HL Deb 25 January 1999 vol 596 cc831-8

Interpretation

1. In any provision of this Schedule "authorised officer" means an officer of the Board authorised by them for the purposes of that provision.

Magistrates' courts

2.—(1) Any amount which—

  1. (a) is due by way of contributions or by way of interest or penalty in respect of contributions, and
  2. (b) does not exceed the prescribed sum,
shall, without prejudice to any other remedy, be recoverable summarily as a civil debt in proceedings commenced in the name of an authorised officer.

(2) All or any of the sums due from any one person in respect of contributions, or interest or penalties in respect of contributions, (being sums which are by law recoverable summarily) may be included in the same complaint, summons, order, warrant or other document required by law to be laid before justices or to be issued by justices, and every such document shall, as respects each such sum, be construed as a separate document and its invalidity as respects any one such sum shall not affect its validity as respects any other such sum.

(3) Proceedings under this paragraph in England and Wales may be brought—

  1. (a) in the case of Class 2 contributions or interest or penalties in respect of such contributions, at any time before the end of the year following the tax year in which the contributor becomes liable to pay the contributions, and
  2. (b) in any other case, not later than the first anniversary of the day on which the contributions became due.

(4) In sub-paragraph (1) above, the expression "recoverable summarily as a civil debt" in respect of proceedings in Northern Ireland means recoverable in proceedings under Article 62 of the Magistrates' Courts (Northern Ireland) Order 1981.

(5) In this paragraph— the prescribed sum" means the sum for the time being specified in section 65(1) of the Taxes Management Act 1970 (recovery of income tax, etc. in magistrates' courts); tax year" means the twelve months beginning with 6th April in any year.

County courts

3.—(1) Without prejudice to any other remedy, any sum which is due by way of contributions or by way of interest or penalty in respect of contributions may—

  1. (a) in England and Wales, and
  2. (b) in Northern Ireland, where the amount does not exceed the limit specified in Article 10(1) of the County Courts (Northern Ireland) Order 1980,
be sued for and recovered from the person liable as a debt due to the Crown by proceedings in a county court commenced in the name of an authorised officer.

(2) An authorised officer may conduct any proceedings under this paragraph before a county court in England and Wales, although not a barrister or solicitor.

(3) In this paragraph as it applies in Northern Ireland, "county court" means a county court held for a division under the County Courts (Northern Ireland) Order 1980.

(4) Sections 21 and 42(2) of the Interpretation Act (Northern Ireland) 1954 shall apply as if any reference in those provisions to any enactment included a reference to this paragraph, and Part III of the County Courts (Northern Ireland) Order 1980 (general civil jurisdiction) shall apply for the purposes of this paragraph in Northern Ireland.

Sheriff courts in Scotland

4.—(1) In Scotland, any sum which is due by way of contributions or by way of interest or penalty in respect of contributions may, without prejudice to any other remedy, be sued for and recovered from the person liable as a debt due to the Crown by proceedings commenced in the sheriff court in the name of an authorised officer.

(2) An authorised officer may conduct any proceedings under this paragraph, although not an advocate or solicitor.

(3) Paragraphs 2 and 3 above shall not apply in Scotland.

General

5.—(1) Proceedings may be brought for the recovery of the total amount of Class 1 or Class 1A contributions which an employer has become liable to pay on a particular date and any sum due by way of interest or penalty in respect of those contributions without distinguishing the amounts which the employer is liable to pay in respect of each employee and without specifying the employees in question; and for the purposes of proceedings under any of paragraphs 2 to 4 above that total amount shall be one cause of action or one matter of complaint.

(2) Nothing in sub-paragraph (1) shall prevent the bringing of separate proceedings for the recovery of each of the several amounts of Class 1 or Class 1A contributions which the employer is liable to pay.").

On Question, amendment agreed to.

Schedule 4 [Enforcement]:

Baroness Hollis of Heigham moved Amendment No. 39:

Page 38, leave out lines 14 to 23 and insert— ("(3) Premises are liable to inspection under this section if an officer has reasonable grounds for believing that—

  1. (a) any persons are employed there;
  2. (b) a trade or business is being carried on from there;
  3. (c) any records relating to a trade or business are kept there; or
  4. (d) a personal or occupational pension scheme is being administered there,
but a private dwelling-house is not liable to inspection under this section unless an officer has reasonable grounds for believing that a trade or business is being carried on from the dwelling-house and that the trade or business is not also being carried on from premises other than a dwelling-house.").

