Examination of witnesses (Questions 60
WEDNESDAY 24 JANUARY 2001
and MR ADAM
60. Following on in a way from Mr Ashton's point,
the communication of all those to smaller businesses interests
me. Obviously a lot of this legislation is most relevant and most
complicated for big multinational companies but a lot of it also
applies to smaller companies. Chapter 4 that we were looking at
just now sets out different qualifications for small companies.
Was there any thought in going through this in terms of the structure
given to trying to highlight or clarify or draw out in an indexed
form those things which somebody involved in a small enterprise
could go to more immediately in order to make it simpler for smaller
companies to find the bits that are relevant? I suppose the alternative
view you could take is that the manager of an enterprise will
read the tax notes sent to him, in which case is there anything
in this rewriting which helps make those tax notes simpler, or
is that a completely separate project?
(Mr Munro) I wonder if I could just make a general
point in response to that. When we were setting up the project
back in 1996 it had been announced that we had not decided in
detail how we were going to do it and we wanted to consult interested
parties on that. One of the questions that we spent a lot of time
on was which audience are we aiming this legislation at, can we
identify a particular target audience and say we will try to produce
this legislation so that audience can understand it better than
the present legislation? We looked at the various users of tax
legislation, which at one level of course is taxpayers and then
businesses, their advisers, Members of Parliament, judges and
so on, and we very quickly formed the view that it probably did
not make sense to try to target any particular audience because
each of these users come to the legislation with rather different
needs and rather different requirements. We were also struck by
the fact that whereas some of it probably could be expressed in
language so simple and straight forward that it would be comprehensible
to any intelligent lay person, an awful lot of it was bound to
end up complicated, despite our best efforts, because the underlying
concepts themselves were so complicated and there was no way that
we could simplify them. So in the end we decided that rather than
try to target any of the legislation, particular bits of the legislation,
to a particular audience, we would simply try to make it all as
simple and as clear as we possibly could, accepting that some
of it would still not be easy bedtime reading.
61. If we may move on to the general evidence
from the team. Can I ask some member of the team to respond on
the question of what constitutes a minor change? Can someone perhaps
explain what in the end the project team settled on by way of
deciding what constituted a minor change necessary for this purpose
and what was not a minor change? If you wish to go straight into
a response to the question, perhaps you can give an example of
proposals that were dropped because it was finally decided that
they were not minor changes in order to give some indication to
this Committee of where the line was drawn between a shift in
tax burden policy on the one hand and a minor change on the other?
(Mr Willis) The Committee have, I hope, a paper numbered
62. This is Changes Suggested But Not Made?
(Mr Willis) Yes.
Lord Howe of Aberavon
63. I wonder if I could interrupt before the
question is answered. I raised this point last time as a suitable
topic for discussion. When I raised it I had in mind the changes
that the drafting team, the rewrite team, had included initially
in the consultative document which were dropped after representations
because they were regarded as going too far. What I think is introduced
is a document dealing with the other end of the telescope, dealing
with policy changes which almost manifestly lay outside our terms
of reference. I think to some extent I plead guilty to having
provoked a misunderstanding here. These changes, I think I am
right in saying, are way outside our terms of reference anyway.
Would you agree with me?
(Mr Willis) Indeed, with some exceptions, Lord Howe,
I agree totally. I hope this paper will nevertheless help the
Committee and, in a sense, answer the question because we have
applied exactly the same criteria when looking at changes suggested
to us and manifestly what this paper is about, deciding that we
would not make them, as we applied when looking at changes that,
if you like, we self-generated, we self-started by coming to them.
We have not really seen any way of distinguishing or building
any bias in. I do not think from what Mr Broke said earlier that
those helping us with this exercise would have wanted any bias
built in. We have approached a suggestion for a change, no matter
where it came from, in the same way. In summary, it is a matter
of judging the balance of the arguments that are made to us for
or against making the change. I hope it will assist the Committee
if I very briefly run through them as they are set out in the
paper. We only really consider a change appropriate for a Tax
Simplification Bill if it improves the legislation. That improvement
might be that it makes the legislation shorter, simpler, clearer,
more certain, more consistent; that it incorporates an extra statutory
concession; codifies the law; corrects mistakes that can happen
on consolidation; removes an anomaly which is patently unintended
and unfair, confirms the intended and accepted interpretation;
or just fills a gap where the legislation does not tell you anything.
