Clause 3 - Claims

Tax Credits Bill – in a Public Bill Committee at 11:30 am on 15 January 2002.

Alert me about debates like this

Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs 11:30, 15 January 2002

I beg to move amendment No. 58, in page 2, line 37, after 'Kingdom', insert

'and/or in the European Union'.

Photo of Jimmy Hood Jimmy Hood Chair, European Scrutiny Committee, Chair, European Scrutiny Committee

With this it will be convenient to take the following amendments: No. 59, in page 2, line 38, after 'Kingdom', insert

'and/or in the European Union'.

No. 60, in page 2, line 40, at end insert—

'(2A) No person shall be entitled to a tax credit who is physically absent from the United Kingdom for more than 4 weeks in any one year.'.

No. 5, in page 3, line 4, at end insert

'and/or in the European Union'.

Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs

Amendments Nos. 58 and 59 are probing amendments that relate to the issue raised by the first Liberal Democrat amendment, on which the Minister undertook to respond in full at this stage of the Bill's consideration.

We should like clarification of the relationship between the new tax credit regime and the European Union, the position of EU citizens, and whether the Government intend essentially to limit the payment of credits to those who are physically present in the UK. My first question is whether EU nationals resident in the UK—who may pay lower rates of UK income tax than British nationals—will qualify for the tax credits in full. The second question, which is related, is what is the Government's proposed policy on other nationals, especially Commonwealth nationals, who reside and work in the UK. Is an obligation involved? I understand that that is the position under EU law. Are those obligations avoidable? About 725,000 individuals, who are not British nationals, working in the UK will qualify under one or other count for the tax credits. What is the position on reciprocity for any analogous benefits in other EU countries? Given the EU directives on benefits and EU accounting standards, how does the issue interrelate with that of whether we are dealing with a benefit or a tax item? Are the rules different depending on how tax credits are regarded or on whether they are correctly categorised?

I note that clause 38 grants the Government power to regulate in relation to immigration. We are, therefore, potentially covering some of the issues related to that. Amendment No. 60 is related, but different. The Minister will be aware that under the existing benefits regime there are problems with people returning to their families in the Indian sub-continent, for example, for substantial periods of time. In those cases, the amendment would restrict absences abroad on holiday to what any reader of The Sun—or even the Daily Mail—would regard generous: a four week maximum. That amendment is principled but would also probe to discover the Government's proposed policy.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions 11:45, 15 January 2002

I understand the example that the hon. Member for Arundel and South Downs gave, but I am thinking of a different one. If a British citizen arrived back in the country in the middle of May, having missed six weeks of the tax year, he could be subject to destitution under amendment No. 60 because he would not receive any tax credits. That may be an unintended side effect.

Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs

Later amendments would address that by abandoning the principle of the tax year, but the point is readily taken.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I am grateful for the hon. Gentleman's gracious response. Rather than risk those later amendments not being debated in Committee, I am disinclined to support the current one.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I shall explain the function of the provisions at which the amendments are directed. This is the second debate we have had in this sitting about interaction with European law. Clause 3 provides that a person must be in the United Kingdom to make a claim for tax credits: that is a reasonable requirement. The purpose of tax credits is to support people who live in the UK. Equivalent rules operate for the working families tax credit, the disabled person's tax credit, the children's tax credit, income support and the jobseeker's allowance. Without such rules, anyone living anywhere in the world could claim tax credits, providing that they met the qualifying criteria. That might put a strain on the Exchequer, not to mention the pockets of UK taxpayers: we must have a reasonable limitation. Therefore, a person's entitlement to tax credits will cease from the point at which they leave the UK.

I hope that you will permit me to look slightly ahead, Mr. Hood, because clause 5(3) states that a person's entitlement to tax credits ends if they leave the UK. It makes it clear that an award ends at any time when the person who made the claim can no longer make a claim under clause 3(2). As the hon. Member for Arundel and South Downs pointed out, the two provisions interrelate, because only a person in the UK can make a claim under clause 3, and it follows that the award ends when they leave the country. That is perfectly sensible. The new tax credits will be responsive: awards will change with people's circumstances.

