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Lord Higgins: My Lords, certainly in the light of the comments which the noble Baroness made when we were debating Amendment No. 3, I am grateful for what she has said on this amendment and for the fact that it appears on the Marshalled List. It provides some reassurance, subject to anything which the noble Lord, Lord Goodhart, may wish to say in relation to it. If I did not actually say that it was an "Englishman's home is his castle" amendment, that is certainly what it was intended to be. I take the point made about the portcullis. I am slightly surprised by the wording which seems extremely ingenious but it meets the point and I am grateful to the noble Baroness.

Lord Goodhart: My Lords, first, I am grateful for the noble Baroness's explanation about the use of the words:

in relation to subsection (2)(c) of the new Section 110ZA. It certainly helps our view as to whether or not that is justified. I understand why no amendment has been proposed and I accept that.

Amendment No. 39 widens the range of premises which are subject to inspection by substituting paragraphs (b) and (c) for the previous paragraph (b) which referred only to the premises where the trade of an employment agency was carried on. That certainly seems to make sense. I am somewhat concerned about

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the effectiveness of the closing words of the amendment which state that,

    "a private dwelling-house is not liable to inspection under this section unless an officer has reasonable grounds for believing that a trade or business is being carried on from the dwelling-house and that the trade or business is not also being carried on from premises other than a dwelling-house".
That seems to me to mean that if a trade is being carried on at more than one set of premises, you can only inspect the premises which are not a dwelling house even though the records are in fact being kept at the dwelling house. The obvious example is a farm. A farm consists of a farmhouse and probably also barns, milking parlours and cowsheds. The effect of this provision appears to be that the officer is allowed to inspect the cowsheds but not the farmhouse. I am not aware that farmers are in the habit of keeping records in their cowsheds. This renders ineffective the whole power of inspection in a case of that kind. I wonder whether this draft needs further amendment if it is to cover the situation and make it effective. Clearly, we regard it as proper that there should be an effective power to inspect records.

Lord Skelmersdale: My Lords, in response to Amendment No. 3 tabled by my noble friend Lord Higgins the noble Baroness spoke about the possibility in the longer term of different powers for different purposes; namely, those of the Inland Revenue and those of the Contributions Agency. In the short term those powers will be different. Does she agree that when the letter is written it is even more important that the business should be told under what auspices the inspector is inspecting? Otherwise, it will be much more difficult for a solicitor or another legal adviser to give the appropriate advice should matters go awry.

Baroness Hollis of Heigham: My Lords, I should like to respond first to the observation of the noble Lord, Lord Skelmersdale. Basically, he asks whether employers will be aware if the inspection will be about PAYE or NICs. The aim is to move towards a single visit that covers both tax and NICs. This may involve more than one officer until training in both skills is given. In the interim we want to ensure that the letter from the Inland Revenue to the employer makes clear the purpose of the visit.

In response to the noble Lord, Lord Goodhart, I considered the syntax of this provision and wondered whether the "and" was conjunctive or disjunctive. I am advised that this wording is drawn from the Fraud Act and therefore has a well-established understanding associated with it. It is particularly helpful when it comes to the self-employed. The interpretation that is offered of the disjunctive "and" in the words

    "and that the trade or business is not also being carried on from premises other than a dwellinghouse",
is that there is a presumption that one goes first to the business premises to see the records. If the business premises did not hold those records one would then have the right to inspect the home address--in this example the farmhouse--to see if they were there. I believe that that is a way of avoiding going first to the domestic premises

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when there are also business premises at which there is a reasonable expectation that the records will be held. That is the intent and the understanding that is attached to the Fraud Act.

Lord Goodhart: My Lords, that may be the understanding. However, is the noble Baroness prepared to look again at the wording? That understanding does not appear to bear much relationship to the wording.

