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Peers who remain Members of the House at the end of the three-month transitional period would automatically be deemed resident, ordinarily resident and domiciled for tax purposes.

Mr. Dominic Grieve (Beaconsfield) (Con): The Minister is aware that we have signed up to the proposed changes, but it would be helpful to clarify the point about the ability of a Member of the other place-this does not really apply to the House of Commons-to get their affairs in order in sufficient time both to comply with the three-month rule and not to have an issue of retrospectivity over their tax. Will he explain how the marriage between the three months and the start of the tax year will work in practice?

Mr. Wills: In general, the way in which it will work is quite clear. There will be a three-month period after Royal Assent, and thereafter there will be a choice, which peers will make. I cannot pretend to be an expert on the tax affairs of every Member of the other place, but if the hon. and learned Gentleman would like to give me the details of any instances that he thinks might be caught up in that interaction, I should be very happy to address them and seek specialist advice on them.

Mr. Grieve: As matters stand, I understand that one does not even have to be a national of this country to be a Member of the House of Lords; one can be a Member as a Commonwealth citizen. On that basis, some Members of the House of Lords might even originate from Commonwealth countries and never have been UK domiciled. Although this is a hypothetical matter, I can think of a number of Government appointees who might fall into that category. I want to understand how they will put their affairs in order if they wish to opt to remain in the House of Lords: what procedural mechanism will be required for that?

Mr. Wills: The hon. and learned Gentleman has put his name to these new clauses, and as such I would have hoped that he understood the purpose of a deeming mechanism. He keeps referring to people putting their affairs in order, but it is not clear whether he means their financial affairs or their status as a non-dom, or in any other way. We have chosen this mechanism of deeming someone to be ordinarily resident and domiciled for a very particular reason. There may be a perfectly good, entirely benign reason, which has nothing to do with their tax affairs, why someone might wish not to change their status in the way that he mentions. That is perfectly fine, but what is not fine is that Members of this Parliament should not be placed in exactly the same position as the vast majority of British citizens for whom this place legislates. If people are prepared to pay tax in this country, like the vast majority of British citizens, that is fine, and they have three months to put themselves in order. If they do not want to do that, that is also fine, and they can cease being a Member of Parliament. I hope that the hon. and learned Gentleman fully understands the purpose of the deeming mechanism in these provisions.

Mr. Grieve: I think that I do: that is why I was hoping to encourage the Minister to clarify the position in the way that the Secretary of State clarified it when I wrote to him about this matter as soon as I saw the amendment.
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The key issue is whether somebody could end up being subject to double taxation. I believe that the Minister may be in a position to give the Committee some reassurance on that matter. If it is not satisfactorily covered, it provides the one opportunity that somebody who ended up being double-taxed might have to bring legal proceedings against the Government on the grounds of discrimination. As I entirely support the Government amendments, I wish to avoid that happening; that is why I want to press the Minister on this point.

Mr. Wills: Good-I am glad that at last we have managed precisely to elucidate what the hon. and learned Gentleman is about. If he is concerned about double taxation agreements, he can simply nod to tell me that that, and nothing else, is the burden of his concern.

Mr. Grieve indicated assent.

Mr. Wills: Right. In that case, the position is clear; I think that the hon. and learned Gentleman is already aware of it. These new clauses do not affect the UK's double taxation agreements. For someone who is resident in the UK but also resident in another country or receives income from another country that is taxed in that country, the double taxation agreements exist to ensure that there is no double taxation. If no double taxation agreement is in place, Her Majesty's Revenue and Customs will give unilateral relief that allows relief for the foreign tax paid, and the individual will be liable only to tax for the difference, if UK tax rates are higher. That means that there will not be double taxation.

It is worth pointing out that these arrangements are available to all those resident in the United Kingdom: they are not special arrangements for Members of Parliament or for peers. That is important, because the fundamental point of principle is that Members of Parliament, whether in this House or in the other place, should be subject to the same taxation arrangements as the vast majority of British citizens. I hope that the hon. and learned Gentleman is reassured and that I have clarified his concerns about the matter.

As I said, new clause 86 provides for a transitional period of three months during which incumbent peers can give notice in writing to the Clerk of the Parliaments that they are not willing to be subject to the deeming provision, and from that point their membership of the other place will cease. Members who remain will automatically be deemed resident, ordinarily resident and domiciled after that period. Once part 3 of the Bill comes into force, a peer may resign from the other place at any time if they do not wish to continue to be deemed resident, ordinarily resident and domiciled for tax purposes. New clause 86 provides that when a peer stands down from the other place during the transitional phase, they will be enfranchised. It also provides that when clause 33 comes into force they may disclaim their peerage. This is consistent with the approach we have taken in part 3 whereby those who leave the House for whatever reason may also, if they wish, disclaim their peerage.