Conversely, we would then also have to be very much alive, and
we are very much alive, to arguments against a change: it might
make the legislation more complex; it could contradict what was
clearly the intention; or it could lead to a change beyond the
scope of the Bill, rather like the point about emoluments which
we have mentioned a couple of times in this Bill but runs enormously
wider. We would want to look at whether it involves more or less
allowances for any particular person, or group of persons, and
does it have more than a negligible effect on tax revenues? Lastly,
is it going to cause a fuss? I would not like to have to define
"fuss", Chairman, but it is a consideration because
these are not Bills which are intended to make that sort of change.
At least, that is how we have taken it. We have seen it that there
is no clear dividing line. After any amount of analysis it is
going to come down to a judgment in all but the most simple cases.
We have made that judgment with the help of our Steering Committee
and Consultative Committee as best we can. Clearly this is the
first time that we have been around this track and if the Committee
had any views on how and where we ought to draw the line we would
obviously very much welcome them.
64. What seems to me to be most difficult is
where the changes in the drafting and move to the new Bill alters
the burden of taxation. Where you are simply codifying a judgment
of the court or putting into legal effect a long standing extra
statutory concession there is no individual business or taxpayer
remotely affected by that, indeed they have the advantage of seeing
codified with certainty and clarity that which they have already
come to expect. It seems to me that one or two of these changes
do involve benefit to some taxpayers who will probably benefit
from the minor change to the law and, correspondingly, perhaps
an increased burden on other taxpayers. In all cases these are
very minor indeed, but is that the case? What sort of judgment
was brought to bear by your project team and what sort of judgment
was brought to bear by the Consultative Committee when it decided
in broad terms that there would be losers and gainers compared
with the existing practice if you change the present law?
(Mr Willis) Perhaps I can offer two answers to the
question. The first point is to pick up a point that Mr Broke
made in his evidence which is whether we are actually changing
from the practice when we have something which is called a change
in the law is in most of these cases questionable and a question
that is intensely difficult to answer. These are not mainstream
day to day issues that come up in the practice of a small accountant
or even in the practice of a very large accountancy firm. In various
cases what we are essentially faced with is "we are not absolutely
certain whether anyone has met this point in practice; if they
have done, what they have almost certainly done is taken it that
the answer is this". On close forensic scrutiny of the legislation,
and I look here to the right-hand side of the table with Helen
Caldwell and her colleague from the Parliamentary Counsel's Office,
the legislation either is or might be leading to the law being
something different. So we then have a change and have very properly
indicated that it is a change in the law, but whether it is a
change in the practice which is going to affect people adversely,
the honest answer in most of these cases is that it is very difficult
to say; possibly not. Perhaps I could just say that in terms of
the process of judging that, clearly we start off with any suggestion
for a change by asking ourselves what happens in practice as far
as we know, and having people who have been tax managers in the
private sector actually helps rather a lot with that. We would
then take it to the Consultative Committee and the consultative
process on the basis that if we are really treading on toes then
people will scream. The consultative process is, in our sense,
a main test of this. If we are doing something that is going to
upset people because they will be paying more tax, generally speaking
they will let us know.
65. Were there occasions when the Steering Committee
and the Consultative Committee, or some of the people who have
been consulted on the draft, came and said "if you put it
this way, that is not my understanding of the present burden of
taxation"? Were there points that were rejected on that basis?
(Mr Willis) I think there were one or two. Forgive
me, my memory may be failing here but I can only think of one
or two very minor points where it was put to us that it was not
quite so clear that that was happened in practice and perhaps
it would be better not to do that in this Bill. Then we would
all go away and think about it a bit further and consider whether
or not we needed to actually pursue it through what I would call
the "normal" Finance Bill channels.
66. Would people not continue to act as practice
dictated as it emerged? We have always got this slight problem
with whether the legislation exactly reflects in discussion how
it works. The practice should not change even with the rewrite
unless, as happened in the construction industry scheme, for instance,
it became clear that people were complying with more rules than
they had previously even though the rules were the same and that
caused a problem. That is the issue, that the practice should
not change and, therefore, the question of burden, compliance,
on the taxpayer is the same as before.