However, it is not the Government's intention that a person's award should end because they go abroad

for a few days or weeks on holiday or because of family illness, whether to a European Union country or elsewhere. As the hon. Member for Northavon suggested, someone may have to return to another country for a period due to family illness but they are to all intents and purposes still resident in the UK, and their family remains here.

The clause allows regulations to be made that set out the circumstances in which a person may be treated as being in the UK. We intend those regulations to allow scope for people to retain their entitlement if they have to go abroad for a short period. An obvious scenario is that of someone who has to return to Pakistan or India because of a parent's illness and who might be out of the country for a slightly longer period. I am sure that hon. Members can think of other examples. The regulations will be designed to make the situation reasonable. To be eligible for tax credits, a person must be resident in the UK, but the regulations will be reasonable and sensible about circumstances in which for some reason in the course of a tax year, they may not be in the UK.

The amendments would enable people anywhere in the EU to claim a tax credit irrespective of whether they lived in the UK. However, only those who were physically present in the UK for all but four weeks of the year would be entitled to any tax credit for that year. With respect to the hon. Member for Arundel and South Downs, the Bill as drafted works in a much clearer, more sensible and straightforward fashion. I accept that he is seeking to probe the limits of the provisions.

I have said that we intend to make regulations to retain entitlement for those who go abroad temporarily. They will also mean that a person is not prevented from making a claim for a tax credit simply because they are temporarily out of the country. I think that that is the reverse of the point made by the hon. Member for Northavon in an intervention.

Photo of Richard Younger-Ross Richard Younger-Ross Liberal Democrat, Teignbridge

Will the Minister expand the point slightly further and say whether someone who wanted to work abroad for a short period would lose their entitlement? We should consider labour mobility, and my part of the country has many seasonal workers, who benefit from moving abroad for short periods.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

The issue is already addressed in the social security and tax systems. When is a person deemed no longer to be in the UK for the purposes of paying tax and national insurance? Some circumstances have been touched on, although I cannot see how they could come within the provision. For instance, there is a question about people who work on a North sea oil rig, but I think that they are paid rather generously. I do not want to be drawn into the question of tapers and rates, but I cannot see how such people would get into even the range that we are thinking about. I am trying to think of a relevant circumstance, but I honestly cannot think of one. Someone who works for an employer and is required to work for a certain number of months somewhere else in the world is still subject to United Kingdom tax and national insurance. Their place of

employment and their family are, to all intents and purposes, still in the United Kingdom, and the temporary location of their work does not change their employer or their status as present in the United Kingdom. The regulations seek to address those issues. They do not seek to remove entitlement from those who are genuinely entitled to it, but will ensure that those who to all intents and purposes are not present in the United Kingdom will not find that they can qualify.

European nationals who are resident in the United Kingdom will qualify for the tax credits provided that they meet the residence test for being in the United Kingdom, in the same way that everyone will have to provide information that they genuinely live here. That is what we do for WFTC and DPTC. Our approach is sensible, tried and tested.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I will just address the next point. The hon. Member for Arundel and South Downs raised a question that related specifically to Commonwealth countries. Anyone who has ever looked at the E111 form will know that we have a vast array of varying degrees of reciprocal arrangements with countries throughout the world. I am not aware of any country where there could be a reciprocal arrangement on tax credits, but that is the basis on which they are negotiated. Other countries are interested in developing a reciprocal arrangement on tax credits.

Photo of James Clappison James Clappison Shadow Spokesperson (Treasury)

I ask the Paymaster General to clarify one point. She has told us that EU citizens who are working in this country will be eligible for the tax credits, and that the provisions extend working credits in particular to those without children. Does it follow that EU citizens without children who work in this country will now be entitled to that credit? Will she indicate the numbers of people who might be new claimants?

