Joint Committee on Tax Simplification Bills Minutes of Evidence



Examination of witness (Questions 1 - 28)

WEDNESDAY 24 JANUARY 2001

MR ADAM BROKE

  Chairman: Good morning, Mr Broke. I think we should begin under this new procedure by a declaration of interests that Members wish to make, according to the rules of the Houses. Having been elected Chairman of the Committee, if I may start from the Chair, I wish to declare an interest as a director of various publicly quoted and private companies. You will have to refer to the Committee Office to the Register of Members' Interests which sets them out and, of course, all those companies are bound to be, in one way or another, directly affected by the law on capital allowances. I do not know whether any other Member wishes to make a declaration of interest.

  Lord Blackwell: I also declare an interest as the director of a number of companies similarly affected, as Chairman of a private think-tank—the Centre for Policy Studies—and, also, as an advisor to KPMG's Corporate Finance activities.

  Baroness Cohen of Pimlico: I have a similar declaration in respect of being a director of public and private companies. I refer everybody to my entry in the House of Lords Register of Members' Interests, except that I am no longer an adviser to Arthur Andersen.

  Lord Howe of Aberavon: I follow suit by referring to the House of Lords Register of Members' Interests. I do not think it now includes any public or private United Kingdom companies, but I advise a number of other organisations. I declare another interest, I suppose, as Chairman of the Tax Law Rewrite Steering Committee and, to some extent, the person who started all this trouble.

  Lord Goodhart: I have a non-financial interest as Member of the IFS Tax Law Review Committee, which played a part in having this Committee set up.

Chairman

  1. Thank you very much. The Committee has had one informal discussion in private at a previous meeting, and today we begin our public proceedings. Everybody knows that we are required to scrutinise this piece of legislation which is the first of what will be a series of Tax Simplification Bills. We propose to proceed following the procedures of the Commons Select Committees, although we are a Joint Committee of both Houses, and we propose to call witnesses and then scrutinise the Bill. Our principal aim is to report on whether or not we are satisfied that the drafting of the Bill is indeed an improvement on the drafting of the previous legislation, that the rewrite has achieved its purpose and that it will be of practical benefit to users of legislation in future, including Ministers and both Houses of Parliament. The second thing we are going to concentrate on is considering each of the minor changes which have been made. It always was contemplated that minor changes would have to be made to accommodate the rewriting of the tax law in simple English, but we think we have a particular duty to ensure that the changes which have been made are minor in the literal meaning of that term as conjugated by the House of Commons, necessary for the purposes of rewriting the Bill in plain language and that they do not involve any policy change or shift in the burden of taxation which really ought to be done in primary legislation, either in a Finance Bill or in a Tax Bill. I do not think I need to say anything more by way of introduction, but other Members of the Committee may wish to comment on the present situation. It has an interesting history, with which many people round this table have been involved, and it is well set out in the papers that have been placed before Parliament. We are grateful to Adam Broke for coming along as the first witness before the Committee, and the Committee will be interested to hear your experience as someone who has been intimately involved in this for some years, Mr Broke. Would you like to begin by introducing yourself, explaining who you are and, perhaps, the role which you have played in this rather long process of introducing this first Tax Simplification Bill.
  (Mr Broke) Chairman, thank you. I have been in the tax business now, man and boy, I guess, for forty years, and in that time have visited most of the distant corners of tax legislation, although by background and training I am an accountant, and I am still in practice as an accountant working in the tax field. I have always had an interest, I guess, in legislation itself when it is made and I am curious about the byways that have been gone down. That means I have tended to take part in some of the public exercises along those lines. I happen, at the moment, to be Chairman of a body called the Special Committee of Tax Law Consultative Bodies. I apologise for its title but that was what the Committee agreed upon. It has been going for about 10 to 15 years and was brought together as a grouping of all those bodies that are generally consulted on tax law, not to make a lot of recommendations and representations but more to talk to each other about matters of common interest in the tax business. Each of the bodies represented makes its own representations and it is only with something of major interest that we will really need to discuss it, and the rewrite is certainly one of those. We are what you might call "resource poor but experience rich". I was consequently invited to join the Consultative Committee which has been operating for, I guess, about five years under the extremely good Chairmanship, if I may say so, of Neil Munro. When we started I think we all thought this would take about five years. It is clearly going to take quite a lot longer as an exercise, but that is a consequence of both the excellence of result and the very careful scrutiny that it has been given. In my view that is a good thing, not a bad thing. The Bill that you have got, Chairman, is obviously a first product. I am a practitioner, as I said, and I am a consumer of this legislation, and I would say that as a route map it is better by a distance than anything I have seen before. It is, I would not say, readable but it is understandable in the sense that it is in plain English, it follows a logical pattern, it has a lay-out that makes sense, it tells you where to go to, in some places it tells you where not to bother to go to and, generally speaking, it is there for the consumer, I would say, whereas an awful lot of legislation (if you will forgive me saying so) is in the interests of the producer. If one could ask for stasis of Capital Allowances legislation that would be nice, we know we are not going to get stasis because the intellectual property rules, for example, are going to be rewritten, but, nonetheless, let us hope that as an example for the future the language in which this is written and the logic of its order is something that we can follow. I really do commend it for that reason. It is all a very long march, although it is not for this Committee, but there are of course a number of other products on the go where we have seen a number of drafts. I do not think we have got into the real serious areas of complexity. We have not really got into anti-avoidance yet, where, in some senses, vagueness is the order of the day anyway. We will be interested to see what language is used there, but we believe that the techniques that the teams have developed for dealing with Capital Allowances are likely to be quite valuable as we go through. I am not sure it is going to mean speeding it up but I think it is going to help in both ordering and the language used and in the logic of what is applied in the relevant legislation. To sum-up, I would say that we have, as a consequence, a much better product than we did have. I say that as an accountant, not a lawyer, and I will be very interested to hear the views of the lawyers on the Committee on that. I think there are quite interesting points that come out of it, I think particularly the candidates for reform stare one in the face much more starkly when they are written in language that one can read and follow and understand than they do when they are lost in the various finance acts that originally introduced these things. I would commend to the legislators the opportunity to look at those candidates as we go through. Overall, I do believe this is a good product, I do believe the Inland Revenue have been particularly scrupulous in the professionalism they applied to this, and I believe it is a good product.

