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Lord Mackay of Ardbrecknish: If that is the case why should we not hitch a lift with the same rules and regulations that are already applied by the Revenue?
Lord Mackie of Benshie: I do not know. But I do know that what happens now does not appear to cause too much trouble. We have heard gloriously exaggerated examples about people travelling on sleepers and so on. I have a much better story about sleepers that I shall tell the Committee a little later. I believe that we are making a little too much of this, especially when the Inland Revenue is today dealing with this matter. Of course the Revenue will deal with the matter in the same way. I believe that we should get on.
Lord Dunleath: I apologise if I am labouring a point. I am very grateful to the noble Lord, Lord Mackay of Ardbrecknish, and the noble Earl, Lord Balfour, for their maritime expertise. In particular, I thank the noble Earl for his kind words about the Northern Ireland linen industry. I am vexed about the position relating to vessels. Currently, there is an extremely good and fast ferry service operated by two companies between Northern Ireland and Cairnryan or Stranraer in Dumfries and Galloway.
To return to the "midnight clause", the Northern Ireland Assembly that will shortly be up and running does not at the moment have tax-raising powers. However, as sure as night follows day it will have such powers at some stage. The wretched crews of high-speed vessels will have to wrestle with the question of whether they are in Stranraer, Cairnryan or Belfast. I suspect that they will have to spend so much of their time filling in their tax returns that the vessels will not sail at all.
Baroness Strange: I believe that subsection (6) has some vagueness about it in that it refers to "or other means of transport". Does it mean a raft, yacht, houseboat, barge or ark? Exactly what is it? Would it not be much easier not to have it at all?
Baroness Ramsay of Cartvale: It may be helpful if I deal first with the specific point raised by the amendment tabled by the noble Earl, Lord Balfour, before dealing with the wider point raised in Amendment No. 281E.
Clause 71(6) makes provision, for the avoidance of doubt, that a vessel or other means of transport can be regarded as a place of residence and can therefore in particular circumstances, be a person's principal residence in Scotland. For example, somebody living on a vessel permanently moored in Scotland could be liable for the Scottish variable rate of tax. To put it another way, if someone lives in a mobile home, either on land or water, in Scotland, if other conditions are met, he or she will be liable for the Scottish variable rate. That is only right if that person is benefiting from public services in the same way as a person who lives on shore.
It may also be possible for this clause to apply to a person working aboard a merchant ship. Various members of the Committee have given examples of such a situation. But it is important to recognise that for that to happen--it applies to everyone--all the other relevant conditions in the clause must be met. Since the Committee seems to be losing sight of that fact in some of the contributions it is worth dealing with the matter in detail. The other main relevant conditions are that he or she must be a UK resident for tax purposes. Then he or she would have to have a principal residence in Scotland or meet the "days spent in Scotland" criterion; or perhaps, more bizarrely, there are the cases we have had of an MSP, an MP or an MEP for a Scottish constituency.
The amendment would mean that a person whose principal residence was on a vessel could be a Scottish taxpayer if the vessel upon which he or she lived happened to be registered in Scotland, but could find himself or herself not liable if the vessel was, for example, English or Panamanian-registered. That would surely be illogical. In the light of that explanation, I hope that the noble Earl will not move his amendment.
I turn to Amendment No. 281E which would remove from the definition of a place of residence the clarification that that includes a boat, a ship or other means of transport. The amendment would not necessarily remove ships and so forth from the definition. It would just serve to make the position less
clear. There is no reason why houseboats and yachts sailed or moored in Scottish inland waters or territorial sea adjacent to Scotland should not be regarded as someone's principal home for tax purposes if such is the case in reality. I should make the point that someone living on, for example, a boat or ship would be liable only if the various criteria set out elsewhere in Clause 71, which I have already enumerated and will not repeat, are met.Any time that the person was outside Scotland (as defined in Clause 112) would not count towards the various tests in the clause. Various Members of the Committee have raised various imaginative cases. My old acquaintance rather than friend, I have to say, in this place, the noble Lord, Lord Mackay of Ardbrecknish, mentioned the Scottish fisheries protection crew. In practice, such people are likely to have their principal home in Scotland, and will qualify as a Scottish taxpayer on that basis, regardless of the number of days spent in Scotland's inland waters. If any member of the crew lives outside Scotland, days spent in Scotland, including on inland waters, would be a factor in determining liability.
Lord Mackay of Ardbrecknish: Before the noble Baroness leaves ships, I am entirely with her about houseboats and the like, but on her answer to the last point about the fishery protection vessel I understand that if someone lives in Scotland, that is fine, but if someone lives in England and spends enough time in coastal waters--my understanding was that the fisheries protection service did not spend any time in inland waters, but in the sea in coastal waters--to break through one of the definitions, despite the residence in England, such a person would be considered to be a Scottish taxpayer.
Baroness Ramsay of Cartvale: I think that the answer is yes. If such a person qualified under the clause providing for days spent in Scotland, then he or she does, because in Scottish inland waters that is what applies.
Lord Mackay of Ardbrecknish: I know that I may be splitting hairs and that the noble Baroness may just be making a mistake in her reading, but I cannot allow her to keep on the record "inland waters". That is utterly wrong. It is not inland waters that bother me. It is not the fisheries protection vessel sailing up Loch Ness or Loch Lomond, it is the fisheries protection vessel sailing in Scottish waters; that is, the Minch, outside the Minch, and so on. I think that the noble Baroness has made a slip of the tongue, because she does not have much of a nautical background, despite the fact that she lives overlooking the sea.
Baroness Ramsay of Cartvale: Yes, but it is the Firth of Clyde. It is coastal waters. I agree with that. I thought that I said "coastal waters" the second time that I spoke about the point. I do not want to get into the question of sleepers crossing the Border. The noble Lord is technically right. Where one is at midnight determines where one spends the day--in Scotland or
elsewhere. Limits and divisions have to be drawn somewhere. I should like to set out the general principle rather than go into every example that has been given, although I cannot resist dealing with the Stranraer ferry mentioned by the noble Lord, Lord Dunleath. Workers on that ferry could, through months spent on the boat in Stranraer, qualify as Scottish taxpayers. To do that they would need, first, to qualify as UK residents for tax purposes and then have a principal residence in Scotland or qualify through the days-spent-in-Scotland rule.If all those other criteria were met, there is every chance that such people would benefit from the Scottish tax power, and it is wholly appropriate that they should count as Scottish taxpayers. As a general principle, behind the liability rules, UK residents who are likely to derive benefit from the operation of the Scottish tax power, whether it is varied up or down--no one seems to mention that it might be down--through having a close connection with Scotland should be liable.
Clearly some people have closer connections with Scotland than others, but as I have said, limits have to be drawn somewhere. The lines drawn in Clause 71 are built around the general principle which I have just described. While there is scope for some dispute around the margins, there will always be a reasonable argument for the inclusion of those marginal cases within liability as well as for their exclusion.
It should be stressed that the difficult cases are almost by definition going to be at the margins, with the greater majority of taxpayers unaffected. About how many people are we talking here? I suspect that with most of these extreme examples it is very few indeed.
I am sure that everyone remembers the adage:
- "Hard cases make bad law".
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