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

They would have to be covered by the reciprocal arrangements in the regulation and would have to satisfy the criteria for eligibility. I understand that we have those arrangements with the European Union. If the hon. Gentleman were taken ill in Germany or France, he would have access to the national health services in those countries. That relates to the arrangements that are guided by the regulations and any additional reciprocal arrangements that we have with individual countries. We have sought through the regulations to remain within our international obligations but to ensure that the intent is that the person is resident in the UK. The requirements vary according to whether the provision is designated as a family benefit. When that debate is finally settled, we will be able to give an absolute answer. The principle is that it is supposed to benefit people who live and work in the United Kingdom, bearing in mind that in some circumstances, people may find themselves temporarily outside the United Kingdom.

There are a number of other points to make in respect of the amendments. However, I will not detain the Committee if the hon. Member for Arundel and South Downs is simply seeking to probe the reciprocal arrangements. I will conclude my remarks later, and return to the more detailed points of why the amendment should be opposed only if the hon. Gentleman is attached to them. However, he may wish to withdraw them.

Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs 12:00, 15 January 2002

The Minister's diagnosis is correct, as I have said. On several occasions, she referred to temporary absence. Will she say what that means in terms of potential period of time? Amendment No. 60, in particular, is designed to probe the length of that piece of string. The hon. Lady is aware that it is an area where there have been many problems in respect of social security benefits and prolonged temporary absences overseas. Therefore, members of the Committee need to know what the intended specific policy is, with regard to qualification of periods of time for temporary absence.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

The question of temporary absence is one of exception. As I am sure the hon. Gentleman will agree, we are considering circumstances when it would be an exception that a person would be absent. Let us suppose that a person returned to their parents' home because one parent was terminally ill. It would be difficult to say to that person that, if his parent died within four weeks, he could return to his own home within the qualifying period, but if his parent did not die within four weeks, he would not get back in time. That person would lose his entitlement, even though his wife and family whom he normally lives with remained at their usual residence. Such a person might also have taken leave, and have a job to return to.

I want to be able to consider what actually happens in genuine cases and to create sufficient room for manoeuvre. For example, child benefit allows eight weeks. I am not saying that we would definitely allow the same period. That is a matter for further consultation. We need to ensure that we do not introduce something that would be cruel, simply for the sake of having a cut-off point, when families find themselves in tragic circumstances. However, we have to protect the Exchequer and ensure that there is no abuse. I am happy to keep the hon. Member for Arundel and South Downs informed of how our thinking develops on the matter. If he is asking for a period of time, and if he promises not to take my response as the absolute answer, I would say that, as child benefit works well at eight weeks, that that would be a starting point for our consideration.

Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs

I thank the Minister for her comments. She has answered the key points that the amendments are designed to raise. It is appropriate to note that EU citizens who come to work in the UK already enjoy—as far as I am aware—a preferential tax regime over native citizens, depending on how long they are working here. Admittedly, that may be relevant only to higher earners. However, a tab needs to be kept on the extent to which we might, unthinkingly, be creating a substantial tax incentive for people from the EU to

come and work here. There is nothing wrong with that in principle, but it should have a justification of benefit to the country. The other issue is about the numbers of people potentially involved.

The Minister has set out the legal position clearly. I thank her for her comments about what ''temporarily absent'' may mean, and I repeat the point that in the past the Department of Social Security has wasted a lot of time because of greyness of definition and, on occasions, attempts to milk the system by absences that are not due, for example, to a dying parent. It will save administrative time and costs if it can be as closely defined as reasonably possible. We do not want to pursue the amendments on their words, but to raise the issues. On the basis of the answers that I received, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs

I beg to move amendment No. 4, in page 2, line 42, leave out from 'are' to end of line 45 and insert

'not separated under a court order'.

Photo of Jimmy Hood Jimmy Hood Chair, European Scrutiny Committee, Chair, European Scrutiny Committee

With this, it will be convenient to take amendment No. 81, in page 2, line 42, leave out from 'are' to end of line 45 and insert

'members of the same household'.

Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs

The paragraph to which the amendments refer follows an income tax definition that may work satisfactorily for the collection of tax but is unnecessarily woolly for the paying out of taxpayer's money to others in tax credits. What does the phrase ''likely to be permanent'' mean in relation to separation, and how will it be quantified? The definition as it stands provokes argument and debate. More specifically, how does the paragraph interrelate with the rest of clause 3(3), relating to couples? My point is that cohabitation fraud is endemic in any system that pays more to couples. It has been a nightmare to police in the past, and it would be more sensible to have a much clearer definition of when two people are a couple and when they are not. The amendment sticks with the clear legal definition that separation is only separation under a court order.

