Schedule 3: Rights not to suffer unfair dismissal or other detriment

Paragraph 1(2) protects the employee from detrimental action whether or not he has the right which he is claiming and whether or not this right has been infringed, as long as his claim to the right is made in good faith.

Paragraph 1(3) disapplies the paragraph in cases where the detrimental action taken against an employee amounts to dismissal because dismissal is dealt with separately in paragraph 3. There is an exception where an employee is dismissed in circumstances where he is employed under a fixed term contract and he has agreed in advance to exclude his right to claim unfair dismissal. In those circumstances the employee can rely upon this paragraph.

Paragraph 2 provides an employee with the right to complain to an Employment Tribunal (or in Northern Ireland to an Industrial Tribunal) to enforce the right not to suffer detriment contained in paragraph 1. A complaint is to be made in the same way as a complaint under section 48 of the Employment Rights Act 1996 (ERA) or Article 71 of the Employment Rights (Northern Ireland) Order 1996. This means that a complaint must be made within three months of the alleged detrimental act (or deliberate failure to act) unless the tribunal considers that it was not reasonably practicable to do so.

Paragraph 3(1) 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 (a) the employee has taken action to enforce the rights conferred on him by regulations under clause 6(2)(a) or (c) of the Bill; or (b) the employer has incurred a penalty under clause 9 or penalty proceedings have been brought against the employer; or (c) the employee is entitled, or will or may in future be entitled, to a tax credit.

Paragraph 3(2) 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.

Paragraph 3(3) inserts a new subsection (3)(gh) into section 108 of ERA. This means that the right not to be dismissed for enforcing a right under the Bill will be one of the rights set out in section 108(3) which apply from the day the employee starts work. Without this amendment, section 108(1) would mean that the right would not apply until an employee had been continuously employed for two years.

Paragraph 3(4) inserts a new subsection (2)(gh) into section 109 of ERA. This means that the right not to be dismissed for enforcing a right under the Bill will be one of the rights set out in section 109(2) which apply without any age limit. Without this amendment, section 109(1) would mean that the right would not apply to those over their normal age of retirement.

Paragraph 4 serves exactly the same function in relation to employment rights in Northern Ireland as paragraph 3 serves in relation to Great Britain.

Paragraph 5 inserts a new paragraph (fg) into section 21(1) of the Employment Tribunals Act 1996 to enable appeals from the Employment Tribunal to the Employment Appeal Tribunal on question of law in relation to the provisions of the Bill.

Schedule 4: Penalties: Procedure and Appeals

This Schedule deals with procedures for penalties for non-compliance with obligations.

Paragraph 1 provides for the determination of penalties by an officer of the Board except where proceedings have begun in the courts, under paragraph 5. It provides for the officer to make a determination imposing any penalty under clause 9. The exceptions are initial penalties for failure to provide information, under clause 9(4)(a), which have been imposed by clause 9(3)(b) or (c). The latter penalties will be determined by the tax commissioners under paragraph 4. Under paragraph 1 the officer must serve a notice on the person liable, and may exceptionally increase the amount of the penalty if a discovery is made which shows that the amount of the penalty is insufficient. This reproduces the effect of s.100 of TMA for penalties relating to tax credits.

Paragraph 2 provides for a penalty determined under paragraph 1 to be due from the estate of a person who has died; and for a penalty determined under paragraph 1 to be due 30 days from the issue of the notice of the determination. Paragraph 2 also provides for the collection and recovery provisions in TMA (Part VI) to apply to penalties under paragraph 1. Paragraph 2 reproduces the effect of s.100A of TMA.

Paragraph 3 provides for appeals against penalty determinations, reproducing the effect of s.100B of TMA.

Paragraph 3(2) provides that appeals in relation to penalties imposed under the provisions of s.5(1)(h) and (hh) of the Social Security Administration Act 1992 or the corresponding Northern Ireland legislation, or relating to a fraudulent or negligent claim, shall be heard by the unified appeal tribunals set up by the Social Security Act 1998 or the corresponding Northern Ireland legislation.

Paragraph 3(3) provides that for other appeals the provisions of TMA shall apply as if they were appeals against an assessment to tax.

Paragraph 3(4) allows the Commissioners to set aside the determination, confirm it, reduce it, or increase it.

Paragraph 3(5) provides that an appeal from a decision of the Commissioners shall go to the High Court (or Court of Session in Scotland).

Paragraph 4 provides for penalty proceedings before the Commissioners, reproducing the effect of s.100C of TMA.

Paragraph 4(1) provides for an officer of the Board to begin proceedings for an initial penalty under clause 9(4)(a) which is imposed by clause 9(3)(b) or (c). This is a penalty relating to employers' compliance.

Paragraph 4(2) provides that the proceedings will be before the tax commissioners after information is put to them in writing.

Paragraph 4(3) provides that the collection and recovery provisions in TMA (Part VI) apply for the tax credits. These provisions deal with the collection mechanisms and court proceedings.

Paragraph 4(4) provides that appeal from determination of a penalty under this paragraph will be to the High Court (or Court of Session in Scotland).

Paragraph 4(5) provides that the court may set the determination aside, confirm it, reduce it, or increase it.

Paragraph 5 allows the Board to take proceedings for a penalty in the High Court, where the liability arise from a fraud. This reproduces the effect of s.100D of TMA for the tax credits.

Paragraph 6 allows the Board to mitigate penalties at their discretion. This reproduces the effect of s.102 of TMA for the tax credits.

