| Tax Credits Bill - continued | House of Commons |
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Clause 8: Entitlement53. This clause sets out the conditions of entitlement for the child tax credit.
54. Entitlement hinges on the claimant or claimants being responsible for one or more children. The clause will enable regulations to be made setting out how responsibility for a child is to be determined (subsection (2)).
55. The clause also sets out what is meant by a child or young person for the purposes of the child tax credit. "Child" means someone under 16 or, in prescribed circumstances, someone aged 16. The intention is to continue child tax credit entitlement in respect of a child until 1st September following the child's 16th birthday, so as to cover those children required to remain in compulsory full-time education (subsection (3)). A "qualifying young person" is someone aged 16 or more who is no longer a child for tax credits purposes, meets conditions to be set out in regulations and is below an age limit to be set out in regulations (subsection (4)). This will enable support through child tax credit to be available in respect of young people who continue in full-time, non-advanced education.
56. The clause allows regulations to be made to enable child tax credit to continue for a period after a child or young person has died.
Clause 9: Maximum rate57. Clause 9 provides for regulations to be made setting out the elements making up the child tax credit. The clause provides that child tax credit must include an element available to everyone entitled to child tax credit and an element for each child or young person that the claimant is or claimants are responsible for. The first of these elements is known as the "family element" and the latter is the "individual element". The "individual" element must be a higher amount for a child or young person with a disability and higher again for a child or young person with a severe disability. Regulations may set out the criteria for deciding whether a child or young person is disabled or severely disabled.
58. The clause then allows for regulations to set out other elements of child tax credit. These may provide for the "family element" to differ according to the age of children in the family, or other factors, or for the amount of the "individual" credit to vary according to the age of the child or young person.
Clause 10: Entitlement59. This clause sets out the conditions of entitlement relating to the working tax credit. It provides that a person, or either or both persons in the case of a couple, must be engaged in qualifying remunerative work.
60. The clause allows regulations to be made setting out what is meant by qualifying remunerative work and the circumstances in which a person is to be treated as engaged, or not engaged, in such work. For example, a person will have to work at least a certain number of hours to be regarded as being in qualifying remunerative work. The regulations may make different provisions according to the age of the claimant or claimants, whether he or she has a disability, whether he or she is responsible for a child or young person or any other factors.
Clause 11: Maximum rate61. Clause 11 provides for the elements making up the working tax credit to be set out in regulations.
62. The starting point is that the working tax credit must include an element available to any person entitled to working tax credit. This is to be known as the "basic element" of working tax credit. A worker with a disability entitled to working tax credit must also be entitled to an extra element, to be known as the "disability element". The criteria for deciding whether a person qualifies for the disability element will be set out in regulations.
63. The clause then enables regulations to be made setting out the other elements of working tax credit available. These may include:
Clause 12: Child care element64. Clause 12 provides for one component of the working tax credit to be a component in respect of child care costs, to be known as the "child care element". The clause provides for regulations to be made setting out the child care charges which may be taken into account, and the proportion of them which is to be taken into account.
65. The regulations may set out the types of qualifying child care whose costs may be taken into account by reference to the children for whom, and the persons by whom, the care is provided. The clause allows for the appropriate national authority (in England, the Secretary of State, in Scotland, Scottish Ministers, in Wales, the National Assembly for Wales, and in Northern Ireland, the Department of Health, Social Services and Public Safety) to make schemes under which child care providers can be approved for the purposes of the child care element.
Clause 13: Rate66. Clause 13 provides that claimants whose income (or aggregate income) does not exceed the income threshold are entitled to the maximum rate of tax credit for which they are eligible according to their circumstances. Similarly, a claimant entitled to specified social security benefits is entitled to tax credits at the maximum rate.
67. For other cases, the clause allows for regulations to be made setting out how the rate of entitlement is to be calculated. This provides the scope to set out the rate or rates at which tax credits are to be withdrawn depending on the income of the claimant(s), and allows for rounding.
68. The clause also provides for regulations to specify circumstances where minimal entitlement may be reduced to nil.
Clause 14: Provisional decisions69. Clause 14 provides that, when a claim is made, the Board must decide whether an award of tax credit should be made and, if so, the amount of that award. Before making the decision, the Board can require the person or persons making the claim to provide, within a specified time, information or evidence that the Board consider necessary to make their decision. The Board may also require, in accordance with regulations, information or evidence to be provided by third parties in order to reach a decision.
