Child Support (Miscellaneous Amendments) Regulations 2007

rose to move, That the Grand Committee do report to the House that it has considered the Child Support (Miscellaneous Amendments) Regulations 2007. The noble Lord said: Getting the child maintenance system right is one of the most important matters that we face, as parliamentarians, as parents, and as a society. This House has always played a crucial role in national debates on the issue, and the considered views of the Members of this House has consistently both informed government thinking and improved the legislation that oversees this area. I think it is fair to say then that this House is well aware that the performance of the child maintenance system has fallen a long way short of the expectations of this House, and more importantly, of the people that the system is designed to help. Noble Lords will know that the Government are taking action to reform the child maintenance system for the long term so that it is capable of achieving the important objectives we have set: to help tackle child poverty; promote parental responsibility; provide a cost-effective and professional service; and be simple and transparent. Members of the Committee will soon have the opportunity to debate and scrutinise the Child Maintenance and Other Payments Bill. But there is still the short-term challenge, which we have already begun to address, particularly through the operational improvement plan, which is already showing improvements in several key areas. The Child Support (Miscellaneous Amendments) Regulations 2007 will tackle problems that have been identified with the existing regulations. These need to be addressed now, before the proposals of the Child Maintenance and Other Payments Bill start to take effect. The regulations will: change the way the Child Support Agency calculates the net earnings of a self-employed non-resident parent; end geographical restrictions on the courts’ jurisdiction over child support enforcement cases; and increase the time allowed for a non-resident parent who lives abroad to make an appeal, and the notice period that the agency must give such a non-resident parent before commencing certain enforcement proceedings. The changes to self-employed income became necessary following a judgment of this House last year in the case of Smith. That case was an exceptional one. None the less, this House found that the meaning in legislation of ““taxable profits””, which provides the basis for calculating such earnings, was ambiguous. The House ruled that the agency’s interpretation of ““taxable profits”” was incorrect. We have therefore taken this opportunity to clarify what we mean by providing a definition of taxable profits which corresponds to that used by HMRC; and to change the information used by the agency to calculate self-employed earnings. The result is that self-employed earnings as assessed by the agency will more closely match those of HMRC. Currently, the agency uses the self-assessment tax return as the primary source from which to obtain a total taxable profits figure and calculate self-employed earnings. If a return is not available, the agency has looked to the tax calculation notice supplied by HMRC to the taxpayer instead. Following these amendments, the agency will use the tax calculation notice as the primary source of information, and this means that the agency will be basing assessments on earnings information which has been agreed by HMRC. A key feature of the Smith case was the question of whether capital allowances should have been taken into account when calculating the non-resident parent’s income. The majority ruling of this House was that, in the current scheme, they should not. However, we believe that it is right to acknowledge the reality that over time assets tend to lose their value and that the loss should be offset against business income. This is something recognised by both HMRC and in good accounting practices. By using the tax calculation notice as the basis for assessment, capital allowances will automatically be taken into account, and this reflects our original policy intention that the profits of a self-employed person which are assessable for tax should be the basis for the maintenance calculation. The new method will be administratively straightforward and, because it provides a closer link to HMRC rules, will be more easily understood by parents. It also mirrors how we are proposing to recognise earnings from self-employment in the future child maintenance scheme. The existing child support schemes provide an alternative method for calculating self-employment earnings when information submitted to or supplied by HMRC is not available. Under this method, earnings are obtained by deducting from gross business receipts statutory deductions such as income tax and national insurance contributions, and allowable business expenses. Currently, depreciation is not an allowable expense. These regulations reverse this, providing recognition of depreciation which will broadly mirror that intended for capital allowances. Regulation 3 inserts a definition of taxable profits into the Child Support (Information Evidence and Disclosure) Regulations 1992 by reference to the Income Tax (Trading and Other Income) Act 2005. It also amends those regulations so that the agency can demand any information that is required from the non-resident parent to determine their taxable profits. Regulation 4 amends the Child Support (Maintenance Assessments and Special Cases) Regulations 1992 to bring the new methods of calculating self-employed earnings into effect for the old child support scheme. Regulation 5 makes the same adjustments to the new scheme by amending the Child Support (Maintenance Calculations and Special Cases) Regulations 2000. The Child Support Agency has at its disposal a number of enforcement measures to ensure that non-resident parents meet their child maintenance liabilities. Obtaining a liability order is usually the agency’s first step to enforcing child support debt. At present, an application for a liability order must be heard in the court in the area in which the non-resident parent resides. This means that the agency cannot make an application for a liability order against a non-resident parent who lives abroad. Similarly, appeals against deductions from earnings orders or enforcement of liability orders by distress must be heard in the court in the area in which the non-resident parent resides. This effectively means that non-resident parents who live abroad are unable to exercise a right of appeal in these cases. This is patently wrong and so we have removed these restrictions. To complement the extension of the courts’ jurisdiction, the regulations also double to 56 days the time allowed for overseas NRPs to appeal against a decision to impose a deduction from earnings order, and they extend to 28 days the minimum notice period that the Child Support Agency must give an overseas non-resident parent when it intends to obtain a liability order. Removing the restrictions on courts’ jurisdiction will allow the agency to pursue centralisation of actions in respect of liability orders in future. This will improve the efficiency of its enforcement of maintenance arrears. To effect the required changes to courts’ jurisdiction and the relevant notice periods, Regulation 2 makes a series of amendments to the Child Support (Collection and Enforcement) Regulations 1992. I am satisfied that the statutory instrument before us is compatible with the European Convention on Human Rights. I commend these regulations to the Committee and I beg to move. Moved, That the Grand Committee do report to the House that it has considered the Child Support (Miscellaneous Amendments) Regulations 2007. 19th Report from the Statutory Instruments Committee.—(Lord McKenzie of Luton.)