The new provision will not apply to the Lords Spiritual, as their membership of the House of Lords is inextricably linked to their professional position in the Church. They do not take a seat after accepting a peerage-it comes with their position in the Church of England.

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David Howarth (Cambridge) (LD) rose-

Mr. Wills: It is also worth reminding the House that, as I am sure that the hon. Member for Cambridge (David Howarth) is already aware, the Lords Spiritual are paid by the Church of England and taxed at source anyway.

7.45 pm

David Howarth: I do not want to harp on about bishops to any great extent, as I did so last time we discussed the Bill. However, surely it is possible for a bishop to claim to be non-domiciled on the grounds of having foreign income and then take advantage of that position by being taxed on a remittance basis. I cannot understand why this provision should not apply to bishops.

Mr. Wills: Clearly, it is theoretically possible that there could be an enormously wealthy bishop who was escaping large amounts of taxation in this way, but I am not aware of any in that position. It is important to look at the facts to see why we have taken this view; obviously, all these matters are proportionate. Bishops in the House of Lords do not accept a peerage-they assume the position as a result of their profession as a bishop in the Church of England. If there were to be such a bishop who was non-domiciled and not ordinarily resident and who had these advantageous tax arrangements, then under these new clauses, they would, if they were not exempt, have to cease their profession, because the only way that they could cease to be a Member of the House of Lords would be to stop being a bishop.

I understand the hon. Gentleman's theoretical concern, but I remind him that the Labour party is committed, in the next term of a Labour Government, to moving to a wholly elected second Chamber; in that context, this issue does not arise. I ask him to reflect on my remarks about what might be considered to be a disproportionate response to a situation in the distant future that is very unlikely to materialise. However, I am happy to consider any further representations that he may wish to make on this particular point.

The new clauses will come into force when the Bill receives Royal Assent so that they may apply to the next Parliament. Amendment 132 makes the necessary amendments to part 9 of the Bill. Amendment 134 is a technical amendment to the long title of the Bill to reflect the addition of the new clauses.

These amendments to the Bill clearly demonstrate that we are able to respond to the legitimate concerns of the public and that we are willing and able in this instance to put our own house in order. I very much hope that all right hon. and hon. Members will be able to accept them.

Mr. Grieve: I have put my name to the Minister's two principal amendments-not to the consequential ones, but they are merely consequential. That is a firm expression of my view that they come as near as possible to meeting the necessity that we have identified, and the Government have identified, to do something about this matter. I am comforted by the fact that when the Secretary of State wrote to me in reply to an e-mail that I sent to him about the details of the new clauses, he pointed out that the intention behind them is exactly
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the same as that of new clause 53, albeit that it is fleshed out in greater detail, as I would expect. I was always conscious that in a matter of this sort a Government amendment would be required to resolve the legal minutiae, particularly regarding an issue that concerns revenue matters.

We entirely welcome new clauses 85 and 86. They are a sensible way forward to ensuring that the public are reassured that all Members of this House and the House of Lords are treated as if they were resident in the United Kingdom-like the vast majority of people in this country-for tax purposes.

The Minister also provided reassurance-at my prompting, I am glad to say, though I am sorry if I did not prompt him at quite the right points-to clear up the transitional arrangements, which excited some comment. One or two Members of the other place raised the matter with me to try to understand what it would involve. The Minister has now explained that more fully, and I am grateful to him.

To play devil's advocate, there is only one matter in the proposals about which I had some hesitation, although, on reflection, I can probably dispense with the hesitation. However, it is worth flagging up. There are currently provisions in the upper House for Members to take leave of absence. That enables them to go abroad to pursue their lives, professions, trades or businesses, but leaves them the option of returning and starting to sit in the House again when their leave of absence ends. I should be grateful if the Minister endorsed, in his winding-up speech, that the new provisions effectively mean that that system of leave of absence would no longer be possible if, during the course of it, the person went abroad and became domiciled there for business purposes, because he would be required to continue to be deemed UK-resident, even though he was not playing an active part in the life of the other place.

David Howarth: I am not too sure whether that point works, given that new clause 85 is a deeming clause. The person concerned would therefore be treated for tax purposes as resident and domiciled, regardless of the facts.

Mr. Grieve: I understand the hon. Gentleman's point. My understanding from raising the matter with the Government is that, although in future Members of the other place could seek leave of absence, as they have done in the past and still do, there would be no possibility, once the Bill was enacted, of their being non-domiciled in this country for tax purposes during that leave of absence. They would not be treated as not being domiciled in this country-they would continue to receive tax demands and be required to pay UK tax as if they were still here. Their only avenue out in those circumstances would be to resign from the House of Lords. That would mean that they could not-as they could hitherto-return to the service of the House on their return from some foreign appointment.

