|Tax Credits Bill
Mr. Flight: Amendments Nos. 58 and 59 are probing amendments that relate to the issue raised by the first Liberal Democrat amendment, on which the Minister undertook to respond in full at this stage of the Bill's consideration.
We should like clarification of the relationship between the new tax credit regime and the European Union, the position of EU citizens, and whether the Government intend essentially to limit the payment of credits to those who are physically present in the UK. My first question is whether EU nationals resident in the UK—who may pay lower rates of UK income tax than British nationals—will qualify for the tax credits in full. The second question, which is related, is what is the Government's proposed policy on other nationals, especially Commonwealth nationals, who reside and work in the UK. Is an obligation involved? I understand that that is the position under EU law. Are those obligations avoidable? About 725,000 individuals, who are not British nationals, working in the UK will qualify under one or other count for the tax credits. What is the position on reciprocity for any analogous benefits in other EU countries? Given the EU directives on benefits and EU accounting standards, how does the issue interrelate with that of whether we are dealing with a benefit or a tax item? Are the rules different depending on how tax credits are regarded or on whether they are correctly categorised?
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I note that clause 38 grants the Government power to regulate in relation to immigration. We are, therefore, potentially covering some of the issues related to that. Amendment No. 60 is related, but different. The Minister will be aware that under the existing benefits regime there are problems with people returning to their families in the Indian sub-continent, for example, for substantial periods of time. In those cases, the amendment would restrict absences abroad on holiday to what any reader of The Sun—or even the Daily Mail—would regard generous: a four week maximum. That amendment is principled but would also probe to discover the Government's proposed policy.
Mr. Webb: I understand the example that the hon. Member for Arundel and South Downs gave, but I am thinking of a different one. If a British citizen arrived back in the country in the middle of May, having missed six weeks of the tax year, he could be subject to destitution under amendment No. 60 because he would not receive any tax credits. That may be an unintended side effect.
Mr. Flight: Later amendments would address that by abandoning the principle of the tax year, but the point is readily taken.
Mr. Webb: I am grateful for the hon. Gentleman's gracious response. Rather than risk those later amendments not being debated in Committee, I am disinclined to support the current one.
Dawn Primarolo: I shall explain the function of the provisions at which the amendments are directed. This is the second debate we have had in this sitting about interaction with European law. Clause 3 provides that a person must be in the United Kingdom to make a claim for tax credits: that is a reasonable requirement. The purpose of tax credits is to support people who live in the UK. Equivalent rules operate for the working families tax credit, the disabled person's tax credit, the children's tax credit, income support and the jobseeker's allowance. Without such rules, anyone living anywhere in the world could claim tax credits, providing that they met the qualifying criteria. That might put a strain on the Exchequer, not to mention the pockets of UK taxpayers: we must have a reasonable limitation. Therefore, a person's entitlement to tax credits will cease from the point at which they leave the UK.
I hope that you will permit me to look slightly ahead, Mr. Hood, because clause 5(3) states that a person's entitlement to tax credits ends if they leave the UK. It makes it clear that an award ends at any time when the person who made the claim can no longer make a claim under clause 3(2). As the hon. Member for Arundel and South Downs pointed out, the two provisions interrelate, because only a person in the UK can make a claim under clause 3, and it follows that the award ends when they leave the country. That is perfectly sensible. The new tax credits will be responsive: awards will change with people's circumstances.
However, it is not the Government's intention that a person's award should end because they go abroad
Column Number: 22for a few days or weeks on holiday or because of family illness, whether to a European Union country or elsewhere. As the hon. Member for Northavon suggested, someone may have to return to another country for a period due to family illness but they are to all intents and purposes still resident in the UK, and their family remains here.
The clause allows regulations to be made that set out the circumstances in which a person may be treated as being in the UK. We intend those regulations to allow scope for people to retain their entitlement if they have to go abroad for a short period. An obvious scenario is that of someone who has to return to Pakistan or India because of a parent's illness and who might be out of the country for a slightly longer period. I am sure that hon. Members can think of other examples. The regulations will be designed to make the situation reasonable. To be eligible for tax credits, a person must be resident in the UK, but the regulations will be reasonable and sensible about circumstances in which for some reason in the course of a tax year, they may not be in the UK.