Clause 15: Revised provisional decisions after notifications70. Clause 15 requires the Board to make a decision whether to amend a tax credit award after notification of a change of circumstances which may increase the maximum rate of tax credit has been given in accordance with regulations under clause 6. It provides the same information powers in respect of notified changes as apply to claims.
Clause 16: Other revised provisional decisions71. This clause gives the Board the power to amend or revoke an award of a tax credit during a tax year if they have reasonable grounds for believing claimants are entitled to a different amount of tax credits for that tax year from the amount they are receiving or that they are no longer, or never were, entitled to tax credits.
72. If the Board believe that claimants are entitled to a different amount of tax credits from the amount they are receiving, or that they are no longer, or never were, entitled, the Board may require information or evidence to be provided. The detail of the information powers is similar to that of the powers under clauses 14 and 15.
Clause 17: Final decisions73. Clause 17 provides that the Board must give a notice to a person or persons to whom an award of tax credits has been made for a tax year.
74. The notice must require the claimant(s) to declare that the circumstances affecting their entitlement are as stated by the Board or, if they are not, to state how they differ. This must be done by a time specified in the notice. Alternatively, the notice must inform the claimant(s) that, if they do not declare any respects in which their circumstances differ from the information in the notice, they will be treated as having accepted as accurate the circumstances set out by the Board.
75. The circumstances to be referred to in the notice are the circumstances affecting entitlement to tax credits for the tax year and the amount of tax credits to which the claimant(s) were entitled for the tax year.
76. Similar provisions apply to the requirement to notify the Board of the level of income relevant to the award or to notify any relevant changes in income in response to a notice. The notice may specify a range of income and require people to report changes only outside that range of income. Once people have responded to the notice (or the time for doing so has expired), the Board has to decide whether the tax credit award was correct and, if it is not, it may amend or revoke the award (subsection (6)).
77. The clause also allows for people to provide an estimate of the income relevant to their tax credit award, to enable them to respond to a notice about their entitlement for a tax year. The claimant(s) may correct any such estimate within a specified time if it turns out not to be correct. At that point, the Board may decide to correct or revoke the award, in the light of the actual income for the tax year (subsection (8)).
78. The clause enables regulations to be made setting out the circumstances in which one person may act for another in responding to a notice about an award or in which one partner in a couple is to be taken as acting also for the other.
79. A decision in the light of the response to a notice, or a revised decision in response to the substitution of the actual income figure for an estimate, is conclusive as to the claimant's or claimants' entitlement to tax credits, and the amount of their entitlement (subject to the provisions on enquiries, discoveries and official errors, described below, and to appeals).
Clause 18: Power to enquire into awards80. Clause 18 gives the Board the power to make enquiries into any award of tax credit for a tax year, so long as they give notice to the person or persons to whom the award was made within the time limit allowed. The Board may require information or evidence from the claimant(s), or from a third party, for the purposes of an enquiry into that award. The nature of the information or evidence that may be required from a third party, and the type of third party from whom it may be required, must be set out in regulations (subsection (2)).
81. Following an enquiry, the Board must reach a decision as to whether the award is correct and may revoke or amend it if they decide it is not correct (subsection (3)).
82. The clause sets out the period allowed for beginning an enquiry. The period begins with the date on which a decision under clause 17 is made. Where an estimate of income is given, this means the decision taken under clause 17(8) (see subsection (5)).
83. In the case of an award made to a person or persons, either of whom is required to make a self assessment tax return under section 8 of the Taxes Management Act 1970, the period ends on the day that tax return becomes final (or, if both persons make self assessment returns, the later of those two days). The clause goes on to explain that a return becomes final when an enquiry into that return is completed or, otherwise, on the last day of the period during which an enquiry may be made into that return, as set out in section 9A(2) of the Taxes Management Act 1970.
84. In any other cases, the period ends one year after the date by which a response to a notice issued by the Board must be made or, where an estimate of income is relied on initially, one year after the date the estimate must be corrected if it is incorrect:
85. The clause provides that an enquiry into a tax credit award ends when the Board gives notice of their decision as to the correctness of the award (subsection (8)).
86. There are provisions relating to a person's right to apply for an enquiry to be closed. This application must be heard by the Commissioners in the same way as an appeal against a decision made following an enquiry.
87. An award cannot be enquired into more than once (subsection (11)).
88. The clause provides that a decision on an enquiry is conclusive as to entitlement to a tax credit, subject to the provisions on appeals, discovery or official error.