  2. Thank you very much. How far was your Committee involved in the process of consultation, which seems to have been quite extensive? As you went through the number of papers there was one on consultation.
  (Mr Broke) My Committee—the Steering Committee or the Consultative Committee?

  3. The Consultative Committee.
  (Mr Broke) I think it has met, certainly, over 20 times so far, although each time it has not always had a draft before it and may have discussed a response to our Committee. It has been a very scrupulous process. There were, I think four Exposure Drafts which arrived at the Capital Allowances Bill, the first three of which were particular bids and the fourth was broadly the Bill as a whole. So there has been pretty extensive consultation on that. I think there have been, certainly, from some of the bodies, pretty extensive responses. We have had quite good debates on a number of points within the Consultative Committee, so it has been quite a wide-ranging consultation.

  4. Are you aware of any outstanding controversy from either particular interest groups or particular users who have responded to the consultation process and who are perhaps still expressing dissatisfaction with the result of the Bill?
  (Mr Broke) I am not aware of any, Chairman. I am not an industry specialist, so that in those areas such as minerals extraction and so on you should not look to me for knowledge of any concerns that people may have. However, in the generality I would say no. We have had debates, in particular, on some of the areas of minor change, but debates have tended to revolve around whether it is a minor change. Some people have expressed the view "Well, it is not really a change at all", then others have said "Well, yes, it is, but it may be a slight change", but I think that overall it is fair to say that as far as I know the concerns have been discussed. I cannot say that in everybody's mind they have necessarily been put to bed but I would say that the majority of committees, as far as I am aware, are satisfied with what has been discussed.