The amendments would enable people anywhere in the EU to claim a tax credit irrespective of whether they lived in the UK. However, only those who were physically present in the UK for all but four weeks of the year would be entitled to any tax credit for that year. With respect to the hon. Member for Arundel and South Downs, the Bill as drafted works in a much clearer, more sensible and straightforward fashion. I accept that he is seeking to probe the limits of the provisions.
I have said that we intend to make regulations to retain entitlement for those who go abroad temporarily. They will also mean that a person is not prevented from making a claim for a tax credit simply because they are temporarily out of the country. I think that that is the reverse of the point made by the hon. Member for Northavon in an intervention.
Richard Younger-Ross (Teignbridge): Will the Minister expand the point slightly further and say whether someone who wanted to work abroad for a short period would lose their entitlement? We should consider labour mobility, and my part of the country has many seasonal workers, who benefit from moving abroad for short periods.
Dawn Primarolo: The issue is already addressed in the social security and tax systems. When is a person deemed no longer to be in the UK for the purposes of paying tax and national insurance? Some circumstances have been touched on, although I cannot see how they could come within the provision. For instance, there is a question about people who work on a North sea oil rig, but I think that they are paid rather generously. I do not want to be drawn into the question of tapers and rates, but I cannot see how such people would get into even the range that we are thinking about. I am trying to think of a relevant circumstance, but I honestly cannot think of one. Someone who works for an employer and is required to work for a certain number of months somewhere else in the world is still subject to United Kingdom tax and national insurance. Their place of
Column Number: 23employment and their family are, to all intents and purposes, still in the United Kingdom, and the temporary location of their work does not change their employer or their status as present in the United Kingdom. The regulations seek to address those issues. They do not seek to remove entitlement from those who are genuinely entitled to it, but will ensure that those who to all intents and purposes are not present in the United Kingdom will not find that they can qualify.
European nationals who are resident in the United Kingdom will qualify for the tax credits provided that they meet the residence test for being in the United Kingdom, in the same way that everyone will have to provide information that they genuinely live here. That is what we do for WFTC and DPTC. Our approach is sensible, tried and tested.
Mr. Clappison: Will the hon. Lady give way?
Dawn Primarolo: I will just address the next point. The hon. Member for Arundel and South Downs raised a question that related specifically to Commonwealth countries. Anyone who has ever looked at the E111 form will know that we have a vast array of varying degrees of reciprocal arrangements with countries throughout the world. I am not aware of any country where there could be a reciprocal arrangement on tax credits, but that is the basis on which they are negotiated. Other countries are interested in developing a reciprocal arrangement on tax credits.
Mr. Clappison: I ask the Paymaster General to clarify one point. She has told us that EU citizens who are working in this country will be eligible for the tax credits, and that the provisions extend working credits in particular to those without children. Does it follow that EU citizens without children who work in this country will now be entitled to that credit? Will she indicate the numbers of people who might be new claimants?
Dawn Primarolo: They would have to be covered by the reciprocal arrangements in the regulation and would have to satisfy the criteria for eligibility. I understand that we have those arrangements with the European Union. If the hon. Gentleman were taken ill in Germany or France, he would have access to the national health services in those countries. That relates to the arrangements that are guided by the regulations and any additional reciprocal arrangements that we have with individual countries. We have sought through the regulations to remain within our international obligations but to ensure that the intent is that the person is resident in the UK. The requirements vary according to whether the provision is designated as a family benefit. When that debate is finally settled, we will be able to give an absolute answer. The principle is that it is supposed to benefit people who live and work in the United Kingdom, bearing in mind that in some circumstances, people may find themselves temporarily outside the United Kingdom.
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There are a number of other points to make in respect of the amendments. However, I will not detain the Committee if the hon. Member for Arundel and South Downs is simply seeking to probe the reciprocal arrangements. I will conclude my remarks later, and return to the more detailed points of why the amendment should be opposed only if the hon. Gentleman is attached to them. However, he may wish to withdraw them.
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