Examination of witnesses (Questions 40
WEDNESDAY 24 JANUARY 2001
and MR ADAM
40. You have divided it into two separate sections
because there are, in fact, two quite separate subjects when you
analyse it but you also, as we see, have completely rephrased
and reordered it in setting it out?
(Dr Caldwell) Yes. Perhaps that helps me to move on
to another aspect about the right sized pieces of information.
The other point I want to make is that we are using shorter subsections.
So Section 159 (1) of the 1990 Act is 14 lines long, our subsectionswe
get four subsections out of that, I thinkthey are much
shorter, they are in Clause 4. If I could move on to another point
about what we have done with Section 159. I think it also illustrates
the point I was making about trying to avoid drafting techniques
which impose a great burden on the reader's memory and require
a lot of effort on the part of the reader to get to the bottom
of. You can see that in Section 159(6)it is on the back
page if you turn overthere are some words following paragraph
(b) which say ". . . subsection (3) above shall have effect
as if, for the words from `on which' onwards there were substituted
`on or before which it is required to be paid'". I do not
know about anybody else but I think that is actually quite baffling
when you first read it because you really need to go back and
re-read the subsection that they are talking about and see how
you pencil things out and pencil something else in so it is quite
hard work. What we have done in the Bill is we have actually abandoned
that approach and just written out what we think the effect is
of going back to the subsection and taking some words out and
putting some different words in.
41. Which is in Clause 5?
(Dr Caldwell) It is in Clause 5. It is in subsection
(6) of Clause 5 the way we have spelt it out.
42. Yes. A striking contrast.
(Dr Caldwell) I should perhaps say we do not do this
relentlessly, come what may. There is an example I could give
you, it is to do with leasing plant and machinery to non-residents.
One of the provisions in that area talks about the position of
ships and then there is a subsection in the existing legislation
which says well, that previous subsection applies to aircraft
as it applies to ships with the necessary modifications. In one
exposure draft we thought well, perhaps that is not helpful so
we will spell out what this really means. Consultees responded
to that saying they thought what we had done was unnecessarily
long-winded so we immediately reversed engines because obviously
people did not find that proposition particularly difficult.
43. Have you any more illustrations to help
(Dr Caldwell) Not specifically drawing your attention
to 159 any more but another point that I would like to mention
is that we are trying to use words which are more familiar. In
the Capital Allowances Act one finds references from time to time
to a return required to be made under the Taxes Management Act
and what we have done in the Bill is we have introduced early
on the idea that we are going to call that a tax return because
we think that is a familiar friendly phrase for people. They will
guess what it means, once you define it they will probably remember
what it means so we hope that is a help. The Tax Act talks about
a year of assessment and this Bill actually uses the expression
"a tax year". It means the same thing, we have tried
to achieve that in the Clause at the end of the Bill. Again, we
believe that "tax year" is more familiar terminology
for users. Another significant example I think of trying to use
language that is familiar to users is the fact that tax practitioners
talk about "pooling expenditure" and that is what we
have done but you do not find the expression "pooling"
in the Capital Allowances Act 1990 at all so that is the terminological
change that we have made. The other point I would like to mention
is about including signposts and I think the example I could give
there is the first Clause of the Bill which you quite rightly
said is not the normal way, perhaps, to start off a Bill. Well,
this really is a clause that is a set of signposts to the reader
telling him where he is going to find things and warning him what
is coming. I could give you another example if you would like
44. We will turn to that specifically in a moment
but that is a complete innovation. You are not aware of any tax
legislation which has been laid out starting with signposts?
(Dr Caldwell) I am not conscious of anything that
is quite in that form.
Chairman: If there are no more illustrations,
just pausing there before we go on to the question of the consequences
of changes in the law, are there any questions from any members
of the Committee on this generality of the principles brought
to bear on the drafting as a whole?
45. Could I raise this point. On page 257 you
have got this extremely helpful index of the 126-odd defined expressions
which we find throughout the Bill. That is almost an innovation,
is it not? There is only one Bill I think in this session which
I have discovered which has got such an index. I think there was
only one in the last session, none in the session before and I
think perhaps four Bills in the previous session. There is no
general policy so far as I have been able to discover whether
you have an index of defined expressions or not. I myself have
found it extremely helpful and I would really just like to ask
whether you have got any comments about it and whether this is
going to be part of the general way of producing simplification?
(Dr Caldwell) I think the general response to that
is that probably it will be useful for Tax Law Rewrite Bills to
contain an index of defined expressions. I think the utility of
these indexes is recognised for this sort of exercise, generally
recognised as a useful thing to have. They may not always be appropriate
for every Bill, very short Bills and so on.
46. I notice that in the drafting you make much
less use of Schedules than is the general practice now. I think
you have none of the substantive law in the Schedules, why is
(Dr Caldwell) I think it is fair to say that the decision
not to use Schedules as much was one taken by my predecessor as
head of the drafting team. I think it has been a very easy decision
to live with in the context of this particular Bill. I think there
are occasions when Schedules can be useful but we did not find
a situation where we needed one for the main provisions. Obviously
we have got Schedules here for transitional provisions and so
47. In general practice you tend to put minor
detailed stuff into a Schedule and the main principles into the
text but that has not happened here.
