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Column 751upon the great majority of gang masters who carry out their obligations as we would wish. I trust that the farmers and growers who use gang masters will continue as they have in the past, with a voluntary arrangement whereby the gang master fulfils his obligations and provides the necessary returns to the Revenue.
Mr. A. J. Beith (Berwick-upon-Tweed) : There is concern about the part of the new clause to which reference has been made. I have received representations from the National Farmers Union, as has my hon. Friend the Member for North Cornwall (Mr. Tyler) and my hon. and learned Friend the Member for Fife, North-East (Mr. Campbell). In practical terms, a farmer or grower would be put in a difficult position because not only might a large number of people be brought on to his farm by a gang master during a season when there are crops to be gathered, but they may be there for only one or two days in the week and then they will be on someone else's premises. The farmer or grower may start the week with 30 people working on his farm ; after a couple of days, only half of them are still there and half have gone somewhere else. A few more people are brought in again when there is a bit more work to be finished.
The flexibility of the gang system is the reason why farmers use it. It enables them to get the job done without carrying on their permanent staff a number of employees for which it would be impossible for the farm income to provide. Farmers simply cannot operate in that way. Given the competitive environment to which the hon. Member for Cambridgeshire, South- East (Mr. Paice) referred with produce from other countries, growers must find whatever ways they can to harvest their crops efficiently.
If farmers and growers are faced with having to make
pay-as-you-earn returns for all sorts of individuals who are on their farms for only two or three days in the entire year and who are not under their direction or control, whom they do not know, whose home address they do not know and whose previous employment record they do not know, it is an incredible burden to put on them.
The Government are supposed to be engaged in deregulation and reducing the burdens on small business. The burden which the provision will present to small business is considerable. At present, it is not clear--it may become clearer later--how many farmers and growers will face this daunting problem ; it will depend on how many occasions the Revenue decides to make a direction that a particular grower or farmer must fill in a return. It is not clear whether it is intended to be a general practice or whether it is a power that will be brought into play in exceptional circumstances when it is perceived that a particular gang master has not been doing his PAYE returns properly and not accounting for the people whom he is employing. There is a world of difference between those two. At present, farmers and growers simply do not know whether they will be landed with the power or whether it will be an exceptional and rarely used power. I hope that it is the latter, and that the Minister can give us that assurance.
The gang system is open to abuse not only with regard to taxation but in other ways as well ; it can work to the detriment of those who are employed in it. However, it is a necessary part of the way in which harvesting takes place. Every attempt is being made by all those concerned to find a way of resolving the specific tax difficulty satisfactorily.
It has come as a great shock to those concerned that the
Column 752Government have tabled on Report a new clause on a complex matter while discussions were supposed to be still taking place. So far as I am aware, the provisions in the new clause have not been the subject of consultation with those to whom the Government were talking. I do not see the point of that. The Government rightly engage in discussions with all the organisations. But suddenly, like a rabbit out of a hat, they produce the new clause, and slap it on the amendment paper, and take it at a stage when it cannot be the subject of any further discussion or amendment later. That simply does not make sense. If the Government were that determined to press ahead, why did they not table the new clause in Committee ? At least we could have had some reflection on the matter and perhaps come back on Report with any necessary modification.
It seems that the Government are failing the precepts that they set themselves for the consideration of such tax measures. They are at risk of imposing a serious burden on a great number of small businesses in a sector of agriculture which is not doing well financially and where incomes have fallen seriously recently. I ask the Minister to rethink what the Government are doing with the new provision. They have even included it in a new clause which contains so many other provisions that are necessary--or which the Minister said were necessary. That makes it difficult to vote against the provision because in doing so we will be voting against other anti-avoidance provisions which are probably generally felt to be desirable.
The Minister has put the farming industry in a most unfair position by asking it to accept the change without proper consultation and with all the detrimental effects that it will have on farmers and growers, who have enough problems without having to account for the PAYE returns of people who may be on their farms for only a couple of days or one week of the year.
Mr. John Home Robertson (East Lothian) : I am grateful to my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown) for raising the concerns expressed by the National Farmers Union of Scotland on this issue. I stress that I hold absolutely no brief for the gang masters of this world. I am concerned about the obvious abuses which existed in the agriculture industry in the past, and which may well still exist, where casual employees are ruthlessly exploited by gang masters. However, the fruit and vegetable growing industry in the east of Scotland is important, and the only way in which it can function is by taking advantage of casual labour. If the Government are having difficulty collecting PAYE and national insurance contributions from that sector of the economy, they should address themselves to those who are directly responsible for employing the work force. They should not be trying to get other businesses to do that work for them.