The noble Baroness said: My Lords, on Second Reading and in Committee some concerns were expressed by the noble Lord, Lord Higgins, and the noble Earl, Lord Russell, concerning the meaning of two subsections of the new Section 110ZA which sets out the powers under which Inland Revenue officers will operate when carrying out inspections in relation to NICs. I undertook to consult lawyers as to whether it was possible to redraft those subsections in such a way as to clarify the policy intentions behind them. The noble Lord and the noble Earl, who have a great deal of experience, were somewhat baffled by the wording and that seemed to me to make such action highly necessary. I have done that, and the amendment is the result. I hope that it meets the concerns which were expressed.

Subsection (2)(c) states that an authorised officer shall have the power, to examine, either alone or in the presence of any other person, as he thinks fit … every person whom he finds in any such premises or whom he has reasonable cause to believe to be or have been a person liable to pay … contributions". Your Lordships were concerned that, on the face of it, this could lead in extremis to an inspector being accompanied by a business competitor or a representative of the media. An important point here is that if an inspector acted in that way he would almost certainly be in breach of his duty to keep the affairs of contributors confidential. That would in itself be a criminal offence. In other words, there is a legal protection to check the inspector from doing what the noble Earl, Lord Russell, feared. However, that is not covered in the new section but is covered by the inspector's duty of confidentiality.

As I explained in Committee, we see the main justification for this power as a protection for an employee who might otherwise be subjected to pressure by an unscrupulous employer attempting to cover up fraudulent actions. As I said, if the employee "may" have the employer present, then we fear he "must" in that situation of possible duress. That is a valuable protection for contributors. But as a further safeguard, I shall also ask officials to consider the guidance given to inspectors to ensure that it reflects that intention and makes clear that if the inspector feels that it is sensible to be accompanied on an inspection visit, it must only be by an appropriate person such as, for example, a Benefits Agency officer; for example, in the case of suspected collusive employment or benefit fraud. I hope that your Lordships will accept those reassurances about subsection (2)(c).

The other wording which was queried was in subsection (3) which details the premises liable to be inspected. On this count we have decided to substitute the wording in Section 110B(5) of the Social Security Administration Act 1992 which was inserted by Section 12 of the Social Security Administration (Fraud) Act 1997 with the necessary addition of a line to include premises from which a personal or occupational pensions scheme is being administered. The revised wording, for which we may thank the previous Administration, so we hope it will be appropriately received today, makes clear that if business records are kept both at home and in the office, the inspector's visit must be to the office. I hope that clarifies that point.

I suggest that what is proposed substantially meets the point made by the noble Lord, Lord Higgins, about an Englishman's house being his castle. If he did not say that, I am sure that is what he meant to say. I am sure that he will agree with me that it should not be possible to drop down the portcullis if the house holds the only records relating to employees' national insurance or occupational pension records. But I hope these words reflect more clearly the principle that an inspector would only go to a dwelling house if it was absolutely necessary; in other words, if it was being used to divert information.

I emphasise again that there are no powers in Section 110ZA which give right to enter by force. Entry into any premises can only happen with the co-operation of the owner or occupier. Failure to allow access to the relevant records can lead to proceedings before the tax appeal commissioners being instituted and the imposition by them of monetary penalties. Continued failure can lead to further penalties imposed by the inspector but appealable to the commissioners.

I believe this strikes a fair balance between the need for the Revenue to carry out inspections which ensure that the NICs scheme is being operated as required by statute and the right to privacy. The amendment is in direct response to concerns raised in Committee so I hope that your Lordships will find it helpful. I beg to move.

Lord Higgins

My Lords, certainly in the light of the comments which the noble Baroness made when we were debating Amendment No. 3, I am grateful for what she has said on this amendment and for the fact that it appears on the Marshalled List. It provides some reassurance, subject to anything which the noble Lord, Lord Goodhart, may wish to say in relation to it. If I did not actually say that it was an "Englishman's home is his castle" amendment, that is certainly what it was intended to be. I take the point made about the portcullis. I am slightly surprised by the wording which seems extremely ingenious but it meets the point and I am grateful to the noble Baroness.

Lord Goodhart

My Lords, first, I am grateful for the noble Baroness's explanation about the use of the words: either alone or in the presence of any other person, as he thinks fit", in relation to subsection (2)(c) of the new Section 110ZA. It certainly helps our view as to whether or not that is justified. I understand why no amendment has been proposed and I accept that.

