§ Dawn Primarolo
I beg to move, That this House agrees with the Lords in the said amendment.

§ Mr. Deputy Speaker
With this we may take Lords amendments Nos. 8, 24 to 31, 84, 98 and 100.

§ Dawn Primarolo
I will be as brief as I can on these amendments, which make technical and drafting improvements to the provision in clause 17 about the processing of the final entitlement at the end of the year. Before I explain the main changes made by the amendments, I should perhaps explain why the group begins at clause 7. That is simply because, as a result of the changes that I am about to describe, the terms "current year income" and "previous year income", currently defined only for the purposes of clause 7, will in future have an application elsewhere in part 1. For this reason, amendments Nos. 7 and 8 make the purpose of the Bill clear.
Amendments Nos. 9 and 10 are short, technical amendments, intended to clarify the scope of the Treasury's regulation-making powers under subsections (6) and (7) of clause 7.

§ Mr. Deputy Speaker
Order. I think that the right hon. Lady has jumped ahead a little. Amendments Nos. 9 and 10 come in a later group.

§ Dawn Primarolo
rose—

§ Mr. Deputy Speaker
Order. There is no reason why we should not put the two groups together, if it makes life easier for the right hon. Lady and everybody else.

§ Dawn Primarolo
That is extremely generous of you, Mr. Deputy Speaker. I am not quite sure that it will make life easier, but I will start again.
We are discussing amendments Nos. 9, 10, 11 and 17—

§ Mr. Deputy Speaker
Order. Can I help the right hon. Lady? We are debating Lords amendment No. 7—that is the principal amendment. In the same group are Lords amendments Nos. 8, 24 to 31, 84, 98 and 100. There is a subsequent group, that we have not yet come to, which consists of Lords amendments Nos. 9, 10, 11 and 17.

§ Dawn Primarolo
Thank you very much, Mr. Deputy Speaker. I now discover that I was correct before I changed direction. I am not sure what made me change direction, but I apologise, and will return to the amendments before the House.
Let me resume by saying that this group of amendments deals specifically with finalising entitlement at the end of the year, dealt with under clause 17. However, the main changes made by this group of amendments start with clause 7. That is simply because, as a result of the changes, the terms "current year income" and "previous year income" which are defined only for the purposes of clause 1, will in future have an application elsewhere in 925 part 1 of the Bill. For that reasons, amendments Nos. 7 and 8 make it clear that those terms are defined for the purposes of part 1. At the same time, amendments Nos. 98 and 100 add those terms to the list of terms as defined in clause 44, the interpretation clause.
The most important changes are those to clause 17, which sets out the machinery for finalising the end-of-year awards. As discussed in previous deliberations, entitlement to tax credits will be based on annual income. This means that entitlement can finally be determined only after the end of the tax year, when all the relevant information is known. Clause 17 therefore requires that claimants be given an opportunity, after the end of the year, to provide details of their income and circumstances so that the Inland Revenue can finalise their entitlement.
None of the changes in this group of amendments is intended to change the process and the way in which the Bill works. However, as originally drafted., clause 17 required the board to ask claimants to confirm details of their relevant income. The clarification of relevant income is important. Requiring claimants to report details of their relevant income at the end of the year would mean that to arrive at the correct figure to report to the Inland Revenue, they would have to carry out a comparison of their previous year income with their current year income, applying the threshold for rises in income where relevant. In addition, most claimants would also need to report their actual current year income to the Revenue at the same time, so that their award could be renewed.
There is no need for the Bill to impose such a burden on claimants, nor was it intended to do so. The amendments clarify the correct explanation of relevant income and therefore the obligations that are placed to supply that information to the claimant are made clear in the Bill. Before the changes, the provisions could have been interpreted to mean that claimants were being asked to undertake all the calculations themselves, but that job is undertaken by the Revenue.
Thank you very much for your assistance, Mr. Deputy Speaker. I hope that that is now clear.

§ Dawn Primarolo
I beg to move, That this House agrees with the Lords in the said amendment.

§ Mr. Deputy Speaker
With this we may discuss Lords amendments Nos. 10, 11 and 17.

§ Dawn Primarolo
This group of drafting amendments clarifies the scope of the powers to make regulations about income and about the child care element of the working tax credit. Clause 7 provides that entitlement to tax credits will depend on the income of the claimant or claimants. In particular, entitlement will be based on the income for a tax year. The amendments to clause 7 in this group are concerned with subsections (6), (7) and (8) and relate to the computation of income, the period in which income is taken into account, what counts as income, and when the Inland Revenue can treat a person as having income or not.
926 Amendments Nos. 9 and 10 are short, technical amendments that are intended to clarify the scope of the Treasury's regulation-making powers under subsections (6) and (7) of clause 7. Those subsections allow regulations to be made about how income is to be allocated between particular tax years.
We discussed that matter in the Standing Committee. I point out to the hon. Members for Northavon (Mr. Webb) and for Arundel and South Downs (Mr. Flight) that, through these changes, we are trying to make as clear as possible the question of relevant income and to ensure that the application of the regulations delivers that.
All the amendments will improve the legislation and will clarify some of the meaning, but they do not change the operation of the Bill and I commend them to the House.