I understand that there is an agricultural compliance unit at the Inland Revenue which is actively seeking information about the way in which gangs operate. I would strongly support any efforts by the Treasury and the Inland Revenue to regulate that rather marginal sector of the rural economy because there is a need for proper protection for people who work in that sector. Seriously, it would not make sense to require individual farmers to become personally liable for paying the national insurance contributions and PAYE in respect of people whom they were not directly employing. It would set a silly precedent and I hope that that is not what the Minister intends to do.
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Mr. Dorrell : I can certainly give the House an assurance that it is not our intention to create in the new clause an obligation which does not already exist within the piece of secondary legislation to which I referred in my opening remarks. I remind the House that I said that the purpose of new sections 203BB and 203BD--we are now talking about 203BD--is to replace the provisions in the secondary legislation. The legitimacy of that legislation is at least questioned by the House of Lords ruling in the Herd case. The purpose of the clauses is to replace an existing piece of secondary legislation. I can certainly assure the House that the fact that the powers are now being put into primary legislation has no bearing at all on the assurances which have always been given, or those which are currently in force, by the Inland Revenue about how the powers which hitherto have been provided for by secondary legislation would be used.
I must tell the hon. Member for East Lothian (Mr. Home Robertson) that it is not part of our purpose to provide as a normal state of affairs that a farmer should be required to provide for PAYE for labour employed by a gang master. It is clearly true that the primary responsibility for applying PAYE to members of a gang rests on the gang master, not on the farmer who employs the gang. That is a form of anti-avoidance provision which is already in the secondary legislation and the checks for the farmer are, I suggest to the House, improved by writing it into primary legislation in a number of respects.
First, I draw the attention of the House to subsection (1)(c) of section 203BD which makes it clear that the power can be used only where
"it is likely that income tax will not be deducted or accounted for in accordance with the regulations."
Therefore, the board of the Inland Revenue must first satisfy itself that there is a serious risk of avoidance activity or of a lack of enforcement activity in the circumstances.
There are two new safeguards which are not provided in the current secondary legislation. First, the person who is using the workers' services --the farmer--will be required to deduct tax only from payments which he actually makes to the employer of the workers. Secondly, new legislation requires the board of the Inland Revenue to issue a written direction so that the parties involved are clear about their responsibilities.
I hope that the House will accept that this is a clarification of an existing piece of secondary legislation which is under threat as a result of the Herd case. We have taken the opportunity to write in additional safeguards, and it is an important piece of anti-avoidance legislation.
Question put and agreed to.
Clause read a Second time, and added to the Bill.
.--(1) Regulation 4 of the 1993 Regulations (intermediate employers) is hereby revoked ; but in relation to any time before its revocation it shall be deemed to have been validly made.
(2) Regulation 3 of the 1973 Regulations (intermediate employers) shall, in relation to any time before its revocation, be deemed to have been validly made.
(3) Where, at any time before the passing of this Act
Column 754(a) a payment has been made of, or on account of, any income of an employee not resident or, if resident, not ordinarily resident in the United Kingdom,
(b) at the time when the payment was made it appeared that some of the income would be assessable to income tax under Case II of Schedule E, but that some of the income might prove not to be assessable to income tax under that Schedule, and
(c) the payment or any proportion of it was treated for the purposes of the 1993 Regulations or the 1973 Regulations as a payment to which the regulations applied,
then the treatment of that payment or that proportion of the payment as being a payment to which the regulations applied shall be deemed to have been lawful.
(4) In this section
(a) "employee" means a person holding an office or employment under or with any other person ;
(b) "the 1993 Regulations" means the Income Tax (Employments) Regulations 1993 ; and
(c) "the 1973 Regulations" means the Income Tax (Employments) Regulations 1973.'.-- [Mr. Dorrell.]
Brought up, read the First and Second time, and added to the Bill.
.--(1) The provisions mentioned in subsection (2) below (which enable revenue traders and taxable persons to be required to keep records) shall be amended in accordance with subsections (3) and (4) below (which correct minor errors in those provisions so far as they relate to the admissibility in evidence of the recorded information).
(2) The provisions are
(a) in the Customs and Excise Management Act 1979, section 118A ; and
(b) in Schedule 7 to the Value Added Tax Act 1983, paragraph 7. (3) In subsection (6) and sub-paragraph (5) of those provisions (a) in paragraph (c) for the words "sections 13 and 14 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1968" there shall be substituted "sections 5 and 6 of the Civil Evidence (Scotland) Act 1988" ; and
(b) in paragraph (d), for the words "except in accordance with the said sections 13 and 14" to the end there shall be substituted "except in accordance with Schedule 3 to the Prisoners and Criminal Proceedings (Scotland) Act 1993".
(4) Subsection (7) and sub-paragraph (6) of those provisions shall be omitted.'.-- [Sir John Cope.]
Brought up, and read the First time.
