Examination of witness (Questions 1 -
WEDNESDAY 24 JANUARY 2001
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-tankthe Centre for Policy Studiesand,
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.
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 Committeethe 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 logica 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 incoherentand there will have been
somethat 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
(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
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 feelingand I think
the feeling of the Committeeis 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 expectit is not necessarily a problema
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.
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 legislationpaying their
expenses and, indeed, paying their wageswith 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
copewhich 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
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
(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
was1800 something or otherprovided 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 themI 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
Allowanceswhich, 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 structuresyou 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 structureCapital
Allowanceswhether 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 examplesperhaps
not in this particular Billwhere your Committee has identified
changes worth looking at along those lines, which go outside this
(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 areI do not knowabout 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.
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.
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
(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 theI 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
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 meput 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.
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
(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.
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 bitsworked on Industrial Buildings,
worked on Plant and Machineryand 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 guessand the team, perhaps, will speak for themselveshave
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,
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 isone 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,
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 countriesand
I can think of one or two common law countries which have tackled
tax simplificationalso 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.
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.