  5. What judgment was brought to bear about what did constitute minor change? What do you think was the Committee's approach to deciding whether something was a minor change or not?
  (Mr Broke) I think the determination has, in the first instance, been achieved by the Inland Revenue team. As they go through they have unpicked the legislation and put it back together again. Then, I guess, they have tested the rewritten against the original and they have gone through it with their specialists in the field. My personal view, as I go through the changes, is that one would find in most instances that if there is a change in the law there is not a change in practice. Generally speaking, one finds that these are points where the existing law is operated in a particular way and the legislation as changed is giving effect to that. That may sound as though the Revenue are having their way but in practice one of the aspects the Consultative Committee was extremely concerned to ask at the beginning was the extent to which such changes were or were not favourable to the taxpayer. In particular, we wanted to ensure there was a real balance and, to the extent there were changes in favour of the Revenue, that there were equally changes in favour of the taxpayer. There was an element almost of suspicion in the early stages of the debates on that point and a real concern. As time has gone by debates on that sort of point have not died away but have certainly become a great deal more relaxed. I think we have seen that changes are minor, that in a lot of cases they are really favourable to neither, they are, in a sense, neutral; one could say that some are favourable to the taxpayer and one could say that some are favourable to the Revenue. The difficulty in many cases is knowing whether there are actual cases out there which they affect. They are mostly very minor. There are cases where what you are doing is tidying up or filling a gap in logic—a gap that has always been there. To make it workable you have to fill that gap anyway, and that is what has been done, usually, by consensus between the Revenue and practitioners. However, again, one cannot say exactly that there are not points people might not have taken on either side at some point.

Baroness Cohen of Pimlico

  6. I am new to the subject, though I am an ex-civil servant and, thus, used to legislation. Are you saying that in cases where the law was incoherent—and there will have been some—that you took the practice; that, if you like, this rewrite took account of what was actually happening in the field and what had been agreed over years between the Inland Revenue and practitioners? If so, is there an example that would clear my head?
  (Mr Broke) I would have to ask for assistance myself, I think. I can only give what my impression is of the way in which this has happened, which is that the team has, so to speak, unpacked the legislation, laid it all out and started to put it back together again and has then said that there is a logical jump from here to there. My guess is they would then have gone to the specialists and said "How do we operate these and why?" I guess an answer would come back. They would then have considered whether that required some change in the law. As I say, I am not part of that process, and I am making an assumption. The Inland Revenue may be able to help you to a much greater extent on that.

  Chairman: The Committee agreed at its last meeting that the Revenue and the draughtsmen would be asked to do two things: one is an example of a drafting before and after, so that you can make some comparisons during the passage of the Bill and analyse the rationale behind the drafting changes. The other was to give some examples of minor changes that have been considered and rejected, so that we can see some examples which will help us to decide where the line had been drawn as to what was a minor change necessary for this exercise and what was not. I think later witnesses have been asked to prepare that and produce some examples.

Lord Blackwell

  7. Could I ask a couple of questions? I am neither a tax expert or a lawyer, but as a layman I guess it is very encouraging to hear what you have said about reaction to this legislation. I wonder if I can ask, in your consultation with other practitioners, firstly, is there any concern that in simplifying the language it may have led to ambiguity rather than greater clarity? In other words, language that may seem very impenetrable to the experts may be more precise. Are there any areas or was there any general concern about simple language in effect leading to ambiguity? The second question I would like to ask, if I may, is about the process of change from an existing set of laws and practice around those laws and conventions that has grown up and people who had precedents, to the interpretation now of a completely new set of statutes. Was there any concern or much discussion about the difficulties or cost of moving on to a new legal basis, and what kind of concerns and issues did that raise in terms of managing the transition once the new legislation was introduced?
  (Mr Broke) As to simplicity of language, yes, I think we did initially have some concerns, actually, on our side. Because I am not a lawyer I always think things expressed more simply must be easier to deal with, whereas a lawyer would very properly point out that language is not a precise instrument. My own view is that you have got a product which is about as long as the old legislation. What has happened to it is that it has come into more modern language and been expressed in a more logical manner and order, and while only time will prove the test I would say that it is unlikely to have lost its ability to cope with situations simply by having been re-expressed. It is not a question of compressing it into just a few sections, it is still a very long piece of legislation as it was before. So my own feeling—and I think the feeling of the Committee—is that you do not lose by that. As to the change, again, this is something that practitioners and courts will have to pronounce on as time goes by. I think there are one or two minor areas where it was thought necessary to bring in a transitional provision (I am trying to remember the discussions that we had about that) simply because there might or might not have been an accounting period that fell in or out of the new legislation rather than the old. I really would not expect it to create a greater difficulty, and I certainly would not expect it to create a greater cost. I cannot say there will be a huge saving in costs on something as complex as Capital Allowances, because you need specialists involved anyway. I think there are other areas in tax law where one might expect to see some saving in cost and some, perhaps, ability for the citizen to deal with his tax affairs himself, but I think probably not on Capital Allowances.