The Liberal Democrat amendment No. 81 gets at the same point and tries to address it with a more specific definition than the current one, by using the phrase

''members of the same household''.

The current definition will be an encouragement to fraud and an almighty nightmare for the unfortunate staff in the Inland Revenue who have to administrate it and judge whether people's separations are permanent. It will lead to a relative worsening of the problems and a potential shambles.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I will address amendment No. 81 and the consistency of the definition of marriage in the tax and social security system. The amendment uses the definition of marriage that appears in the State Pension Credit Bill and other parts of the social security system. Are the Government deliberately using a different definition of marriage for this Bill, and could problems arise if they continue to do so? For example, someone who is aged 64 and counts as

married on one definition may find that, on applying for a pension credit on their 65th birthday—or whatever the relevant age—they are married one day and not the next, or vice versa. We want consistency. The Government say that they are attempting to streamline the provisions, so it will be interesting to find out why the two Bills adopt different definitions.

A related aspect is that some people receiving tax credits will also receive social security benefits. Typically, an unemployed family will receive income support for the adults and child credit for the children. A social security based definition of marriage will apply to the income support element and a tax credits definition will apply to the tax element. If there is any difficulty between the two, where do we go? Under the social security arrangement, people can go to a social security appeal tribunal; under the tax credit arrangement, they go to the tax commissioners. So some people will appeal against the tax definition and go the tax commissioners; others will appeal against the social security definition and go to a social security appeal tribunal. What happens if there are inconsistencies? Why are different definitions employed, particularly as people make a transition from one tax credit to another as they hit a certain age? If the definition changes, strange things could happen to a couple's marital status overnight.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

Amendments Nos. 4 and 81 deal with what constitutes a married couple for the purposes of tax credits. Clause 3 defines a married couple as a man and woman who are married and neither

''separated under a court order, nor separated in circumstances in which the separation is likely to be permanent.''

That is a well-established definition, long used in the tax system. The same definition is used for the purposes of the children's tax credit and was previously used in establishing entitlement to the married couple's allowance—and hence to the additional personal allowance.

What we mean by

''separated in circumstances in which the separation is likely to become permanent''

is precisely that. It means what it says: the words carry their natural meaning, which is customary in the tax system. The test is long established and has been interpreted effectively over several years. As I said, the definition has general application in the tax system. It is also used in the calculation of capital gains and in the taxation of jointly held property.

To establish separation in the social security system, a legal document is necessary. A bizarre position could arise when a couple live at opposite ends of the country, but do not possess the requisite document. We need to assess whether that might cause difficulties.

Both amendments are designed to introduce a different definition for the purposes of tax credits. Each takes a rather different approach to the same question, which makes my case. We already have a definition that has worked well for years and the Revenue is able to apply it, whereas hon. Gentlemen have come up with two different ways of defining the same phenomenon that do not work as well.

I hope that the hon. Member for Arundel and South Downs will forgive me if I say that I find amendment No. 4 rather odd. It would require a married couple to be treated as a couple for tax credit purposes, even after they had separated permanently. An estranged couple who led entirely separate lives, possibly at opposite ends of the country, would be obliged to make a joint claim to tax credits and their award would be based on their combined income until they had obtained a court order confirming separation. I see no need to drive couples to court when the facts demonstrate what has occurred: that has operated perfectly well in the tax system in the past.

I am sure that the hon. Member for Arundel and South Downs will explain how scallywags try and manipulate the tax system, but I remind him that we cannot make legislation assuming that everyone is a scallywag or a cheat. Perhaps that is a reflection of our different political starting points: we believe that people are good, honest and entitled to their rights. We must ensure that the system has enough safeguards.

Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs 12:15, 15 January 2002

Of those children's tax credits sampled by the Inland Revenue, about 30 per cent. were wrong. A lack of legal clarity opens the door to problems. Co-habitation has been an area of notorious problems, and there is a case for a more specific legal definition.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I do not agree with the hon. Gentleman. Given the household structure for millions of people in this country, I would be intrigued to see him table a Finance Bill amendment to entitle people to be legally treated only if they have a legal document of separation. If he asked me whether I could guarantee that people will not try to cheat the system, I would reply that in nearly 5 years as a tax Minister—seven if I include my years as a shadow Minister—I have discovered that some people behave outrageously. We do our best to check them.

The current definition works perfectly well. I understand the intention behind the hon. Gentleman's amendment, but people's personal and legal arrangements would be tax-driven. That is not appropriate if we can rely on the facts. Tax credits direct support to people according to their circumstances and responsibilities. The amendment would prevent that, requiring instead that awards be based on the legal status of a relationship, which is wholly inappropriate for many people. We will debate other safeguards and the methods of checking the system. Those who are determined to cheat the system will do so wherever they can.

Photo of Hugo Swire Hugo Swire Conservative, East Devon

Is it the case that the Revenue intends to investigate 1.5 per cent of applications for tax credit? If that is the case, how is that figure arrived at?

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

The hon. Gentleman is again dealing with a later clause. One of the problems in developing an anti-fraud strategy is that if one announces it in a Committee in the House of Commons, it is not much good. We will have a more

detailed debate about how the Inland Revenue will undertake its risk assessment and monitor procedures, penalties and any criminal offences for which investigators would recommend prosecution. He touches on the important question of how we monitor and what the risk assessments are to ensure that we keep downward pressure on the points where the scallywags may try to exploit the system. I would be more than happy to return to that debate at that time.

Amendment No. 81 is an entirely different kettle of fish. It seeks to recast the definition of married couple to replicate the definition in section 137(1) of the Social Security Contributions and Benefits Act 1992, which looks at whether a married couple are members of the same household. It is obviously a thoughtful amendment that seeks to ensure the same use across the entire system. I understand why the hon. Member for Northavon has tabled it. I considered carefully what was the most sensible way forward. On balance, I believe that it would not be appropriate to adopt the approach proposed in the amendment. The question of when a married couple should be treated as a couple arises in the tax and the tax credits system, as well as the social security system. In both we are concerned to establish whether a married couple really do arrange their lives as a couple, rather than continuing to treat them as a couple even though they have separated.

The technical definitions used differ slightly. I revisited this when I saw the hon. Gentleman's amendment, and I am sure that the effect is the same in terms of how households are treated. In setting a definition for the purposes of the new tax credit there is a choice between following the social security approach and the tax approach. I do not share his view that we should follow the social security system. The definition used in the Bill is the same as the definition in the tax system and it operates in particular for income tax reliefs. It is widely understood, straightforward and has been in use of many years. I am not convinced that we should use a definition from somewhere else and give up a system that is working very well. There is no overwhelming case to move the definition.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I suppose the distinction is that quite a few people who get the tax credits, unusually relative to a lot of taxpayers, are also benefit recipients. For example, every family with children on income support will receive social security benefit with one definition of marriage, and a tax credit with a different definition of marriage. I can understand that for the rich, consistency with the benefit system is much less of an issue, but many people go through two different systems with two different definitions simultaneously. When there is a conflict between the two there is a question of where they appeal.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

It comes back to our debate on passporting. I was asked then whether someone on income support would have to apply in lots of different places. I said that they would not; even though it was administered by different organisations, there would be one point of contact. Someone who was in receipt of income support or jobseeker's

allowance would automatically move to a maximum child tax credit. There is not a double application.

The hon. Gentleman asked why the State Pension Credit Bill is different. There is a fine judgment about which definition to use. I approached the issue on the basis of, ''If it's not broken, why fix it?'' I do not think that that is the right why to say it, but hon. Members know what I mean. The definition has worked well in relation to children's tax credit and everyone understands it, so there is no reason to change it. For both Bills, we considered whether a married couple really live together as a couple. For unmarried couples, both Bills take the same approach and consider whether the couple live together as husband and wife.