One could argue that that has a measure of not only novelty but-because it affects someone who is not playing an active role in the other place-unfairness. The other way of looking at it is that if one chooses to remain a Member of the other place, one must simply accept that, under the new rules, one will be deemed to
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be resident in this country for tax purposes until one decides to resign. As I can envisage some difficulties in adapting the provisions to take account of leave of absence, I assume that the Government have decided to ignore that. However, I ask the Minister for a rationale behind the Government's approach to the matter. He did not provide one in his opening speech this evening, but it would be helpful if could do so because I do not believe that anyone has complained in the past of mischief in the case of a peer who has leave of absence being away from the UK or not domiciled, but perhaps the Government think that somebody has done so.

We will support new clause 85. We have signed it and, if it is put to the vote, we will back the Government. We wish it a fair passage on to the statute book. I hope that, consequently, we can bring to an end a sorry episode of constant suspicion of individuals in the other place, some of which may prove totally unfounded in some cases-

Mr. Winnick: Or founded.

Mr. Grieve: It may be founded or unfounded. The hon. Gentleman interrupts from a sedentary position, and I simply say to him that some people may be surprised by who decides to go and who decides to stay.

However, it is essential that the uncertainty be brought to an end. The public are entitled to reassurance that those who legislate pay tax in this country, like any other citizen. On that, we wholly support the Government. Indeed, that is why we tabled new clause 53.

David Howarth: I, too, welcome the Government's movement on the subject and support the proposal. However, I fear that they have chosen the wrong method to bring about a result that hon. Members of all parties want. I ask the Government to think again about that method because it does not reach the heart of the problem.

As I understand it, the Government propose a deeming clause so that, regardless of whether a Member of the House of Lords or the House of Commons is, in fact,

in this country, they will be treated as

for tax purposes. The transitional provisions simply deal with the position of someone who might wish to resign as a consequence of being treated in that way.

I have a problem with the deeming provision. It is about domicile rather than residence. Residence is about the present and the immediate past, but domicile is different. Domicile is about long-term intentions-the place in which people are settled permanently in their own minds. It is ultimately about loyalty to one place or another. It is also true-this is relevant to the comments of the hon. and learned Member for Beaconsfield (Mr. Grieve)-that one can have more than one residence, but only one domicile.

The law of domicile goes back to an idea about personal law-law that applies to a person, who carries it around with them and is judged according to it, wherever they are. It goes back to a definition of domicile in Halsbury, which states:

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The phrase " some community" is why I think that domicile is an important matter in itself for judging whether someone should be regarded as a proper person to sit in a country's legislature.

There is a contradiction in saying, "My long-term intention is to live in another country and to be part of another community rather than this country, in this community where I want to act as a legislator." There is a problem with that. There are different examples, which might have different consequences, but I think they all lead to the same problem.

Let us consider a person whose father had a domicile in a different country-a domicile of origin that is not Britain. Later, when the person reaches the age of 16, the law states that, at that point and any point afterwards, they are entitled to choose a different domicile. Let us say that that person then fails or declines to change their domicile from that of their father to domicile in this country. That is not a technicality about tax, but a reality about that person's view of themselves, and of which country and community they wish to belong.

8 pm

That example has something in common with the situation of Mr. Zac Goldsmith. His position, as far as I understand it, is that his father's domicile of origin was a different country, and that since the age of 16, he has had the opportunity to change that but has not done so. He now says that he is about to change his domicile, but he did not do so from when he was 16, which I believe was about 1981, to the present day. The question is not about paying tax, but about a person's commitment to this country.

Other people are in a similar position. It is perfectly reasonable for a migrant to this country to have a domicile of origin in a different country, but once they come here, assuming they are of age, they are entitled to choose a different domicile. If they do not do so, especially over a long period, one must ask whether they have the commitment to this country that is required of someone who wants to sit in our legislature. That appears to be the case with Lord Paul, who came to this country in, I believe, 1966. Throughout that period, he has had the legal right to change domicile to this country but has not done so.

The position of Lord Ashcroft, of course, is rather more obscure, perhaps deliberately so, but it appears to be a different sort of case-one in which someone starts with a domicile of origin in this country. One could be born in Sussex to a British father, and therefore, I suppose, have a domicile of origin in Britain, but then one might move to a different country-to Belize, for example, or to the Turks and Caicos islands-and develop an intention permanently to live there for the rest of one's life. Making a domicile of choice somewhere else would be an intention not to live in Britain. One could argue that of the Goldsmith-Paul and Ashcroft examples, the latter shows even less commitment to this country, because it is a case not of someone being landed with a domicile by their family or origin and then having to decide what to do about it, perhaps without realising what the law is, but of someone consciously going out to develop a domicile of choice in a different country.

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