  8. I guess what I was thinking about is whether one might expect—it is not necessarily a problem—a period where because there was not a precedent established there was going to be a whole set of legal challenges and issues taken up to get interpretations of the statute book.
  (Mr Broke) Again, I am not a lawyer. I would think and hope not. Considerable care has been taken to ensure the precedents are maintained. There has been quite a lot of discussion about the use of certain words and phrases that are words and phrases the courts have had quite a lot to say about. Where it is unclear I think it has been made clear that it is thought that in a given set of circumstances the old principle still applies to such new words as there are. In one or two other areas of the law, in fact, judicial pronouncements have been incorporated in the proposed legislation. I do not believe that has happened in Capital Allowances, actually. Again, I stand to be corrected, but I think that the case law is still there and I would have thought, subject to correction by lawyers, that it would still be operable in precisely the same way as before.

Mr Pond

  9. One of the most interesting things about this project, I suppose, is that poachers and gamekeepers have got together to see if they can plot exactly where the game has gone under cover. Although, obviously, this is a constructive and welcome process, were there any points on which there appeared to be a conflict of interest between, for instance, the officials who were part of the project on behalf of the Inland Revenue and those who would be specialists in taxation? It is not immediately obvious to the lay person that tax advisers have an interest in simplifying the tax system.
  (Mr Broke) It is a very good question, though I would say that 40 years in the business has taught me that simplification is all, and that, actually, simplification is the fox currently in view, if not actually the subject of this particular exercise. I wondered about that very point when I first was a member of the Consultative Committee, and I think it showed itself in what I have described as the suspicion that perhaps things were going to be run past us and we were not going to notice. One or two of the consultative bodies have spent a fair amount of money on hiring people to go through the legislation—paying their expenses and, indeed, paying their wages—with a fine toothcomb and going back with comments. I think the proof, as I have said, is in the eating, and I think it is because the Consultative Committee has pretty clearly come to the conclusion that things are not being run past us and that it is a fair exercise that their comments are, indeed, listened to and, in appropriate cases, acted on. If I can make the general point, I really do believe that we all have an interest in simplifying. That is not just a man aged 59 saying that to you, it is the fact that we are dealing with legislation which is gargantuan and which everybody who has to deal with it knows is gargantuan and way beyond the public's capability to cope—which is, to that extent, with respect, anti-democratic. I do believe, and have actually always believed, that simplification is in our interests. It does not mean that one cannot give some clear and useful advice to one's clients, it does not mean that one cannot think up clever ideas; once you can see what the legislation is driving at, indeed, it is easier to do. So the boot is not altogether on one foot. I think we have seen there is a common interest and that is why quite considerable resource has been put into it on our side of the fence to make sure this exercise works well.