Sir John Cope : The new clause and the amendments refer to extremely technical provisions about the admissibility of documents, and particularly copies of documents, as evidence in civil or criminal proceedings arising under the various taxes administered by the Customs and Excise. The new clause and amendments correct errors not only in the Bill as originally drafted but in the law as it stood. They are extremely minor errors. They arise from changes in Scottish law on the admissibility of evidence. They do not change the substantive law, but they make clear what documents are admissible as evidence.
Column 755House if he could explain what difference it would have made if he had not tabled the amendments. Where exactly have the errors occurred, in respect of both the Bill and the position of the law as it currently stands ? Does he anticipate that any claims against the Exchequer will arise out of the errors in the previous law ?
Sir John Cope : No, we do not expect any claims to arise from the errors. I am not aware of any cases which have occurred or are pending at this moment as a result of the confusion that might have arisen from the items being in the law. The Civil Evidence (Scotland) Act 1988 allowed computer evidence to be treated like evidence in other business documents in civil proceedings. The Bill as it is currently drafted, and the Acts which are referred to in the new clause and amendments, referred to the old civil provisions of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1968, which was originally about civil proceedings but applied later to criminal proceedings. Those proceedings were deleted from statute law some time ago. They are still referred to in bits of the customs law. Clearly, if a court was asked to refer back to obsolete provisions which have been deleted from the law, it would create a difficulty in judging whether the documents should be admissible. Therefore, it is wise to do as we suggest in the new clause and amendments to bring the law into line by inserting the consequential amendments that should have been made perhaps a year or two ago and by bringing the Bill up to date.
The matter turned up only because of the need to make sure that the drafting of the Bill was correct. That brought to light the difference between Scottish law and English law initially in respect of the insurance premium tax that we are introducing. The amendments correct that difference as well as the earlier legislation to which I referred.
Mr. Andrew Smith I thank the right hon. Gentleman for his explanation. It is good to know that someone is keeping a careful check on the details of these matters. One dreads to think how much other obsolete legislation there might be lurking in the nooks and crannies of the statutes. I welcome the right hon. Gentleman's explanation and I cannot see any reason to oppose the new clause. Question put and agreed to .
Clause read a Second time, and added to the Bill .
1. This Schedule applies in relation to chargeable gains and allowable losses accruing to
(a) an individual, or
(b) the trustees of a settlement made before 30th November 1993 ; (referred to in this Schedule as "the taxpayer").
2.--(1) This paragraph applies for the purposes of this Schedule, and the determinations required by this paragraph to be made shall be made without regard to paragraphs 4 to 7 below.
(2) If an allowable loss accrues on a disposal made on or after 30th November 1993 and, under the old indexation rules, a greater allowable loss would have accrued, there is an indexation loss in respect of the disposal equal to the amount by which the allowable loss which would have accrued under the old indexation rules exceeds the allowable loss accruing on the disposal.
(3) If a disposal made on or after 30th November 1993 is one on which neither a gain nor a loss accrues and, under the old indexation rules, an allowable loss would have accrued, there is
Column 756an indexation loss in respect of the disposal equal to the amount of the allowable loss that would have accrued under the old indexation rules.
(4) If the total amount of chargeable gains accruing to the taxpayer in any year of assessment for which this Schedule has effect exceeds the allowable losses accruing in that year, there is a relevant gain for that year equal to the amount of the excess. 3.--(1) The cases in which the appropriation of an asset by the taxpayer is treated under section 161(1) of the 1992 Act (appropriations to and from stock) as a disposal of the asset include cases in which, if he had sold the asset for its market value, an allowable loss would have accrued to him under the old indexation rules.
(2) Where, but for an election under subsection (3) of section 161 of the 1992 Act
(a) an asset appropriated by the taxpayer would have been treated as disposed of as mentioned in subsection (1) of that section, and (b) paragraph 2(2) or (3) above would have applied on the disposal,
paragraphs 1 and 2 above and 6 and 7 below shall apply, as if the asset had been so treated, to determine for the purposes of subsection (3) of that section any increase to be made in the amount of any allowable loss ; and the appropriation of the asset is referred to below as a "relevant appropriation".
(3) Sections 574 to 576 of the Taxes Act (relief for individual on disposal of shares in qualifying trading company) shall apply if an individual who has subscribed for shares as mentioned in section 574(1) disposes of them in circumstances where paragraph 2(3) above applies as they apply in other cases.
(4) Where a person makes a claim for relief under subsection (1) of section 574 in the case of a disposal in respect of which there is an indexation loss (referred to below as a "section 574 disposal") (a) paragraphs 6 and 7 below shall apply to determine any increase to be made, for the purposes of that subsection, in the amount of the allowable loss, and
(b) paragraphs 4 and 5 below shall apply to so much only of the indexation loss as is not relieved under that section.
