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Sub-Contractors In The Construction Industry: Conditions Of Issue Of Certificates

Volume 895: debated on Thursday 17 July 1975

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Amendment made: No. 97, in page 105, line 37, leave out paragraph ( d) and insert

'(d) the business is carried on from proper premises and with proper equipment, stock and other facilities.'.—[Mr. Joel Barnett.]

I beg to move Amendment No. 98, in page 106, line 23, at end insert

'5A.—(1) Subject to sub-paragraph (2) below, there must be in force a policy or policies of insurance covering the applicant's relevant public liability in respect of the business referred to in paragraph 1 above and effected by him with an authorised insurer or insurers in a sum not less or not less in aggregate than £250,000.
(2) Sub-paragraph (1) above does not apply to an applicant whose business consists of the furnishing or arranging for the furnishing of labour in carrying out construction operations or whose business includes any of those activities but does not also include the carrying out of construction operations.'.
I understand that with this amendment it is convenient to take Government Amendments Nos. 99–102.

The amendments add a further condition to those, set out in the schedule, which sub-contractors have to meet before they can qualify for a sub-contractor's tax certificate to allow them to receive payments in full from contractors, instead of under deduction of tax at source. The additional condition is that a subcontractor shall have taken out adequate public liability insurance.

This requirement was not originally included in the battery of tests provided for in the schedule, because, as the House will know, my right hon. Friend the Minister for Planning and Local Government had been intending to introduce a measure on the lines of the 1970 Construction Industry Contracts Bill. That Bill contained a requirement that, in order to be registered, a sub-contractor would have to be covered against this liability. Accordingly, to avoid duplication, we did not include the condition in the tax legislation.

My right hon. Friend has, however, now announced that further detailed study of his proposals has revealed that his scheme would involve a substantial overlap with the revised Inland Revenue deduction scheme which we are now discussing. He said that he did not, therefore, propose to bring forward further separate legislation for the time being, and that, instead, the Government intend to concentrate their attack on the abuses of the lump through the Finance Bill measures. We are, therefore, proposing to take into this Bill the public liability insurance test so as to make this legislation comprehensive.

I hope that hon. Members agree that it is sensible to incorporate this additional requirement. To have adequate public liability insurance to provide cover against injury to third parties or other damage caused by construction operations is clearly a provision that one could reasonably expect a bona fide subcontractor to undertake.

The intention of the Schedule is to provide criteria for distinguishing the bona fide business from the bogus business—that is, where the proprietor has no intention of carrying out his statutory obligations, including paying his tax. This new condition will be a further useful indicator as to the potential reliability of the proprietor.

The Financial Secretary has spoken of new conditions which he is adding to the schedule. He will recall that in Committee we pointed out the doubtfulness of the validity of some of the conditions already in the schedule, in particular the proposition under Schedule 11 Part I (1)(d) that the Revenue should be entitled to judge whether a business was being carried out in a reasonably efficient manner. We questioned whether the Revenue was, perhaps, the best body to judge efficiency in any organisation, even in the Revenue itself, let alone in any other business.

The Financial Secretary was too concerned to look again at this wording to see whether a better definition of "reasonably efficient" could be established. We expect to hear rather more from him on that and rather less on this lengthy additional condition he has inserted for broader reasons.

The hon. Gentleman referred to Amendment No. 97. That was carried by the vote of this House a few moments ago. Perhaps I might remind hon. Members that we introduced the change that I suggested on Report, and that the conditions for efficient operation have been withdrawn and replaced by the condition that the business is carried on from proper premises and with proper equipment, stock and other facilities. I think that met the intentions of the Standing Committee. I had hoped that that would be approved, as in fact it was by the vote of the House today.

Amendment agreed to.

Amendments made: No. 99, in page 107, line 32, at end insert—

'3A.—(1) Subject to sub-paragraph (2) below, there must be in force a policy or policies of insurance covering the relevant public liability of every partner in the firm in respect of the business referred to in paragraph I above and effected on behalf of the firm with an authorised insurer or insurers in a sum not less or not less in the aggregate than £250,000.
(2) Sub-paragraph (1) above does not apply to a firm whose business consists of the furnishing or arranging for the furnishing of labour in carrying out construction operations or whose business includes any of those activities but does not also include the carrying out of construction operations.'.

No. 100, in page 108, line 21, at end insert—

'4A.—(1) Subject to sub-paragraphs (2) and (3) below, there must be in force a policy or policies of insurance covering the company's relevant public liability in respect of the business referred to in paragraph I above and effected by the company with an authorised insurer or insurers in a sum not less or not less in the aggregate than £250,000.
(2) Sub-paragraph (1) above does not apply to a company whose business consists of the furnishing or arranging for the furnishing of labour in carrying out construction operations or whose business includes any of those activities but does not also include the carrying out of construction operations.
(3) Sub-paragraph (1) above does not apply where—
  • (a) the companies carries on the business referred to in paragraph 1 above in partnership with another person;
  • (b) the company's application for the issue of a certificate under section 67 of this Act is for its issue to the company as a partner in that firm; and
  • (c) there is in force a policy or policies of insurance covering the relevant public liability of every partner in that firm in respect of the firm's business in so far as it is required by paragraph 3A of Part III of this Schedule.'.—[Mr. Robert Sheldon.]