Paragraph 7 sets time limits for determining a penalty, and reproduces the effect of s.103 of TMA. Where the penalty is for fraudulently or negligently making an incorrect statement, the limit is either six years from the date the penalty was incurred; or three years after the final determination of the entitlement to the tax credit. For any other penalty the limit is six years after the penalty was incurred or began to be incurred.

Paragraph 8 provides for interest to be charged on a penalty, from the date it becomes due and payable. It reproduces the effect of s.103A of TMA for the tax credits.

Schedule 5: Information

Paragraph 1 allows the Board of Inland Revenue to pool the information they hold for the purposes of their functions relating to tax credits, tax, national insurance contributions, statutory sick pay, statutory maternity pay and certain functions under Part III of the Pensions Schemes Act 1993 (and the corresponding Northern Ireland legislation).

Paragraphs 2 and 3 provides for the mandatory exchange of information between the Inland Revenue and the Department of Social Security (and the Department of Health and Social Services for Northern Ireland). The information is that relating to WFTC/DPTC, and social security benefits, child support and war pensions.

Paragraph 4 provides for the supply (one way route) of information by or under the authority of the Board of Inland Revenue to local authorities administering housing benefit or council tax benefit. The information is that relating to WFTC/DPTC and is for use in administering the benefits. Paragraph 4 also restricts the onward transmission of the information supplied by the Inland Revenue unless it is supplied to another authority or person authorised to exercise a function relating to the administration of the benefits or for the purposes of legal proceedings relating to Social Security Acts, or it is supplied back to the Inland Revenue under paragraph 5.

Paragraph 5 provides for the mandatory provision of information by local authorities to the Board of Inland Revenue for their WFTC/DPTC functions. The information concerned is that which is relevant to functions relating to housing benefit or council tax benefit.

Paragraph 6 inserts a reference to the Tax Credits Act into s.122 of the Social Security Administration Act 1992 (and corresponding provision for Northern Ireland in s.116 of the Social Security Administration (Northern Ireland) Act 1992). These provisions have been amended by the Social Security Contributions (Transfer of Functions) Bill. This makes it clear that the provisions in ss.122 and 116, which relate to the supply of tax information, are distinct from the provisions described above for the supply of information in relation to tax credits.

Paragraph 7 amends s.110 of the Finance Act 1997 as amended by the Social Security Contributions (Transfer of Functions) Bill. Section 110 is a general provision concerning the supply of information to the Board of Inland Revenue and Customs by the Department of Social Security. The amendment is to make it clear that s.110 does not apply to information relating to tax credits or affect the provisions governing the supply of information by the Department of Social Security to the Inland Revenue for functions relating to WFTC/DPTC.

FINANCIAL EFFECTS OF THE BILL

16.     Clearly, setting up the new tax credit system, transferring existing staff from the DSS Family Credit Unit (and Family Credit Branch in Belfast), handling claims and providing new IT systems, has a cost. The cost to the Inland Revenue/Benefits Agency of setting up the new office within the Inland Revenue to handle tax credits is about £40million spread over 3 years (1998/9 - 2000/01). The bulk of this (£33 million) falls in 1999/00. Once the new office is up and running the estimated additional cost (of staff, accommodation etc.) of dealing with the increased number of claimants is estimated at around £25 million a year.

17.     The Inland Revenue expects to identify efficiencies in the operation of the new system which should offset some of the cost in the longer term.

REGULATORY APPRAISAL

18.     Claims to the tax credits will go to the Inland Revenue who will assess the amount payable. But the new rules governing the role of employers in paying the tax credits to their employees will inevitably involve some changes for employers, including needing to ensure that their systems are able to:

• compute the amount of the tax credit due using the daily rate (provided by the Revenue) of the award for the number of days in the employer's pay period;

• enter this amount on the employee's payslip;

• establish whether they need to apply for funding from the Inland Revenue for (some or all of) the tax credits due to their employees;

• account to the Revenue for the tax credits paid to their employees during the tax year.

19.     Employers will face some costs both in setting up and running and supporting these new tax credit-specific features of their payroll systems, including the cost of dealing with queries from staff, and cash flow effects arising from payments of cash being made to employees earlier than would otherwise have been the case. The Inland Revenue have been consulting employer and other business representatives on the detailed design of the scheme to ensure that any extra costs are kept to a minimum.

20.     A draft regulatory impact assessment (RIA) was published in February 1999 which analysed the costs to business of complying with the provisions in the Bill and the accompanying regulations. For business as a whole there will be annual recurring compliance costs of around £100 million per year, with one-off non-recurring costs of about £40 million. The average annual compliance cost for small employers (with 1-4 employees) will be £37, and for the largest businesses (with 5000 or more employees) about £30,000.

COMMENCEMENT

21.     The Bill will come into force on 5th October 1999, except for the transitional provisions in clause 17(1) (which come into force at Royal Assent), and the provisions relating to the requirement for employers to pay the tax credits (which come into force on 6 April 2000).

EUROPEAN CONVENTION ON HUMAN RIGHTS

22.     Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement about the compatibility of the provisions of the Bill with the Conventions rights (as defined by section 1 of that Act). The statement has to be made before second reading. On 18th March 1999 the Parliamentary Under-Secretary of State for Social Security, Baroness Hollis of Heigham, made the following statement:

In my view the provisions of the Tax Credits Bill are compatible with the Convention rights.