  10. Back in 1977 there was the Meade Committee on tax reform, which Lord Goodhart will be very well aware of, which set out both simplicity and equity as two of the basic principles of a good tax system, though it did recognise that there might be a conflict between those two; that, to some extent, to achieve equity you need some complexity. Is that a conflict which you recognise between those two principles of the tax system, and is it a case of finding a balance or can you achieve both simplicity and complexity?
  (Mr Broke) I wish. No, I do not think you can achieve absolute simplicity with absolute equity. I think that is something that you reach for but you never quite get there. On the other hand, it is worth sitting back from time to time to look at the logic behind the legislation which you have got. Why have we got Industrial Buildings Allowances, for example? We have got them because the Mills and Factories Allowances Act of whenever it was—1800 something or other—provided for them, because this country operated by satanic mills. That is the logic and it is a very old logic. Ditto, I guess, the case for plant and machinery. Agricultural Buildings Allowances are still separate allowances from all the other allowances because of the immense importance of agriculture in the old days, which is now very much less, I guess. You look at the logic for these things and you say "Is it still a runner in the modern age, which if you wanted to simplify would you not do this?" Well, there might be an allowance for all buildings, but that would be, in budgetary terms, a very expensive thing to do, so you have got other judgments to make. That would be the logic of it. Would you really need separate Agricultural Buildings Allowances to Industrial Buildings Allowances? The reason is they are there and people, perhaps, depend on them—I do not know. Look at the reform that is happening now on intellectual property, which is very much welcomed. It is an example of looking at the logic of these things and trying to get there. It does not mean they are simple. I think in Capital Allowances—which, as I have said before, is a complex area dealing with very large amounts of money where you are dealing with very complex structures, very often, and dealing with very complex financing structures—you are going to have some complex legislation describing what you are talking about, dealing with financing structures and dealing with leases, for example. I think that is inevitable. What you can do, though, is think about the logic of trying to develop a strategy that works and try to write it in English.

Lord Howe of Aberavon

  11. Can I just ask one follow-up question on that, which may be illustrative? The examples you have given and the reasons for the different forms of Capital Allowances would lead from logical simplistic characteristics to begin with, though we can simplify this a great deal by having one structure—Capital Allowances—whether it is agricultural, fishery or whatever. Once you move into that area you are making changes which will affect the existing equity, if there is any, and moving to a completely different territory. Have you found a number of examples—perhaps not in this particular Bill—where your Committee has identified changes worth looking at along those lines, which go outside this legislation—this scheme?
  (Mr Broke) Yes, we have. As each Exposure Draft has come out each body has tended to make its own comments and had tended, also, to identify areas which it thinks will benefit from legislation. There are—I do not know—about 20 examples of that in this legislation which the Consultative Committee has shared with the Revenue, the Revenue have passed back, I believe, to the Treasury and to the specialists. We hope something will come of those. Some of them are minor, some are less minor. There are the more structural points which I have referred to. I do not think we have said "Why do we not get the Revenue specialists to think about, let us say, allowing depreciation as a deduction for tax purposes instead of this separate code for each type of expenditure?" Of course that would be much easier, but it has major budgetary implications which are outside our remit. Yes, there are a number of these points, we very much hope they will be followed up and we hope also, as I say, that this sort of general strategic thinking will also have an impact on where we go to.

  12. In a sense, just to follow up, the process has drawn attention to those areas of possible scrutiny but they are actually likely to be areas involving much more difficulty because they raise matters of changing the relative equities, and we are really dealing with the simple stuff here.
  (Mr Broke) Yes. Perhaps I could say this (thank you for pressing me on it): there are going to be winners and losers through change. The minor points very possibly not, the major points very clearly yes. The winners/losers argument is the one that makes it, I think, particularly difficult to make the sort of changes that old men in a hurry would like to see. I believe that sooner or later we will have to get down to that, whether or not there is a winners and losers argument, because we cannot go on getting 300 pages of legislation each year, slotting it in and trudging on; we have got to find ways of cutting down somewhere at the same time. How you do that is very difficult because our structures are, I guess, consultative, and political structures do not necessarily fit that. Mr Pond, you made the point to me that we do not all come from the same point of view, and that is absolutely right, but you would expect us to fight our corner, and if these sort of points do come up then you can expect us to say "But we are going to lose out. What are you going to do about it?" and somebody is going to have to make decisions, because it is the only way of moving through. It may be we need some new structures to achieve that, and Lord Howe has made one or two suggestions outside this place.