The Tax Credits Bill replaces the minimum income guarantee, but remains in the social security system. The premise of the State Pension Credit Bill was presumably the same: the definition already worked and there was no reason to change it. As I understand it, the hon. Gentleman's point concerned the overlap and whether someone could find themselves qualifying for one and not the other. We discussed that quite a lot, and we could think of no scenarios because of the way in which the two systems operate. Apart from the theoretical example, I cannot think of a real-life experience where that might occur. For all those reasons, in the end I played safe and stuck with the definition that works.

As the hon. Members for Northavon and for Arundel and South Downs and other hon. Members regularly point out, the Bill makes several changes, but we should not make a change and risk something where that is unnecessary. That is why we went for the definition. We believe that it works most effectively. We do not believe that there will be any difficulties, and cannot find any. However, if there were any such difficulties, that would be a matter for regulation. I have tried to explain fully every point raised this morning, and I hope that the hon. Member for Arundel and South Downs will agree to withdraw his amendment. If he cannot, I will ask my hon. Friends to vote against it.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I do not want to go over the same ground, and you would not allow me to do so, Mr. Hood. However, the Minister said, ''If it's not broken, why fix it?'' I do not mean it pejoratively when I say that the Government are breaking it by splitting a single payment made through the social security system into a social security benefit and a tax credit with different definitions. It was not broken before. One payment was made under the social security legislation; one payment of income support for children was one social security payment. We are going down two separate avenues at the same time.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

We are prepared to make a change where we believe that it will improve the system. I do not intend to go back over earlier discussions in relation to clauses 1 and 2, but the Government's clear objective on tax credits is part of the anti-poverty strategy. That is the most effective way to deal with the in-work, out-of-work divide and to get support to children. We did not make the change for the sake of it. When I used the phrase, ''If

it's not broken, why fix it?'' I was trying to say that, in my experience, what worked was making additions and improvements, which the Bill does.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I did not doubt that the Minister hoped to improve the system by making the change. It would have been reassuring if she had said that she stressed to her colleagues at the Department for Work and Pensions the advantage of moving to her definition for consistency and for the transition to retirement.

My only point that the Minister did not address was the issue of appeals. People will be under two separate systems; they may appeal to social security or to the tax commissioners. Perhaps the issue will arise again.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I apologise for not dealing with the question of appeals. The hon. Gentleman is right in saying that those who sit on the appeals tribunals must have the expertise to adjudicate the matter. The issue arises with working families tax credit.

I will confirm this in writing, but I believe that the point at which the appeal will be heard will be the same, because of the commonality of some of the points. I will double check, as the arrangements are transitional. However, we must ensure that the appeals tribunal has the skills necessary to deal with the issues.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions 12:30, 15 January 2002

I am grateful for the Minister's response. She made an important point about a unified appeal system. A tax credits decision about marriage, for example, might have implications for social security entitlement. I would be grateful if the Minister would come back to us on that question.

Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs

The Minister has persuaded me of her case, but I am sure that it is on the basis that she will support some of our subsequent amendments, which tighten up the legislation. I asked how the clause interrelates with the next one, in which the cohabitation problem is more complicated when dealing with unmarried couples. Defining when an unmarried couple cease to be a couple is also a difficult issue. Making the separation legal does not particularly help, although it provides some clarification. On the basis of the Minister's response, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs

I beg to move amendment No. 7, in page 3, line 4, at end insert—

'(5A) Entitlement to a tax credit is dependent upon being lawfully in the United Kingdom; the Board shall have access to any information held in any form by any other Government Department for the purpose of satisfying itself whether a tax credit is properly payable under the provisions of this subsection.'.

The amendment is one of several that we drew up to help the authorities in their investigations. It would provide for the exchange of information among Government Departments for the purposes of checking eligibility. The Bill defines eligibility in detail, but the process of checking it will not be easy. Access to other Departments' records would be of use to the Inland Revenue for making checks or for sampling for accuracy. The amendment is designed to add clarification and to probe the Government's intentions.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

The amendment proposes that entitlement to tax credit should be conditional on the claimant being lawfully in the United Kingdom. The Committee will be reassured to hear that the Government do not intend to make tax credits available to people who are here unlawfully. However, it is not necessary to amend the Bill to achieve that result.