(5) References in this paragraph and paragraphs 6 and 7 below to an increase in any loss include, in circumstances where paragraph 2(3) above applies, a reference to the creation of the loss.
Capital gains tax
4.--(1) Where in the case of any taxpayer
(a) there is a relevant gain for the year 1993-94,
(b) the relevant gain exceeds the exempt amount for that year, and (c) there are indexation losses in respect of any disposals made in that year,
then, for the purposes of the 1992 Act, the amount by which the total amount of chargeable gains accruing to the taxpayer in that year exceeds the allowable losses accruing in the year shall be reduced by the amount mentioned in sub-paragraph (2) below, and shall be so reduced before the deduction of any allowable losses carried forward from any previous year or carried back under section 62 from any subsequent year.
(2) The amount referred to in sub-paragraph (1) above is so much of the total of indexation losses in respect of disposals made in that year as does not exceed
(a) £10,000, or
(b) the amount by which the relevant gain exceeds the exempt amount for the year,
whichever is the smaller.
5.--(1) Where in the case of any taxpayer
(a) there is a relevant gain for the year 1994-95,
(b) the relevant gain exceeds the exempt amount for that year, and (c) there are indexation losses in respect of any disposals made in that year or unused indexation losses for the previous year, then, for the purposes of the 1992 Act, the amount by which the total amount of chargeable gains accruing to the taxpayer in the year 1994-95 exceeds the allowable losses accruing in that year shall be reduced by the amount mentioned in sub- paragraph (2) below, and shall be so reduced before the deduction of any allowable losses carried forward from any previous year or carried back under section 62 from any subsequent year.
Column 757(2) The amount referred to in sub-paragraph (1) above is so much of the total of indexation losses in respect of disposals made in the year 1994-95, plus any unused indexation losses for the previous year, as does not exceed
(a) £10,000 less the aggregate of
(i) the amount of any reduction made under paragraph 4(1) above for the previous year, and
(ii) any increase made under paragraph 6(2) below for the previous year, or
(b) the amount by which the relevant gain exceeds the exempt amount for the year 1994-95,
whichever is the smaller.
(3) For the purposes of this paragraph, if the total amount of indexation losses in respect of disposals made by the taxpayer in the year 1993-94 exceeds the aggregate of
(a) the amount of any reduction made under paragraph 4(1) above for that year, and
(b) any increase made under paragraph 6(2) below for that year, there are unused indexation losses for that year of an amount equal to the excess.
6.--(1) This paragraph applies where, at any time in the period beginning with 30th November 1993 and ending with 5th April 1994, the taxpayer makes any relevant appropriation or any section 574 disposal ; and for the purposes of this paragraph there shall be determined (a) the amount of any reduction for the year 1993-94 which (disregarding relevant appropriations and section 574 disposals) would be made under paragraph 4(1) above, and
(b) the amounts of any indexation losses in respect of relevant appropriations or section 574 disposals made in that period. (2) If the aggregate of the amounts referred to in sub-paragraph (1)(a) and (b) above does not exceed £10,000, the amount of any allowable loss referable to such an appropriation or disposal shall be increased by any indexation loss in respect of it.
(3) In any other case, notwithstanding anything in paragraphs 4 and 5 above
(a) the aggregate of
(i) the amount of any reduction for the year 1993-94 to be made under paragraph 4(1) above, and
(ii) the amount of any indexation losses in respect of relevant appropriations or section 574 disposals made in the period referred to in sub-paragraph (1) above,
shall be equal to £10,000 and shall be allocated as the taxpayer may determine between that reduction and increases in allowable losses referable to such appropriations or disposals, and (b) no reduction shall be made under paragraph 5 above or 7 below for the year 1994-95.
7.--(1) This paragraph applies where, at any time in the year 1994-95, the taxpayer makes any relevant appropriation or any section 574 disposal ; and for the purposes of this paragraph there shall be determined
(a) the amount of any reduction for that year which (disregarding relevant appropriations and section 574 disposals) would be made under paragraph 5(1) above, and
(b) the amounts of any indexation losses in respect of relevant appropriations or section 574 disposals made in that year. (2) If the aggregate of the amounts referred to in sub-paragraph (1)(a) and (b) above does not exceed the limit for 1994-95, that is
(a) £10,000, less
(b) the aggregate of the amount of any reduction made under paragraph 4(1) above for the year 1993-94 and of any increases made under paragraph 6(2) above for that year,
the amount of any allowable loss referable to such an appropriation or disposal shall be increased by any indexation loss in respect of it.
(3) In any other case, notwithstanding anything in paragraph 5 above, the aggregate of the amount of any reduction for the year 1994-95 to be made under paragraph 5(1) above and of the amount of any indexation losses in respect of relevant appropriations or section 574 disposals made in that year