Amendment No. 39 widens the range of premises which are subject to inspection by substituting paragraphs (b) and (c) for the previous paragraph (b) which referred only to the premises where the trade of an employment agency was carried on. That certainly seems to make sense. I am somewhat concerned about the effectiveness of the closing words of the amendment which state that, a private dwelling-house is not liable to inspection under this section unless an officer has reasonable grounds for believing that a trade or business is being carried on from the dwelling-house and that the trade or business is not also being carried on from premises other than a dwelling-house". That seems to me to mean that if a trade is being carried on at more than one set of premises, you can only inspect the premises which are not a dwelling house even though the records are in fact being kept at the dwelling house. The obvious example is a farm. A farm consists of a farmhouse and probably also barns, milking parlours and cowsheds. The effect of this provision appears to be that the officer is allowed to inspect the cowsheds but not the farmhouse. I am not aware that farmers are in the habit of keeping records in their cowsheds. This renders ineffective the whole power of inspection in a case of that kind. I wonder whether this draft needs further amendment if it is to cover the situation and make it effective. Clearly, we regard it as proper that there should be an effective power to inspect records.

Lord Skelmersdale

My Lords, in response to Amendment No. 3 tabled by my noble friend Lord Higgins the noble Baroness spoke about the possibility in the longer term of different powers for different purposes; namely, those of the Inland Revenue and those of the Contributions Agency. In the short term those powers will be different. Does she agree that when the letter is written it is even more important that the business should be told under what auspices the inspector is inspecting? Otherwise, it will be much more difficult for a solicitor or another legal adviser to give the appropriate advice should matters go awry.

Baroness Hollis of Heigham

My Lords, I should like to respond first to the observation of the noble Lord, Lord Skelmersdale. Basically, he asks whether employers will be aware if the inspection will be about PAYE or NICs. The aim is to move towards a single visit that covers both tax and NICs. This may involve more than one officer until training in both skills is given. In the interim we want to ensure that the letter from the Inland Revenue to the employer makes clear the purpose of the visit.

In response to the noble Lord, Lord Goodhart, I considered the syntax of this provision and wondered whether the "and" was conjunctive or disjunctive. I am advised that this wording is drawn from the Fraud Act and therefore has a well-established understanding associated with it. It is particularly helpful when it comes to the self-employed. The interpretation that is offered of the disjunctive "and" in the words and that the trade or business is not also being carried on from premises other than a dwellinghouse", is that there is a presumption that one goes first to the business premises to see the records. If the business premises did not hold those records one would then have the right to inspect the home address—in this example the farmhouse—to see if they were there. I believe that that is a way of avoiding going first to the domestic premises when there are also business premises at which there is a reasonable expectation that the records will be held. That is the intent and the understanding that is attached to the Fraud Act.

Lord Goodhart

My Lords, that may be the understanding. However, is the noble Baroness prepared to look again at the wording? That understanding does not appear to bear much relationship to the wording.

Baroness Hollis of Heigham

My Lords, all I can claim in my defence is that the previous government used this wording in two or three other pieces of legislation presumably with the approval, support and scrutiny of the majority of your Lordships' House. But time has moved on and perhaps what we accepted five or 10 years ago we do not accept now. I shall review the wording and try to reassure the noble Lord that it does what we believe it to do. If it does not do so clearly we must return to it. With that undertaking, I beg to move this amendment.

On Question, amendment agreed to.

Schedule 6 [Decisions and appeals]:

Baroness Hollis of Heigham moved Amendment No. 40:

Page 47, line 30, at end insert—

("19A. After section 171 of the Pension Schemes Act 1993 there is inserted—

"Reports by Inland Revenue.

171A.—(1) The Inland Revenue shall prepare, either annually or at such times or intervals as may be prescribed, a report on the standards achieved by their officers in the making of decisions against which, by virtue of section 170(6), an appeal lies to an appeal tribunal constituted under Chapter I of Part I of the Social Security Act 1998.

(2) Any report under this section—

  1. (a) may be included in any annual report by the Inland Revenue of which a copy is laid before each House of Parliament, or
  2. (b) may be annexed to any report of the Secretary of State under section 81 of the Social Security Act 1998.

(3) A copy of every report under this section shall be laid before each House of Parliament. unless the report is included in, or annexed to, a report of which a copy is so laid."").

