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Session 2006 - 07
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Public Bill Committee Debates

Draft Tax and Civil Partnership Regulations 2006

The Committee consisted of the following Members:

Chairman: John Cummings
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.
Today’s 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 injustices—for 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 dependant’s 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?
The main reason why I do not have details of individual cases—aside from the fact that it would be inappropriate—is 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 o’clock.

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