Clause 19: Decisions on discovery89. This clause provides for two circumstances in which the Board can amend a tax credit award where they discover that the award was wrong. It does not provide any additional enquiry powers. However, where it becomes apparent, after a conclusive decision on an award has been made and after the period for opening an enquiry has expired, that the award was not correct, clause 19 allows for the matter to be put right.
90. The first part of this clause 19 allows the Board to amend or revoke a tax credit award where they discover that the original award was incorrect, as a result of a revision of a claimant's income tax liability. This must be done within a year of the revision to the claimant's income tax liability.
91. The later part of this clause 19 allows the Board to amend or revoke a tax credit award where it discovers the award is incorrect because of fraud or neglect on the part of the claimant or claimants. This must be done within five years of the end of the year to which the award relates.
Clause 20: Decisions subject to official error92. Under clause 20, the Board can provide by regulations for the revision of decisions to correct official error when the revised decision would be in the favour of the person or persons concerned.
Clause 21: Information etc. requirements: supplementary93. This clause enables regulations to be made detailing the manner and form in which information or evidence must be provided when required under the provisions of the preceding clauses. Regulations may also make provision as to the time limits that may be specified for providing such information or evidence.
Clause 22: Notice of decisions94. This clause provides that the Board is obliged to give a notice of a decision on a tax credits award to any person to whom the decision relates. The clause also provides that the notice must state the date of the decision and details of any right of appeal against it (under clause 36).
Clause 23: Payments95. This clause provides that payments of a tax credit, or of an element of a tax credit, must be made to the person to whom an award is made. In the case of a couple, or where one person acts on another's behalf, regulations may enable payment be made to whichever of them is specified (subsections (2) and (3)). For example, regulations may provide that payments of an award made to a person who is incapacitated may be made to the person acting on their behalf.
96. This clause also allows regulations to be made providing for payments to be continued after the end of a tax year for which a tax credit award was made. These payments are to be treated as payments of tax credits on an award for the next tax year. This will enable tax credit payments to continue to be made, without interruption, at the start of each tax year when claims are being renewed.
97. Under this clause, tax credit payments must be made by the Board, except where payments of working tax credit are required to be made by employers. Regulations may be made about how, and in what circumstances, tax credit payments should be made by the Board. In particular, regulations may make entitlement to a tax credit, or to an element of a tax credit, dependent on the claimant(s) providing details of a suitable account into which payments can be made (subsection (8)).
Clause 24: Payments of working tax credit by employers98. Clause 24 gives the Board power to make regulations requiring employers, when making Schedule E payments, to pay working tax credit, or prescribed elements of working tax credit, to their employees.
99. The regulations may, in particular, require employers to:
100. The regulations may also provide for:
101. The clause also allows the Board to exercise its information powers under section 20 of the Taxes Management Act in relation to employers' compliance with regulations made under this clause. Section 20 of the Taxes Management Act 1970 allows an inspector to require the production of documents. Those powers are applied with appropriate modifications, to treat references to employers and to tax liabilities as though they were references to employers and payments of working tax credit. Section 20B, which places restrictions on this power, and section 20BB, which makes it an offence to falsify or destroy documents required, are also applied.
Clause 25: Liability of officers for sums paid to employers102. The purpose of this clause is to prevent officers of bodies corporate (in practice, usually directors) from using for some other purpose funding provided by the Board to enable them to pay tax credits to their employees. In particular, it deals with the situation where officers deliberately set out to exploit limited liability through "phoenixism" (the practice of carrying on what is effectively the same business successively through a series of companies, each of which in turn becomes insolvent with substantial debts to the Government)
103. This clause allows for regulations to be made to deal with cases where a body corporate has received funding from the Board for the purposes of paying the working tax credit. If that body corporate fails to repay the funds to the Board and the provision of the funding or the failure to repay appears to the Board to be attributable to the fraud or neglect of one or more of the officers of that body corporate, regulations may provide for the culpable officers to be made personally responsible for that debt.
Clause 26: Rights of employees104. Clause 26 gives effect to Schedule 1. This provides for the rights of employees not to suffer unfair dismissal or other detriment as a result of the obligations imposed on employers by regulations made under clause 24.
Schedule 1: Rights of employeesRight not to suffer detriment105. Paragraph 1 amends the Employment Rights Act 1996 (ERA).
