EXPLANATORY NOTE

This Clause and Schedule introduce various amendments to put Members of the Scottish Parliament and the devolved assemblies for Wales and Northern Ireland on the same footing for tax purposes as Members of the House of Commons in relation to termination payments, certain travel and accommodation allowances, and pensions. It also provides that the tax rules which apply to certain Ministerial and other offices, also apply to equivalent offices in the devolved administrations.

The amendments will have effect from 6 April 1999 onwards.

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3. Sub-section (1) introduces Schedule 5 which makes amendments:

(a) to treat Members of the Scottish Parliament and the devolved assemblies for Wales and Northern Ireland in the same way, for tax purposes, as Members of Parliament, and

(b) to treat certain office-holders under the Scotland Act 1998, the Government of Wales Act 1988 and the Northern Ireland Act 1998 in the same way, for tax purposes, as the holders of corresponding offices connected with the UK Parliament.

4. Sub-section (2) provides that the amendments take effect from 6 April 1999.

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5. Paragraph 1 substitutes new wording for that currently in Section 190 of the Income and Corporation Taxes Act 1988 (ICTA) so that (a) resettlement grants to Members of the Scottish Parliament and the devolved assemblies for Wales and Northern Ireland who lose their seats at an Election, and (b) termination payments made to certain Ministerial and other office-holders who cease to hold office, are treated in the same way, for tax purposes, as for their Westminster counterparts.

6. New Section 190(1) provides that such grants and payments shall not be chargeable to tax under Schedule E as emoluments, but instead applies the rules in Section 148 ICTA 1988 (payments and other benefits on termination of employment etc).

7. New Section 190(2) retains the existing relief for grants and payments to:

(a) Members of Parliament who lose their seats following a General Election;

(b) certain Ministerial and other office-holders who cease to hold office; and

(c) Members of the European Parliament who lose their seats at an Election.

8. New Section 190(3) extends relief to grants and payments to a Member of the Scottish Parliament, the National Assembly for Wales or the Northern Ireland Assembly, who ceases to be a member, and to office-holders in the devolved administrations who cease to hold an office corresponding to "a relevant office".

9. New Section 190(4) defines "a relevant office" as having the same meaning as in Section 4 of the Ministerial and other Pensions and Salaries Act 1991.

10. Paragraph 2(1) introduces a new Section 200ZA of the Income and Corporation Taxes Act 1988.

11. New Section 200ZA(1) applies to payments made (a) to Members of the Scottish Parliament under Section 81(2) of the Scotland act 1998, (b) to Members of the National Assembly for Wales under Section 16(2) of the Government of Wales Act, or (c) to Members of the Northern Ireland Assembly under Section 47(2) of the Northern Ireland Act 1998.

12. New Section 200ZA(2) provides that payments for "necessary overnight expenses" and "EU travel expenses" shall not be regarded as income for income tax purposes.

13. New Section 200ZA(3) defines:

"necessary overnight expenses" as the additional expenses necessarily incurred by members in staying overnight away from their only or main residence for the purposes of performing their duties as a member either in the area where the assembly sits or in the constituency or region they represent, and

"EU travel expenses" as additional expenses incurred in travelling between the United Kingdom and any European Union institution in Brussels, Luxembourg, or Strasbourg".

14. Paragraph 2(2) substitutes new wording for that currently in Section 198(4) of the Income and Corporation Taxes act 1988 so that no deduction under the general expenses rule, contained in Section 198(1), shall be made for expenditure incurred by:

(a) a Member of the House of Commons, or

(b) a Member of the Scottish Parliament, or

(c) a Member of the National Assembly for Wales, or

(d) a Member of the Northern Ireland Assembly

in, or in connection with, the provision of residential or overnight accommodation to enable him to perform his duties as a member in or about the place where the body of which he is a member sits or the constituency or region for which he has been returned.

15. Paragraph 2(3) substitutes new wording for that currently in Section 74 of the Capital Allowances Act 1990 so that no allowances shall be made for expenditure incurred by:

(a) a Member of the House of Commons, or

(b) a Member of the Scottish Parliament, or

(c) a Member of the National Assembly for Wales, or

(d) a Member of the Northern Ireland Assembly

in, or in connection with, the provision of residential or overnight accommodation to enable him to perform his duties as a member in or about the place where the body of which he is a member sits or the constituency or region for which he has been returned.

16. Paragraph 3 inserts a new paragraph (c) in sub-section 2 of Section 200AA of the Income and Corporation Taxes Act 1988 (office-holders’ transport and subsistence). The new paragraph exempts from income tax travel and subsistence provided to any office under the Scotland Act 1998, the Government of Wales Act 1998 or the Northern Ireland Act 1998 that corresponds to any of the offices mentioned in paragraph (a) and (b) of sub-section 2. These are members of Government, the Speaker, Leaders of the Opposition and the Opposition Chief Whips and Deputy Chief Whip for whom a salary is provided for in the Ministerial and other Salaries Act 1975.

17. Paragraph 4 adds to the list of parliamentary pension funds in section 613(4) of the Taxes ACT 1988 funds held by trustees of any pension schemes set up for members of the Scottish Parliament and the Welsh and Northern Ireland Assemblies under the 1998 legislation which established those bodies. Section 613(4) exempts the trustees of certain funds, including the Parliamentary Contributory Pension Fund for Westminster MPs, from tax on fund income.

18. Paragraph 5(1) adds parliamentary pension schemes to the definition of "relevant statutory scheme" in section 611A of the Taxes Act. "Relevant statutory schemes" include pension schemes set up under legislation which broadly correspond with Inland Revenue tax approved schemes.

19. Paragraph 5(2) introduces a definition of "parliamentary pension scheme". This lists (and brings together in one place) existing parliamentary schemes as well as any new schemes set up by the Scottish Parliament and devolved Assemblies.

20. Paragraph 6(1) provides for paragraph 6(2) to apply if the Scotland Act 1998 provides for the salary of Scottish MPs who are members of the Scottish Executive to be lower than that of other Scottish MPs.

21. Paragraph 6(2) extends sections 629 and 654 of the Taxes Act 1988 to members of the Scottish Executive who are Scottish MPs. Those sections allow part of the salary received by Ministers who are Westminster MPs to be treated as MP salary for pension purposes.

22. Paragraph 6(3) makes clear that members of the Scottish Executive includes Junior Scottish Ministers.

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23. There are specific statutory rules that apply to the tax treatment of certain payments and facilities which Members of Parliament, Government Ministers and certain office-holders connected with the UK Parliament receive by reason of their office.

24. These rules concern the following items:

the Additional Costs Allowance paid to Members - unless they have an Inner London constituency - to reimburse them for the additional cost of having to stay overnight at either Westminster or their constituency;

travelling and related expenses when Members visit European Community institutions in Brussels, Luxembourg or Strasbourg on Parliamentary duties;

termination payments to ensure that Members get tax relief on the first £30,000 in the same way as all other office-holders and employees who get compensation for losing their jobs;

contributions and fund growth of the Members’ pension schemes;

certain transport, meals and temporary accommodation provided for Ministers of the Crown and Opposition office-holders in connection with their official duties.