FIRST REPORT
The Select Committee appointed to consider any instrument
which is directed by Act of Parliament to be laid before and to
be subject to proceedings in this House only being:
(a) a statutory instrument,
or draft of a statutory instrument;
(b) a scheme, or an amendment
of a scheme, or a draft thereof, requiring approval by statutory
instrument; or
(c) any other instrument
(whether or not in draft), where the proceedings in pursuance
of an Act of Parliament are proceedings by way of an affirmative
resolution:
In pursuance of the Instruction that in considering
any such instrument the Committee do not join with the Committee
appointed by the Lords, has made progress in the matter referred
to it and has agreed the following report:
1. The Committee has considered the instruments listed
in the Annex to this Report, and has determined that the special
attention of the House does not require to be drawn to any of
them.
OVERSEAS
INSURERS
(TAX
REPRESENTATIVES)
REGULATIONS
1999 (S.I. 1999/881)
2. The Committee draws the special attention of the
House to the above instrument on the ground that it is defectively
drafted.
3. The instrument supplements a provision in the
Taxes Act (section 552A; inserted by section 87 of the Finance
Act 1998) requiring non-resident insurance companies to have tax
representatives in the United Kingdom for certain purposes. It
makes provision for the appointment, and termination of appointment,
of tax representatives.
4. Section 552A(7) ("subsection (7)") provides
that "A person shall not be a tax representative unless—
(a) if he is an individual,
he is resident in the United Kingdom and has a fixed place of
residence there, or
(b) if he is not an individual,
he has a business establishment in the United Kingdom, ...".
Regulation 6(1) provides that the Board may at any
time give notice to both the overseas insurer and his tax representative
that they have decided to withdraw their approval of the tax representative
on certain specified grounds, including [(a)] that he no longer
satisfies the requirements of subsection (7). Where the Board
have given notice of their decision to withdraw approval of the
tax representative, regulation 6(2)(a) provides that he continues
to be the tax representative of the overseas insurer until they
give notice of their approval of the nomination of another person
or themselves appoint another person in his place. This provision
would appear to be capable of producing a result which is prohibited
by subsection (7) in that a person continues to be the tax representative
(albeit for a limited period) even though he no longer fulfils
the requirements of that subsection as to residence or business
establishment.
5. The Department's memorandum of 26 April 1999 (printed
in the Appendix to this Report), while accepting that no person
can continue to act as a tax representative if he does not satisfy
the requirements of subsection (7), explains that the giving of
a notice of the Board's decision to withdraw approval of the tax
representative on the ground that he no longer fulfils the requirements
of subsection (7) does not conclusively establish that those requirements
are no longer satisfied: the insurer may appeal against the decision
or informally dispute its correctness. The Department submit that
it is a legitimate exercise of the power in section 552A(9)(f)
(power to make supplementary provision as to termination of a
person's appointment as tax representative) to require a person
to continue as tax representative so long as there is a doubt
as to whether or not he satisfies the requirements of subsection
(7).
6. The Department's further memorandum of 10 May
1999 (also printed in the Appendix to this Report) addresses a
supplementary point raised by the Committee, namely what is the
position in a case where there is no doubt that the tax representative
no longer satisfies the requirements of subsection (7) (and accordingly
the insurer does not wish to challenge the Board's decision) and
whether, in such a case, regulation 6(2)(a) has the effect that
a person can continue as a tax representative when he no longer
satisfies those requirements.
7. The Department explain that regulation 6(2)(a)
only has effect in situations where, notwithstanding that the
Board have given notice of their decision to withdraw approval,
doubts remain as to whether or not the requirements of subsection
(7) are no longer satisfied; and that, in a case where the facts
are not in dispute, regulation 6(2)(a) is not meant to have (and
because it cannot override subsection (7) does not have) the effect
that a person who no longer satisfies those requirements can continue
to be a tax representative.
8. The Committee considers that, given that regulation
6(2)(a) is only intended to operate in the limited circumstances
mentioned in paragraph 7 above, the scope of application of that
provision should have been made clear. Regulation 6(2)(a), without
any such qualification, misleadingly suggests that it has a wider
range of application than that intended. Any appearance of inconsistency
with subsection (7) should have been removed by restricting the
scope of operation of regulation 6(2)(a). The omission to do so
constitutes defective drafting, and it is on that ground that
the Committee reports regulation 6(2)(a) to the House.
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