The
Committee consisted of the following
Members:
Afriyie,
Adam
(Windsor)
(Con)
Balls,
Ed
(Economic Secretary to the
Treasury)
Brennan,
Kevin
(Lord Commissioner of Her Majesty's
Treasury)
Cable,
Dr. Vincent
(Twickenham)
(LD)
Cruddas,
Jon
(Dagenham)
(Lab)
Evennett,
Mr. David
(Bexleyheath and Crayford)
(Con)
Goldsworthy,
Julia
(Falmouth and Camborne)
(LD)
Greening,
Justine
(Putney)
(Con)
Hamilton,
Mr. David
(Midlothian)
(Lab)
Hoey,
Kate
(Vauxhall)
(Lab)
Kaufman,
Sir Gerald
(Manchester, Gorton)
(Lab)
McCarthy-Fry,
Sarah
(Portsmouth, North)
(Lab/Co-op)
McDonnell,
John
(Hayes and Harlington)
(Lab)
Naysmith,
Dr. Doug
(Bristol, North-West)
(Lab/Co-op)
Spring,
Mr. Richard
(West Suffolk)
(Con)
Stringer,
Graham
(Manchester, Blackley)
(Lab)
Villiers,
Mrs. Theresa
(Chipping Barnet)
(Con)
Hannah
Weston, James Gerard, Committee
Clerks
attended the Committee
Third
Delegated Legislation
Committee
Wednesday 7
February
2007
[John
Cummings
in the
Chair]
Draft Tax and Civil Partnership Regulations 2006
2.30
pm
The
Economic Secretary to the Treasury (Ed Balls):
I beg to
move,
That the
Committee has considered the draft Tax and Civil Partnership
Regulations 2006.
It
is a great honour to serve under your chairmanship, Mr.
Cummings, in this important Committee. I welcome the opportunity to
debate the regulations, which make minor amendments both to schedule 28
to the Finance Act 2004 and to the Pensions Schemes (Application of UK
Provisions to Relevant Non-UK Schemes) Regulations 2006, to take
account of the Civil Partnership Act
2004.
Let me recap
briefly. The 2004 Act enables same-sex couples to obtain legal
recognition of their relationship by forming a civil partnership. On 31
March 2004, the Government announced that, for tax purposes, civil
partners would be treated the same as married couples. Therefore, from
the start of the civil partnership scheme on 5 December 2005, tax
charges and reliefs and anti-avoidance rules applied equally to married
couples and civil partners, and those treated as such. The Tax and
Civil Partnership Regulations 2005 changed primary tax legislation and
the Tax and Civil Partnership (No. 2) Regulations 2005 changed
secondary tax legislation to help to achieve that effect by ensuring
that references in tax legislation to marriage, marrying and spouses
include relevant references to civil
partnerships.
Todays
regulations make a limited number of minor changes relating to
tax-advantaged pension schemes which were inadvertently omitted by the
original regulations. In doing so, they ensure that some minor
references in the pensions legislation to marrying, marriage and spouse
or ex-spouse are updated to include civil partnerships and civil
partners or former civil partners. In summary, the regulations make
minor changes to the tax rules on scheme pensions and annuities to
bring those into line with our intentionsin the regulations
that implemented, for tax purposes, the 2004 Act. I commend the
regulations to the
Committee.
2.32
pm
Mrs.
Theresa Villiers (Chipping Barnet) (Con): I, too, am
delighted to serve under your chairmanship, Mr. Cummings. I
can be brief. I welcome both the regulations and the principle that
underlies them. I was not an MP when the 2004 Act was passed, so I did
not have a chance to vote for it, but had I had the opportunity, I
certainly would have done so. I support its goal of allowing gay
couples the opportunity to
show their commitment to each other by giving thata formal
legal status. The legislation has remedieda number of
significant injusticesfor instance, by giving gay couples the
benefit of the spouse exemption for the purposes of inheritance tax. We
debated that important legal concept at length in the context of the
Finance Bill last year. It is a real indicator of social change that
the 2004 Act has enjoyed such widespread support, although obviously it
is by no means universal. Civil partnerships have remarkably quickly
become an established part of the social fabric in Britain, and rightly
so.
The Committee
might be aware that the Opposition have reservations about the way in
which the relevant pensions legislation operates in a number of ways,
but the proposed technical changes are clearly only consequential to
the adoption of the 2004 Act. There is no obvious technical problem
with the regulations, so I have just one or two short questions. Does
he anticipate further consequential amendments along the same lines as
these? Have any further errors been made in trying to ensure that all
the consequences of the 2004 Act are fully implemented across
all the relevant legislation, or should we expect to have to gather
again on some future
occasion?
It would be
useful to hear any general comments that the Minister would like to
make on the impact of the 2004 Act on pensions in general. I understand
that any impact on pensions will largely be prospective, not
retrospective, but if he wanted to comment on the distinction between
prospective and retrospective changes to pensions as a result of the
2004 Act, that would be of benefit to the
Committee.