The Bill already allows regulations to be made excluding persons subject to immigration control from entitlement to both the working tax credit and the child tax credit. This is a complicated area. It depends on the status of the person subject to immigration control. The hon. Member for Arundel and South Downs is no doubt aware that a person requiring leave to enter or remain in the United Kingdom but who does not have it—that is, a person here unlawfully—falls within the category of persons subject to immigration control. That is made clear in section 115(9) of the Immigration and Asylum Act 1999, to which clause 38 refers.

The first limb of the proposed new section is not necessary. It has been covered. It is cross-referenced in immigration law and there is provision for regulations to specify. The second limb would give the board access to information held for any purpose by other Government Departments to enable it to establish whether a person should be excluded from entitlement on the grounds of being in the United Kingdom unlawfully. I hazard a guess that I would not get an amendment that would give the Inland Revenue such wide powers to access information in any Government Department in the interests of deciding entitlement through the House of Commons let alone the House of Lords. The hon. Gentleman is familiar with the important balance that we strike in the tax system on taxpayer confidentiality, the existence of information gateways and their tight control. It was the subject of discussion on a recent Bill, which completed its passage just before Christmas. The issue of where the Revenue should have powers was hotly contested.

I assure the hon. Gentleman that the Government share his concern that the Revenue should have the information it requires to make correct decisions about a claimant's entitlement. I am not convinced that we need such vast powers to do so. It is not the Inland Revenue's role to police the immigration laws. Its role is to ensure that the rules for entitlement to tax credits are met. As I mentioned, those rules will include rules on entitlement for those subject to immigration control. The provision is in clause 38.

For the new tax credits, the procedure will be the same as for the working families tax credit, where the Revenue determines entitlement without direct access to the information held by the Home Office. I have decided that a regulatory power is necessary here because discussions are taking place at the Home Office about immigration and asylum and methods for ensuring that someone is here legally and therefore receives their legal entitlement. It is not a sensible approach to include provisions that may change and may necessitate a return to primary legislation. The regulations will replicate the interaction that occurs now on the working families tax credit.

I am grateful to Opposition Members for tabling the amendment, which raises an important point. I am sure, however, that the hon. Member for Arundel and South Downs will agree that it is not the Committee's role to make the Inland Revenue responsible for all Government policy, including immigration controls. We need to follow the immigration policy laid down in legislation. The information gateways proposed by the hon. Gentleman are much wider than we need and would concern all citizens in this country. Nevertheless, he raises an important point to which I am sure that he will return: ensuring that only those who are eligible will receive the tax credits. I hope that he accepts that the cross-reference to the immigration laws and status give us the necessary powers.

Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs

In simple terms, under the powers proposed in the regulations, can the Inland Revenue check with the immigration department if it suspects that a claim is from someone who is not lawfully resident in the UK?

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

One issue that might be considered, along with immigration controls, is whether an individual who has entered the country has applied for and been allocated a national insurance number.

I think that we would not ask the Home Office directly, but the tax department can use its information to cross-check whether a person exists and other checks may be made elsewhere in the tax system to reinforce that. We are prohibited from disclosing taxpayers' information to the Home Office, but there are ways of cross-referencing. The Inland Revenue has the same problem as other Departments: someone who is here illegally will not be in the system and the Home Office will not know about them either. Information gateways to the Home Office will therefore not resolve the illegality issue. The only question is whether such people were subject to immigration controls; there are other ways of checking an individual's documentation.

On that basis, we can deal with the matters raised by the hon. Gentleman without extending the Inland Revenue's powers, which would probably frighten the living daylights out of honest taxpayers, who would worry about whether we were disclosing information. On reflection, he may wish to ask leave to withdraw the amendment, as it is unnecessary.

Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs

I thank the Minister for her response. I would not wish to extend powers more than is justified and therefore to reduce privacy. The Minister has answered the probing question underlying my proposal. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 3 ordered to stand part of the Bill.