Chairman

  13. We are getting into politics here because successive chancellors and successive governments have taken very different views about the value of Capital Allowances, stimulating and supporting particular types of investment and first-year allowances and so on. There have been chancellors and governments in the last few years in startling contrast with each other in the policy they adopt. On the relevance of those exercises, do you feel that next time we all start arguing about the merits and de-merits of particular types of capital allowances it would be easier if Parliament were to debate the structure of the law we have?
  (Mr Broke) I suppose the answer to that, Chairman, has to be yes, it ought to. I am going to be impertinent now, because I have to say that I do not think the Finance Bill procedures are really designed to achieve that. Next time there is something in a Finance Bill which deals with Capital Allowances, asking the Standing Committee to really get down to the nitty gritty is asking a great deal of people who are not in the tax business. There will have been consultations, undoubtedly, and that will have brought out a lot of these points, but I think it is difficult for Parliament to sit down and think about these things because I am not sure the procedures really fit terribly well. That is why, within the Consultative Committee, there have been good, productive discussions that have worked towards a common ideal. It would be nice to see something like that which operated on a rather wider simplification sphere. I think this will become much more pointed when we get to some of the other areas, for example the Income Tax Bill we are expecting to see in a year or two's time, when you look at employment income and see some of the stuff there. I think it will become a more obvious point. Because those are concepts that, perhaps, are easier to see, grasp and point to, I think Parliament will perhaps have that focus.

Mr Ottaway

  14. Mr Broke, when you talk about your Committee (I see you are on the Steering Committee and on the Consultative Committee) you are talking about your work with the Consultative Committee.
  (Mr Broke) I am, yes.

  15. The Consultative Committee also consults interested bodies. Is that the way it works?
  (Mr Broke) It is composed of representatives from interested bodies, which is why I sit on it. You also have chartered accountants there, you have people from taxation there and you have the Law Society—

  16. I have the list. The brief I have here says that the work is put out giving interested parties an opportunity to comment on draft clauses. That is done through your committee?
  (Mr Broke) I think it is done more from the Revenue, actually. They put it out for consultation with the usual press release, and they put it out to a much wider body than just the Consultative Committee. They put it out to anybody who wants a copy of it. For example, the Agricultural Buildings Allowance would undoubtedly have gone to those bodies representing farmers, landowners and so on. Ditto intellectual property, ditto for oil exploration etc. So it actually gets a very wide circulation.

  17. Do you see the responses?
  (Mr Broke) I do not see the actual words of the responses, but we discuss on the Consultative Committee the composition of a response document the Revenue puts together, which responds to comments made.

  18. Are you aware of any dissatisfaction on the part of any of the—I am talking about the process here rather than the content?
  (Mr Broke) I am actually not, no.

  19. You said at the beginning that you thought the majority were happy.
  (Mr Broke) Yes.

  20. That slightly implied that there was a minority that was unhappy.
  (Mr Broke) I did not mean a minority generally, what I meant was that there would be the occasional point on which we had a discussion and maybe or maybe not the person who is promoting the point has been convinced. They may have some technical point they are running. There are always two sides to those sort of technical arguments.

  21. Are there any members of the Consultative Committee who do not agree and who think minor changes are more than minor changes?
  (Mr Broke) They have not said so to me—put it that way. I am not aware of that. If anybody is still knocking down the door saying "You are doing something that is not a minor change" they have not mentioned it to me.

Lord Goodhart

  22. Would you agree, Mr Broke, that where there has not been a deliberate change in the law it is very important, if the Tax Law Rewrite project is going to work, that judges should accept that a change in the wording does not mean a change in law?
  (Mr Broke) Yes, I think that follows.

  23. I just wondered how much consultation, if any, there had been with the Special Commissioners or judges that are likely to have to handle tax cases? Have some of the projected changes been run in front a few of them, asking them whether they are satisfied that they will be able to continue to interpret the law in that same way?
  (Mr Broke) I do not know that. I would have to ask the Inland Revenue.