(Dr Caldwell) No. I think the other use of a Schedule
is if you have got a subject which awkwardly straddles material
dealt with, say, in different Parts. You might then think perhaps
a Schedule would be a useful thing.
48. One small point on user friendly language.
I just wonder whether you have gone quite far enough. For instance,
I notice that in Clauses 4 and 5 there is the word "emolument"
used which is a pretty old fashion word these days. Is there any
reason for doing that rather than trying to find something rather
more up-to-date? Is it linked with the broad way the courts have
interpreted emoluments that you did not want to put at risk?
(Dr Caldwell) I think my response to that would be
that if we are going to do something about emoluments we would
not wish to make an innovation here in this Bill, in the Capital
Allowances Bill, because here we are just trying to hoover through
capital allowances rather than go through the employment income
side. The question of whether emoluments should be retained as
a word has been gone into.
(Mr Munro) Can I add to that. Helen is absolutely
right. Our next Bill will be an Employment Income Bill where this
point will obviously have to be considered. We have already done
a fair amount of work on employment income and we have wrestled
with the possibility of moving to a word which is more familiar
and we are still at this point wrestling with it. It is very much
one we have in mind.
Lord Howe of Aberavon
49. I think I am right in saying it has been
discussed already by the Consultative Committee.
(Mr Munro) Absolutely.
50. And indeed the Steering Committee.
(Mr Munro) Absolutely.
51. It is a fascinating question which is as
(Mr Munro) Yes.
52. I want to go back to a comment that was
made or to a discussion we had right at the beginning which was
about the length of Finance Bills and how policy changes add different
tiers to legislation which makes it complicated. If that is the
case, which I am sure it is, how long do you think the simplicity
of the Bill can be maintained? How likely is it that you are going
to have to return to similar projects and what sort of timescale
would you envisage?
(Dr Caldwell) I think in a way that is not really
a question which should come to me.
(Mr Willis) I do not know, Chairman, whether the Committee
could spare a very few more minutes for a look at another example
which I think might help me respond to that.
53. Yes. I was going to come to you and your
colleague in a moment on the question of money changes. If you
want to come in on this drafting point please do, of course.
(Mr Willis) It is not a subtle drafting point at all.
I do not know the number, I am afraid. You have before you CA6
which is the current legislation for first-year allowances. I
do beg the Chair's indulgence, I chose first-year allowances as
an example mindful that there were different views on the policy.
We have had first-year allowances in the capital allowances system
most of the time. They were reintroduced I think in the 1992 Budget
for the year 1992-93 and then subsequently so they have been around.
Section 22 of the current Act is the main legislation for this.
It is important in practice because it is used by a lot of businesses
and their advisors because a lot of people want to know if they
are entitled to first-year allowances and how much. The current
Section 22 is really pretty hard going. It is hard to see the
wood for the trees. You do not actually discover until you are
three pages in in subsection (3E) that there are first-year allowances
for information and communications technology. It is rather hard
to navigate when you have got 32 subsections in all spread across
six pages. It is rather hard to work out what it does and does
not actually apply to. I will not ask you to read through the
whole thing but if you happen to be leasing plant and machinery
as your business you might come to subsection (4) which is on
the fourth page, which tells you that ". . . no first-year
allowance shall be made in respect of any expenditure to which
this section applies otherwise than by virtue only of one or more
of subsections (3C), (3CA), (3D) and (3E) above . . . (c) subject
to subsections (5), (6), (6A) and (11) below, on the provision
of machinery or plant for leasing . . ." and a few more words.
That does not actually tell you whether you are entitled to plant
and machinery first-year allowances now, you have to keep on reading.
I advise you to skip over subsection (6A) because that is not
the key one either. It is only when you actually get to (6B) that
you find out that "no first-year allowance shall be made
in respect of . . .." etc., etc., particularly paragraph
(d) which tells you if it is for leasing. Leasing, here, you have
go off to section 50 to find out what it means. There are some
cheap shots in there. It is not a criticism of the draftsman because
this has been added to a lot. If I could invite you to turn to
page 20 of the Bill where this and other provisions about first-year
allowances have been given a Chapter of their own because they
seem to be quite important and do different things. We have, to
be absolutely honest, moved to Schedule 3 to the Bill some provisions
which are now of only transitional interest for people with first-year
allowances and additional VAT. As Helen Caldwell has already said
we have, as usual, used shorter Clauses. Chapter 4 actually does
a lot more. It actually starts by telling people what is coming.
