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Lord Sewel: Let us look at Amendments Nos. 283, 284 and 285. They all have in common the fact that they seek to replace the definition in Clause 71 of a Scottish tax payer. In a way they all build one upon the other, starting with the amendment in the name of the noble Lord, Lord Lyell. It is the common building block of all the amendments because it seeks to restrict liability to the Scottish variable tax to people who are ordinarily resident in Scotland.

Amendment No. 284 widens the definition slightly by building back in the existing provision in Clause 71 Scottish MPs, MEPs and MSPs, who would be Scottish tax payers. Amendment No. 285 widens the definition

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further by including people in Scotland for a temporary purpose who spend more than six months there in any year.

One of the difficulties is that the amendments are not correct in ascribing existing statutory definitions to the terms "resident" and "ordinarily resident". These terms are not defined in the Income Tax Acts.

Lord Simon of Glaisdale: Is the noble Lord sure about that? My recollection--admittedly somewhat rusty--is that those phrases have been clearly interpreted by the courts that "resident" and "ordinarily resident" mean the same thing. They are both used in the Income Tax Acts and can be well accepted.

Lord Sewel: I thought I was on the thinnest of all possible ice for some time. The noble and learned Lord said in his intervention what I was going to say in my subsequent sentence. They are not defined in the Acts but have been defined through the courts. There is no point of disagreement between us.

It is worth going back to say that we have tried to define a Scottish tax payer, in the following ways, in Clause 71. An individual is deemed to be a Scottish tax payer for a given year under the following conditions. First, an individual must be a UK resident for tax purposes in the year in question. So we are talking only about UK residence. That is an absolute requirement. If that test is met, there are three ways to qualify. One way of qualifying is that the principal home is in Scotland. Another way of qualifying is that more than half the number of days spent in the UK are spent in Scotland. The third is that one is a Member of Parliament--Scottish, UK or European--for a Scottish constituency. A person who meets one or more of those tests will be regarded as a Scottish taxpayer.

Noble Lords have argued forcefully that the proposed alternative test for defining Scottish taxpayers is more straightforward and should be easy to apply in practice because it relies on familiar concepts. We have considered that approach. It was the obvious one to consider--we have not gone down this road with any sense of perversity. We looked at that as the possible solution to the difficulty of defining a Scottish taxpayer, and of course we had discussions with the Inland Revenue. I take the point made by the noble Lord, Lord Mackie of Benshie, that the Inland Revenue has expertise in dealing with these matters. It is because of those discussions that we have come up with the clauses in the Bill.

The difficulty that we faced was that the case law that had been developed in terms of resident and ordinarily resident could not be simply translated to a rather different situation of movement within the United Kingdom where that case law had been developed very much in the context of international movement, not least because the level of cross-border traffic between Scotland and the rest of the United Kingdom is much greater than it is in an international context. Furthermore, it is far more common to move home within the United Kingdom. We were drawn to the conclusion that we must have rules which work for persons who spend a lot of time in both Scotland and

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the rest of the United Kingdom and persons who move home from, say, Scotland to England. That is what we have attempted to do in laying down these tests.

Although residence is an appropriate qualification for tax liability, it is not in itself a sufficient one because it is proper, particularly in this context, to have something which captures those who spend a great deal of time in Scotland without technically residing there. Indeed, Amendment No. 285 attempts to deal with that by introducing the concept of temporary purpose. However, I think that the introduction of that concept would be enormously difficult to define.

I think that we are broadly correct in the approach we are taking. However, I have listened to what noble Lords have said and I take on board the concern that has been expressed about the 92 nights situation whereby someone can become a Scottish tax payer on the basis of spending 92 nights in Scotland. That would arise only if none of those 92 nights was consecutive. If I may almost argue against myself, if we arrived at a system of regional government in England and those regional authorities had variable tax rates, it would be at least theoretically possible to pay three different variable tax rates. That would take some degree of argument and justification.

I have listened to what has been said. I think that our broad approach remains correct. I do not think it is possible just to apply the working concepts of resident and ordinarily resident. I wish to go away and look at the definition that produces the 92 day cut-off. Perhaps we could consider wording that part of Clause 71(4)(a) differently so that we remove what I think are the words that cause the problem--"the beginning or end of the day"--and come up with a different formulation. I will then come back to your Lordships' House at Report stage.

6.30 p.m.

Lord Mackay of Ardbrecknish: Before I decide what to do with my amendment--perhaps my noble friends will be of the same mind--I wonder whether I could invite the Minister to indicate that, if they wished to do so, he would be happy to have a meeting with the CBI, the Institute of Chartered Accountants and the Law Society of Scotland in order to discuss these matters. They have attempted to discuss these matters with the Chancellor of the Exchequer. I have before me a letter which the CBI received back from the Chancellor. It is dated 1st October. The CBI had written on 28th July. It took the Treasury two months to reply. Frankly, it could have replied the next day because it did not argue. The Chancellor simply said that he was not persuaded that the suggestions from the CBI would achieve a better result.

The CBI was not in the least persuaded by the Chancellor because he did not argue his case. He just made the bland assessment that the Government had thought about it, the Government are right, and that is it. I recognise such a letter. I probably signed a few of them in my time. It is not a very adequate answer. I did not think so even when I was signing such responses. I wonder whether the Minister could give an assurance

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that if these organisations, either together or individually, would like to discuss these matters with the Government before Report stage, the Government would be willing to do so.

Lord Sewel: There have been discussions with the three organisations on this very point. But I am more than happy, and I am sure my colleagues will be more than happy, to meet them again and try to resolve this issue.

Lord Lyell: I was a little mystified, because I thought we were getting close together, by the Minister saying, "We want to catch people". That is at variance with what was said by the noble and learned Lord the Lord Advocate at Second Reading. The United Kingdom Inland Revenue has a good idea of the number of people to whom Clause 71 should apply. Indeed, the figures quoted by the noble and learned Lord were very close to the figures quoted to me by the chartered accountants. It was in that spirit that I was very encouraged. But I am very encouraged by what the Minister has said. I have copies of correspondence from the president of the Institute of Chartered Accountants of Scotland expressing gratitude to Mr. McLeish, the Minister of State, for his helpful attitude in trying to resolve this difficulty.

I return to Clause 71(2)(b). The Minister made an eloquent comment about residence and was backed by the noble and learned Lord, Lord Simon of Glaisdale. The existing concept of residence seems to tally with what the noble and learned Lord said at Second Reading. Clause 71(2)(b) might extend a little wider and might cause unnecessary concern among non-Scottish taxpayers. At no time during the referendum campaign or in your Lordships' House did the Government intend, to quote the Minister's words, to catch them. I do not think they intended to do that. It is with that in mind that I ask leave to withdraw Amendment No. 283.

Amendment, by leave, withdrawn.

[Amendments Nos. 284 and 285 not moved.]

Clause 71 agreed to.

Clause 72 [Changes to income tax structure]:

The Earl of Balfour moved Amendment No. 286:

Page 33, line 13, leave out ("or the Board").

The noble Earl said: At this stage of the proceedings on this Bill, we find reference to "the Board". This amendment is a purely probing amendment, to give me an opportunity to see whether it is possible to find out who or what is "the Board". Although I have searched for it all the way through this Bill, I have found no definition whatever.

But I notice that Amendment No. 286 is grouped also with Amendment No. 293. I sought the best possible advice from our wonderful staff in the Public Bill Office and they suggested that "the Board" could mean the Commissioners of Inland Revenue. I may be right; I may be wrong. However, as the Bill stands, I have not a clue as to who or what "the Board" is. I beg to move.

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