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Lord McIntosh of Haringey: The employer will send a cheque for a smaller sum. "Money changing hands" implies an additional transaction. That is not an additional transaction. The noble Lord said on the previous amendment that there will be a further transaction. There will not be.
Lord Skelmersdale: One cannot translate part of my argument from the previous amendment to this one. In this case money changes hands. I accept the Minister's statement that it will almost certainly be a smaller amount of money changing hands. In extreme cases, it will be an income from the Revenue.
Lord McIntosh of Haringey: We are talking about burdens. There would be a burden if there were an additional calculation and transaction. There is neither an additional calculation nor an additional transaction. Let me interrupt myself to reassure the noble Lord,
Lord Peston: Perhaps I may interrupt my noble friend. I hope that he is not saying that it will be impossible for the firm--the employer--to be in credit to the Inland Revenue or for the Inland Revenue to be in debt to the employer. Is my noble friend saying that that cannot happen?
"On receipt of a start notification in respect of an employee the ... employer shall calculate the tax credit to which that employee is entitled", during the period when the employer will be responsible for the payment of tax credit to that employee. It does not say that on receipt of a start notification the Inland Revenue will inform the employer of the calculation.
Lord McIntosh of Haringey: I think it does. Clearly, if there is going to be disagreement about it we will add to our procedures of consultation. I shall write to the noble Lord if any change in the wording is required. But it is totally explicit as far as I am concerned.
My noble friend Lord Peston and the noble Lord, Lord Skelmersdale, referred to delays in payment and to the prospect, as my noble friend put it, of employers lending money to the Government. There is no question of employers lending money to the Government. In most cases the amount of money which is due to the Inland Revenue in the form of payment of PAYE and NICs will be reduced by the amount of tax credits.
The noble Lord, Lord Higgins, used the word "suffer" for that. All I can say is that since PAYE was introduced in 1949, it has been the case that employers have had a short-term cash-flow benefit which will be marginally reduced in most cases. But they have had no right to that cash-flow benefit and it has never been queried that it happened because of the administrative convenience of the PAYE system both for them and for the employee. All that will happen is that there will be a slight reduction in that cash-flow benefit. I do not call that suffering.
There are other cases. We recognise that. We estimate that between 50,000 and 70,000 employers will have more to pay out in tax credits than they pay out in the form of PAYE and NI contributions. In those cases, all they have to do is to notify the Revenue in advance of that fact and, depending on the form of credit transfer--whether they use automated credit transfer or otherwise--they will receive the money in good time to make the payment to the employee. In the worst of all possible cases, when someone messes that up, the Revenue has the power to intervene and make emergency provision.
I believe I have made clear that there is no question of lending money to the Government and there is no question of elaborate calculations other than the very simple, straightforward, arithmetical calculation of the
This is a simple mechanism for funding. It means that the cumbersome arrangement of money passing backwards and forwards, as envisaged by Amendment No. 30, is both unnecessary and inappropriate. I hope that the noble Lord will feel able to withdraw the amendment.
Lord Higgins: I do not find convincing the noble Lord's answer on the statutory instrument and I should be grateful if he would write to me well in advance of Report stage so that we can consider carefully whether change is required.
Lord Higgins: Perhaps I may say in response to that intervention that it shows some of the advantages of publishing statutory instruments in draft. I pay tribute to the Government for going ahead and doing that.
Perhaps I may turn to the substance of the argument. Instead of the company simply being told what to pay to the employees and being given the money, which is a quite separate operation, what is proposed means that the company will have to integrate that calculation with its existing PAYE one, even though it is quite unnecessary to do so.
Lord McIntosh of Haringey: New confusions arise each minute. There is no integration with PAYE. The amount will be notified by the Revenue to the employer who will pay out the tax credit on a separate line from PAYE. The only integration is on the total payroll where they are netted out. That is not integration in the terms that the noble Lord seems to imply.
I agreed to write to the noble Lord on one point. Before I do that, perhaps I may draw his attention to Regulation 4(2)(d), which says that the employer will be told the daily rate.
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