Dawn Primarolo

  24. I wondered, at the end of this first process, whether you feel there are lessons that are emerging on how to deal with a Tax Law Rewrite project? I think you have said that although this is not fantastically complicated as a subject, nonetheless there are others that might make this look rather simple. Do you have a view, at the end of the part of the process that you have been particularly involved in, of where it has worked well or where things need to be done differently as we move on to the next set of projects?
  (Mr Broke) I think the process has improved over time. I think that the Revenue would probably say, having watched the last six months, that there was more work in the final product, perhaps, than they had expected because what has happened is that people have worked on bits—worked on Industrial Buildings, worked on Plant and Machinery—and in the end you have to stitch all these bits together. I believe that the actual work of the drafting staff has been very considerable in stitching it together. I think taking it in bits is the right way to do it, it is certainly the way that Income Tax is being tackled. I think there is a lesson that you should not try to bite off too big a chunk at any one go. Capital Allowances is a discrete chunk; we all know what it is trying to do and it is just about manageable in size. I would guess anything much bigger would be pretty jolly difficult as a management project. I think that is certainly a lesson that has been learnt. I think in some ways Capital Allowances has been more difficult to unpack and put together again. One of the things the Revenue said to us right at the beginning was that there was a tremendous amount of "deeming" in the act. You are endlessly saying "Here are some rules, here is a new type of expenditure, we will pretend this type of expenditure is really the old expenditure and we will deem it to be that because then those rules apply." What they have actually done is unpick all that and say "This is the expenditure, these are the rules that apply; this is the expenditure these are the rules that apply", which is a much easier way to follow. That sort of unpacking is going to be very interesting when we come to something like anti-avoidance legislation, which is going to need much the same sort of process and logical thought: Why is it there? What is it trying to do? Where is it picking up things from other places? and so on. A lot of those lessons, I would guess—and the team, perhaps, will speak for themselves—have been learnt. There will be more lessons to be learnt. The other lesson, of course, is that it is going to take a lot longer than we all thought at the beginning. It is still a good exercise, despite that.

  25. Would it be fair to say, in summing-up your evidence this morning, that the Bill as we have it drafted now provides for certainty because of its structure and language that is sought by practitioners and industry; that it reveals in a clearer form the balance between simplicity and equity, and, therefore, the focus subsequently on policy that underlies the legislation is, in fact, the equity/simplicity debate, which is the one that Parliament would intend? That is, it facilitates a more productive debate both inside Parliament and out?
  (Mr Broke) As to certainty, I am not so sure. I think this is complex legislation, it is a complex area and I think certainty is—one would like it and one always asks for it but we keep thinking up new bits of machinery and new types of structure and new sorts of intellectual property. As regards the focus on policy, yes, I have no doubt at all this does, because you can pick up the product and you can see how allowances are given for a particular type of expenditure and you can see what sort of expenditure you are not going to get the allowances for. So from that point of view, yes, absolutely.

  Lord Brightman: The question I would like to ask, I think, is rather outside the terms of reference of this Committee, but I cannot resist putting it.

  Chairman: A minor excursion, no doubt, Lord Brightman?

Lord Brightman

  26. I come to Capital Allowances for the first time, although I was a lawyer one day. It seems extraordinary that it takes 334 pages to encompass the law on Capital Allowances, the concept of which, of course, is very simple and can be written out on half a page of paper. Have the other common law countries—and I can think of one or two common law countries which have tackled tax simplification—also produced a Capital Allowances Bill of 334 pages?
  (Mr Broke) I believe the Americans run to many more than that. The people who have been most involved in simplification are, perhaps, the Australians and the New Zealanders. I have not seen what they have done on Capital Allowances, though I know that there have been discussions with the Revenue on this. I suspect it may be a bit simpler, but not a lot. Would that it was. I believe that it may be rather simpler on the continent, but I could not say in terms because I am a United Kingdom specialist.

Chairman

  27. I believe the Income Tax part of this process, when it arises, is likely to be at least 1,000 pages.
  (Mr Broke) I can believe that.

  Baroness Cohen of Pimlico: Chairman, just by way of observation, this actually is not about simplification, it is about codification and clarification. Simplification is if we really do something about the legislation and policy, and many questions have been directed to something which is not what I think this is doing. It is a codification.

  28. It is not just a consolidation of legislation, this is trying to express it in a more user-friendly fashion, so you are simplifying the language by expressing it in more colloquial English; not only bringing it together and consolidating, but bringing it together in a more logical fashion to make it more user-friendly for businesses, advisers, Parliament, Ministers, judges and so on. So I think that is denying it is tax simplification of a kind, but as you say, it is not making the law frightfully simplistic. Thank you very much, Mr Broke, for coming and for this further step in the several years now of this process. We are very grateful to you for coming.
  (Mr Broke) Thank you, Chairman.


 
previous page contents next page

House of Lords home page Parliament home page House of Commons home page search page enquiries index

© Parliamentary copyright 2001
Prepared 31 January 2001