Clause 39 lets you see immediately what in broad terms you might
get first-year allowances for. It also lists in Clause 46, which
is just a page or two on, what, generally speaking, you cannot
get first-year allowances on. That is really a response very much
to our users who tell us they like lists and tables because they
can handle them better. Coming back, because I am sure you are
all desperate to know the rules about leasing, general exclusion
6 in that Clauseand general exclusion means you are not
going to get first-year allowancestells you that it is
excluded if "The expenditure is on provision of plant or
machinery for leasing (whether in the course of a trade or otherwise)."
Sadly, we do not now send you off on a trip into the far reaches
of the Bill to find out what this means, "For this purpose,
the letting of a ship on charter, or of any other asset on hire,
is to be regarded as leasing . . .." with a few more words.
FinallyI had better choose my words carefully hereit
is capable of dealing with additional first-year allowances that
might be added in a future year and, I hasten to add here, not
necessarily constrained that they fit in but, if someone were
to introduce a new set of provisions that fitted in to this Chapter,
a summary could be added right back at the beginning to Clause
39 and then the details put in Clauses at the end. To that extent,
and I am sorry it is rather a long answer to your question, we
think that this approach of restructuring does make it easier
for future legislation to be fitted in.
54. So it is fairly durable?
(Mr Willis) I would not wish to stake my pension on
it but I think that it is more durable than the existing legislation.
55. Will the same principles be used when redrafting
legislation? Is that part of the project?
(Mr Willis) I think I would invite Helen to answer
that in terms of how this does and does not affect that issue
when approaching the Finance Bill amendments.
(Dr Caldwell) What you can do when trying to put something
into the Finance Bill depends very much on what the policy is
to be achieved. You are boxed in by a number of considerations
when you are amending things and you have to fit in with what
you have already got, you cannot turn everything upside down just
because you will get a more beautiful result. That is one of the
causes of complexity if you are asked to come along and achieve
a new policy within an existing structure which has not got a
place holder where you can stick this new piece of policy. In
the original scheme if nobody had this new policy in mind then
you can produce a rather complicated result because you are not
at liberty just to say "let us tear this up and start again",
which is what you would really like to do.
56. In your opinion, therefore, other things
being equal, if a similar amount of complex legislation were produced
for the next Finance Bill as for the last one, would it be shorter
(Dr Caldwell) Possibly a bit shorter. It is quite
difficult to say in the abstract, I think, it depends very much
on what it is that people want to do.
57. First of all, let me apologise, I had to
move to another Committee at the other end of the building, so
I am sorry that I was away for the first part of the questioning.
I raised a point last week about communicating what you are doing
to the general public or even to the financial public. It is a
huge project and I think it is worthy of great praise. I said
that in communicating the work you have done we ought perhaps
to talk to a Financial Times journalist or somebody such
as that. Have you thought perhaps of approaching the BBC for The
Money Programme to get some sort of statistics, charts or
graphs shown? Much of what you have said this morning, what I
have heard of it, could have been communicated excellently, with
respect, in 20 seconds with slides on television or that sort
of thing. I am sure there is a lot of interest from accountants
and people in the tax industry, a minority interest, obviously
a niche interest, but with the modern communications we have today
this work you are doing needs to be explained more than in words
on paper. Have you thought about doing that?
(Mr Munro) If I can answer that question, Chairman.
Yes, we have given a lot of attention right from the outset of
the project to getting our message over about what we are trying
to do and, equally importantly, what we are not trying to do.
I think it is fair to say that there has always been a fair amount
of interest among the specialist media in what we are doing, in
the Accountancy Journal and that sort of thing. We have
not, until recently, managed to achieve much coverage in the national
press. I think that is beginning to change. This is not something
which I think is ever going to be big news unless, heaven forbid,
something went seriously wrong with the project. At the moment,
although it is taking us an awfully long time, nobody is saying
that anything is going seriously wrong so there is perhaps less
incentive for journalists who are looking for news stories to
write it up. We did, however, have a press conference last July
which marked the occasion when we produced this present Bill in
an earlier draft version. We felt that was a good opportunity
perhaps to try to get people interested. We were very pleased
with the way that went, we had a good turnout. I think something
like 30 or 40 journalists of one sort or another, not just specialist
but also national journalists, came. Lord Howe, as the Chairman
of our Steering Committee, was the master of ceremonies for that
and led the discussion. That generated, I think, some very useful
press coverage. I think that will continue as we become a more
established part of the landscape. It is always going to be something
58. There is no disk that you can slip into
a computer which will explain? You can put it all on a disk to
put into the computer to explain it all, there is nothing like
that in mind?
(Mr Munro) That is something we would have to think
about. At the moment we have only harnessed the new technology
to the extent that we have put all our publications and the minutes
of our committee meetings on the website so that people can access
them from the internet, which increasingly they are doing. We
are certainly interested to consider any more innovative ways
of getting the message across because we feel it is a very good
59. There may be wider interest when you get
on to income tax law and you have the wider public struggling
with the problems of self-assessment.
(Mr Munro) Yes.
4 Evidence, p 17. Back
5 Note by witness: announced in the Autumn Statement in 1992. Back