Baroness Hollis of Heigham: My Lords, all I can claim in my defence is that the previous government used this wording in two or three other pieces of legislation presumably with the approval, support and scrutiny of the majority of your Lordships' House. But time has moved on and perhaps what we accepted five or 10 years ago we do not accept now. I shall review the wording and try to reassure the noble Lord that it does what we believe it to do. If it does not do so clearly we must return to it. With that undertaking, I beg to move this amendment.

On Question, amendment agreed to.

Schedule 6 [Decisions and appeals]:

Baroness Hollis of Heigham moved Amendment No. 40:

Page 47, line 30, at end insert--
("19A. After section 171 of the Pension Schemes Act 1993 there is inserted--
"Reports by Inland Revenue.
171A.--(1) The Inland Revenue shall prepare, either annually or at such times or intervals as may be prescribed, a report on the standards achieved by their officers in the making of decisions against which, by virtue of section 170(6), an appeal lies to an appeal tribunal constituted under Chapter I of Part I of the Social Security Act 1998.
(2) Any report under this section--
(a) may be included in any annual report by the Inland Revenue of which a copy is laid before each House of Parliament, or
(b) may be annexed to any report of the Secretary of State under section 81 of the Social Security Act 1998.
(3) A copy of every report under this section shall be laid before each House of Parliament, unless the report is included in, or annexed to, a report of which a copy is so laid."").

The noble Baroness said: My Lords, in moving Amendment No. 40 I wish to speak at the same time to Amendment No. 42. As noble Lords will be aware from earlier exchanges at Second Reading and in Committee, responsibility for policy and legislation on contracting-out of SERPS will remain with social security Ministers. But the Contracted-out Employments Group (COEG), the unit in the Contributions Agency that administers the system of contracting-out on a day-to-day basis, will transfer to the Inland Revenue with the rest of the agency. Officers of the Inland Revenue will therefore take on responsibility for making decisions and managing any disputes on those decisions. They will follow the procedures set out in the Social Security Act 1998 and the supporting regulations.

Section 81 of the 1998 Act places a requirement on the Secretary of State to produce a report on the standards achieved in the making of decisions against which an appeal lies to a unified appeal tribunal. Schedule 6 to this

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Bill amends Section 81 to require the Secretary of State to report also on the standards achieved by Inland Revenue officers in making decisions on contracting-out matters. On reflection we have decided that it is more appropriate for the Inland Revenue to produce the report as it will be for it rather than the Secretary of State to monitor the standards. The first of these amendments inserts a new Section 171A into the Pension Schemes Act 1993 to require the Inland Revenue to produce and lay before Parliament a report covering the standards achieved by its officers in making decisions on contracting-out matters. That report could be included in the Inland Revenue's annual report or annexed to the Secretary of State's report under the 1998 Act.

The second amendment is consequential on the first and removes the now unnecessary paragraph from Schedule 6 to this Bill which requires the Secretary of State to produce the report. We believe that this will clarify the lines of accountability.

Lord Goodhart: My Lords, I rise to welcome the amendment. I very much regret that the noble Baroness did not see fit to accept the amendment that I tabled at Committee stage to transfer the appeal functions relating to contracting-out appeals to the tax tribunals rather than the social security tribunals. Since that appeared to be a lost cause I did not believe it right to table another amendment at Report stage. This is at least a minor step in the same direction. It is obvious that where decisions are taken by Inland Revenue officers it should be for the Inland Revenue to report upon them. Therefore, I am happy to support the amendment.

Baroness Hollis of Heigham: My Lords, I am pleased about that. The noble Lord will recall that at Committee stage we suggested that if his concerns proved to be valid, as they might be, and appeals should be to the general and special tax commissioners rather than the unified appeal tribunal system under the Social Security Act 1998, we could rectify the matter by virtue of the Order in Council procedure in Clause 22 and did not need to return to Parliament for further scrutiny. In the light of that the noble Lord was content not to press his amendment to a further round. The matter can be remedied if his forebodings turn out to be valid. However, given the fact that the noble Lord welcomes this amendment and it appears to have the consent of the House, I beg to move.

On Question, amendment agreed to.

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