The noble Baroness said: My Lords, in moving Amendment No. 40 I wish to speak at the same time to Amendment No. 42. As noble Lords will be aware from earlier exchanges at Second Reading and in Committee, responsibility for policy and legislation on contracting-out of SERPS will remain with social security Ministers. But the Contracted-out Employments Group (COEG), the unit in the Contributions Agency that administers the system of contracting-out on a day-to-day basis, will transfer to the Inland Revenue with the rest of the agency. Officers of the Inland Revenue will therefore take on responsibility for making decisions and managing any disputes on those decisions. They will follow the procedures set out in the Social Security Act 1998 and the supporting regulations.

Section 81 of the 1998 Act places a requirement on the Secretary of State to produce a report on the standards achieved in the making of decisions against which an appeal lies to a unified appeal tribunal. Schedule 6 to this Bill amends Section 81 to require the Secretary of State to report also on the standards achieved by Inland Revenue officers in making decisions on contracting-out matters. On reflection we have decided that it is more appropriate for the Inland Revenue to produce the report as it will be for it rather than the Secretary of State to monitor the standards. The first of these amendments inserts a new Section 171A into the Pension Schemes Act 1993 to require the Inland Revenue to produce and lay before Parliament a report covering the standards achieved by its officers in making decisions on contracting-out matters. That report could be included in the Inland Revenue's annual report or annexed to the Secretary of State's report under the 1998 Act.

The second amendment is consequential on the first and removes the now unnecessary paragraph from Schedule 6 to this Bill which requires the Secretary of State to produce the report. We believe that this will clarify the lines of accountability.

Lord Goodhart

My Lords, I rise to welcome the amendment. I very much regret that the noble Baroness did not see fit to accept the amendment that I tabled at Committee stage to transfer the appeal functions relating to contracting-out appeals to the tax tribunals rather than the social security tribunals. Since that appeared to be a lost cause I did not believe it right to table another amendment at Report stage. This is at least a minor step in the same direction. It is obvious that where decisions are taken by Inland Revenue officers it should be for the Inland Revenue to report upon them. Therefore, I am happy to support the amendment.

Baroness Hollis of Heigham

My Lords, I am pleased about that. The noble Lord will recall that at Committee stage we suggested that if his concerns proved to be valid, as they might be, and appeals should be to the general and special tax commissioners rather than the unified appeal tribunal system under the Social Security Act 1998, we could rectify the matter by virtue of the Order in Council procedure in Clause 22 and did not need to return to Parliament for further scrutiny. In the light of that the noble Lord was content not to press his amendment to a further round. The matter can be remedied if his forebodings turn out to be valid. However, given the fact that the noble Lord welcomes this amendment and it appears to have the consent of the House, I beg to move.

On Question, amendment agreed to.

Baroness Hollis of Heigham moved Amendment No. 41:

Page 48, line 7, after ("decisions)") insert— ("(a) in subsection (1), for "subsections (3) and (4)" there is substituted "subsection (3)", and (b)")

The noble Baroness said: My Lords, in moving Amendment No. 41 I wish to speak at the same time to Amendment No. 44. These are both technical amendments to remove references to provisions of the Social Security Act 1998 repealed by the Bill. Schedule 9 to the Bill repeals subsection (4) in Section 10 of the Social Security Act 1998 in consequence of the removal to the jurisdiction of Inland Revenue officers of decisions about the personal liability of company directors for contributions owed by their companies. Amendment No. 44 removes a reference to Section 14(3) of the Social Security Act 1998 which is being repealed on the transfer of responsibility for decisions about SSP and SMP. I beg to move.

On Question, amendment agreed to.

Baroness Hollis of Heigham moved Amendment No. 42.

Page 50, leave out lines 11 to 20.

On Question, amendment agreed to.

Schedule 8 [Further consequential amendments]:

Baroness Hollis of Heigham moved Amendment No. 43:

Page 52, line 1, at end insert— ("2A. In section 12 of the Social Security Contributions and Benefits Act 1992 (late paid Class 2 contributions), in subsection (7), after "commences" there is inserted— (aa) civil proceedings in a magistrates' court commence when a complaint is made;".").

On Question, amendment agreed to.

Schedule 9 [Repeals and revocations]:

Baroness Hollis of Heigham moved Amendment No. 44:

Page 54, line 39, column 3, at end insert ("and in subsection (6) the word "(2),".").

On Question, amendment agreed to.

In the Title:

Baroness Hollis of Heigham moved Amendment No. 45:

Line 6, after ("benefits;") insert ("to enable functions relating to any of those matters in respect of Northern Ireland to be transferred to the Secretary of State, the Commissioners of Inland Revenue or the Treasury;").

On Question, amendment agreed to.

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