2.35
pm
Julia
Goldsworthy (Falmouth and Camborne) (LD): I, too, shall be
brief, because we supported the principle behind the 2004 Act and
therefore support the regulations. They are fairly straightforward
because they are consequential amendments to the Finance Act
2004, as amended by following Finance Acts, bringing the pensions and
tax regime in line with the Civil Partnership Act 2004. Essentially,
they ensure consistent treatment for people in civil partnerships and
those who are
married.
I have a
couple of brief questions. When will the draft regulations be formally
laid before Parliament, assuming that they are approved, and it seems
that they will be? Secondly, the Minister said that an inadvertent
omission resulted in the regulations not being laid before us earlier.
It is now after A-day, when many of the previous amendments were made.
How many people in civil partnerships have been affected by the delay
between A-day and the regulations being laid? Some clarification of
that would benefit the Committee and people who may have been
affected.
2.36
pm
Ed
Balls:
I shall give a little more detail about the
measures. The first change concerns pension rules that allow a scheme
pension or lifetime annuity to be guaranteed to be payable for up to 10
years. That means that if a member dies within 10 years of the pension
or annuity starting, it can continue to be paid until the end of that
period. The rules also allow for the
payment of a dependants annuity following the death of a member.
In those cases, legislation provides that any pension or annuity may
end if the recipient marries. The change will ensure that the rules
will apply in the same way to individuals who enter a civil partnership
as to people who
marry.
The second
change concerns some overseas schemes that are not registered under the
new regime but receive income-tax relief, so that civil partners are
treated in the same way as married couples. Rules relating to pension
sharing on divorce for such schemes are amended to include the
dissolution or annulment of a civil
partnership.
The hon.
Member for Chipping Barnet is right to say that the civil partnership
legislation has been widely welcomed. The latest figures show that
15,500 civil partnerships have been formed since December
2005.
I am afraid that
I cannot give the hon. Member for Falmouth and Camborne details of the
number of people who will be affected by the changes because, as we
have discussed in previous Committees, it is not for me to know the
details of individual tax arrangements. However, as issues have arisen
from individual cases, the Revenue has acted on them. It was a big task
to ensure that the consequential changes to tax legislation were put
into place following the Civil Partnership Act 2004, but we
believe that all changes to the new pension rules have now been made. I
cannot give the hon. Member for Chipping Barnet a guarantee that there
will not be further consequential changes, but as far as we are aware,
all consequential changes have been made. Clearly, if there are
inadvertent gaps, we will act
accordingly.
On the
timing of the formal laying of the draft regulations, I understand that
they have been laid, which is why we are debating them. We are where we
are. I do not think we are discussing draft regulations; they are
happening in real time and, unless there is a vote, the matter will be
concluded when I sit
down.
On the impact of
prospective and retrospective pension changes, we are correcting an
anomaly and bringing the position of people in civil partnerships into
line with current practice for married couples. When the regulations
have been laid, we shall have a complete picture going forward for the
tax consequentials of civil
partnerships.
Adam
Afriyie (Windsor) (Con): Is the Minister confident that
people who formed a civil partnership and then dissolved it during the
time between enactment of the civil partnerships legislation and these
regulations will not be caught in the gap?
Ed
Balls:
I am confident that the regulations correct an
anomaly. We will ensure that any individuals who
are caught in such a gap will be viewed sympathetically by the Revenue,
but I do not have details of the tax affairs of particular couples so I
cannot give chapter and verse on any individual case. Given that the
omissions were inadvertent, I am sure that everything will be done to
ensure that no one falls through a gap or is retrospectively
disadvantaged by the fact that it has taken a little longer than we
would have liked to get the measures into place. We will try to ensure
that from now on we apply the tax rules comprehensively and correct
this anomaly that has existed in our society for many years. It is good
that there is cross-party support for that.
The main reason why I do not
have details of individual casesaside from the fact that it
would be inappropriateis that no individuals have raised this
issue with the Revenue. This is a purely precautionary move to ensure
that were anyone to be caught, they no longer will be. Were people to
find out retrospectively that they had been caught by the omission, I
am sure that the Revenue would look sympathetically on their
position.
I hope that
I have answered hon. Members questions. This is clearly a
non-controversial tidy-up exercise to complete an important piece of
work on which the House has legislated.
Mrs.
Villiers:
My question might not be relevant now that we
are about to make the correction, but is not the solution to this
problem to try, in future drafting, to come up with a measure that says
that wherever marriage or the dissolution of a marriage is mentioned in
a particular context in relation to tax and pensions, it shall be
deemed to include a civil partnership or its dissolution respectively?
Thus, if there were one or two errors and relevant amendments to a
statute were not made, that hold-all sweep-up clause could cover the
situation without the need for more statutory
instruments.
Ed
Balls:
I am happy to look into that for the hon. Lady, but
it will be an academic exercise because we are confident that we have
now corrected all relevant omissions. I doubt that the need to use such
a clause would arise, but it will be interesting to look into that for
future cases in other tax legislation. I fear that once we get into the
detail of the legislation we will find that to specify the particular
parts of an Act to which such a change would apply would require going
through the same process if it is to be comprehensive. However, I am
happy to look into that, and if there is anything interesting that I
can say beyond the interesting comments that I have already made, I
shall happily write to her and the rest of the
Committee.
Question
put and agreed
to.
Committee
rose at sixteen minutes to Three
oclock.