106. Paragraph 1(2) inserts a new section 47D into the ERA. It provides an employee with the right not to suffer detriment as a result of any act, or failure to act, by his employer done on the ground that:
107. New section 47D(2) protects the employee from detrimental action whether or not he has the right which he is claiming and whether or not his right has been infringed, as long as his claim to the right and its infringement is made in good faith. New section 47D(3) brings within the scope of subsections (1) and (2) those who are employees for the purposes of this Bill but not for the purposes of ERA. The purpose of subsection (4) is to preclude those who are employees for the purposes of ERA from claiming under section 47D when the detriment they suffer is termination of their employment contract. Such a termination will always be a dismissal within the meaning of Part 10 of ERA.
108. Paragraph 1(3) amends section 48 of ERA to give an employee the right to complain to an employment tribunal if he has been subjected to detriment in contravention of new section 47D of ERA.
109. Paragraph 1(4) amends section 49 of ERA to ensure that, where a complaint is made under section 48, any compensation must not exceed the amount that would have been payable if the employee had been dismissed for the reasons specified in section 104B of ERA (inserted by paragraph 3 of the Schedule).
110. Paragraph 1(5) extends the right under section 47D to members of the armed forces and paragraph 1(6) extends it to staff of the House of Lords and House of Commons.
111. Paragraph 2 makes equivalent amendments to the Employment Rights (Northern Ireland) Order 1996.
Right of employee not to be unfairly dismissed112. Paragraph 3 amends the provisions of ERA relating to unfair dismissal.
113. Paragraph 3(2) inserts a new section 104B into ERA so as to provide that an employee will be regarded as having been unfairly dismissed if the dismissal arises because:
114. Paragraph 3(3) inserts a new subsection (7B) into section 105 of ERA, which provides that selecting an employee for redundancy on certain grounds amounts to unfair dismissal. The new subsection ensures that selecting an employee for redundancy because he has enforced or attempted to enforce any of the rights referred to in the new section 104B(1) of ERA amounts to unfair dismissal.
115. Paragraph 3(4) inserts a new paragraph (gh) into section 108(3) and section 109(2) of ERA. This means that the right not to be dismissed for enforcing a right to payment of tax credits under the Bill will be one of the rights which apply from the day an employee starts work and without any age limit. Without these amendments, section 108(1) would mean that the right would not apply until an employee had been continuously employed for two years and section 109(1) would mean that the right would not apply to those over their normal age of retirement.
116. Paragraph 4 serves exactly the same function in relation to employment rights in Northern Ireland as paragraph 3 serves in relation to Great Britain.
Clause 27: Overpayments117. Clause 27 establishes that an overpayment arises when the amount paid out in tax credits to a claimant or claimants in a tax year exceeds their entitlement to tax credits for that year and gives the Board the power to decide whether to recover the overpayment.
118. The rest of the clause gives the Board the power to decide who should repay the overpayment in particular circumstances. In particular, it enables the Board to decide from which partner in a couple it should seek to recover the overpayment or how much to seek from each partner. It also enables the Board to recover an overpayment that is likely to arise for a particular year from an award of tax credit for the next tax year.
Clause 28: Recovery of overpayments119. This clause sets out the framework for recovering overpayments of tax credits. It provides that a notice must be given to the person who is liable to repay the overpayment, setting out the amount to be repaid and the manner in which it is to be repaid. The clause provides for the Board to decide whether an overpayment is to be repaid by:
Clause 29: Incorrect statements etc120. Clause 29 provides for a penalty of up to £3,000 to be imposed on any person (including an employer in relation to his responsibilities under clause 24) who fraudulently or negligently provides a false or incorrect statement or incorrect information or evidence in respect of a claim and any associated notifications, notices and requirements.
121. For couples, such a penalty may be imposed on either partner, but the total of the penalties imposed on both partners must not exceed £3,000 (subsections (2) and (4)). No penalty can be imposed on a partner who could not reasonably have been expected to have been aware of the fraud or neglect giving rise to the penalty (subsection (3)).
122. Penalties may also be imposed on a person who has acted for another in relation to a claim, notification or notice, where they have acted fraudulently or negligently (subsection (5)).
Clause 30: Failure to comply with requirements123. This clause provides that penalties may be imposed on a person (including an employer) who fails to comply with a requirement to supply information or evidence. An initial penalty of up to £300 may be imposed by the Commissioners. Thereafter, the Board may impose daily penalties of up to £60. Such penalties cannot be imposed after the information or evidence has been supplied. This clause also provides that a penalty of up to £300 may be imposed on a person who fails to notify a change of circumstances in accordance with regulations. A person is not be regarded as failing to supply information or evidence or giving the notification if:
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| © Parliamentary copyright 2001 | Prepared: 29 November 2001 |