(Mr Willis) I agree absolutely, Minister. The only
slight qualification I would add is going back to the point that
when we are actually trying to shine a bit of light into a very
deep crack which is very narrow in an obscure part of the system
67. Yes, I know how difficult it is.
(Mr Willis) I would not wish to give a guarantee that
there is not someone somewhere at some time who has done something
and looked at the legislation and decided that it needs X where
we now think that the practice is Y and we have legislated for
68. I am not asking you for an absolute guarantee,
I do not even get that on Finance Bills, that is the way of the
(Mr Munro) I think if I may just add a word to what
Robin has said. From the very outset, from the report that was
produced at the end of 1995, we recognised that this was going
to be an issue and on many of these things we were going to have
to base our judgment on the best information that we had available
and as long as these points were given as much public airing as
possible so that people could tell us if our judgment was wrong
then it might be acceptable to proceed in this way.
Chairman: Before we move to the Bill
in substance, are there any more general questions that Members
would like to put to the project team?
Lord Howe of Aberavon
69. Am I right in thinking that the Capital
Allowances Bill area is one where there have been fewer examples
of the rewrite team putting forward proposals which have been
rejected as being more than minor after consultation? I think
that has happened more often than in other areas, is that right?
(Mr Willis) I think that is correct, Lord Howe, yes.
Chairman: Let us, therefore, move to
the actual contents of the Bill, if we may, with the assistance
of the witnesses we have before us. Mr Broke is still at the back
of the room if anybody wants to bring him back on any particular
point. We have this break down provided by the team describing
the distribution of changes between Parts of the Bill, which I
suggest we follow as our broad agenda together with the list of
changes set out in the Explanatory Notes. The first point is the
Introduction, upon which we have already touched. There are no
changes to the law in that. This is an innovation in setting up
at the beginning of legislation a guide to the user of the remainder
of the Bill that follows. I have no questions, it strikes me as
a wholly original way of starting the process, and a very valuable
one. Has any Member of the Committee got any points that they
would like to raise arising out of Part 1 of the Bill, which is
the Introduction, down to Clause 6?
Lord Brightman: Are you including Clause
Chairman: I am including Clause 6 here.
Lord Brightman: Is it a convenient moment
to raise a drafting point or should I do that later?
Chairman: It is perfectly convenient.
I think this Committee can declare itself in a position to pass
amendments if it wants, so if you raise a drafting point this
morning we might be able to get an amendment drafted next time
if the general consensus of the Committee is that we would like
to see that amendment.
Lord Brightman: Could I ask you to look
at Clause 6(1) of the Bill on page three.
Chairman: You had it in your note, Lord
Brightman. Would it be possible for somebody to pass a copy of
that note to the project team?
70. I have got some spare copies. It is a question
of which I gave notice. Clause 6(1) has got two expressions on
page four in dealing with the meaning of "chargeable period".
"For income tax purposes , a period of account, or for corporation
tax purposes, an accounting period..." So you have got two
expressions which seem to me prima facie to be expressing
the same thing. "Period of account" is expressly defined
in Clause 6(2). "Accounting period" is not defined in
Clause 6 but is included in the Index of Defined Expressions on
page 257 by reference to the definition in section 12 of ICTA.
For the ordinary reader it does seem to me that it would be very
convenient to have immediately after subsection (2) "Period
of account means" to have (2A), or it will be numbered (3)
presumably, "`Accounting period' has the same meaning as
in section 12 of ICTA." I am thinking just of the convenience
of the reader who sees immediately what "period of account"
means but to find out what "accounting period" means
he has got to make his way to page 257, which may or may not have
been discovered at that stage, and then find what the meaning
is. My suggestion is limited to this: that you will have immediately
after subsection (2) "'Accounting period' has the same meaning
as in section 12 of ICTA." There is a somewhat similar course
taken on page two at line 19 where we find subsection (4) "In
subsection (1)(b) `profits' has the same meaning as in section
6 of ICTA." All I am suggesting is that you have the same
sort of thing in Clause 6 just for the ease of the reader.
(Dr Caldwell) It is a very interesting point you make.
There are a number of other uses of the expression "accounting
period" in the Bill and possibly the implication of what
you are saying is that we should put a similar definition in those
other places in the other clauses. These occurrences of the phrase
"accounting period" are not that numerous elsewhere
in the Bill so we could perhaps do that, but doing that sort of
thing would raise implications for the drafting of tax legislation
more generally because if one goes into a Finance Bill there will
be many, many references to an "accounting period" for
a company and it may make the legislation a lot longer if one
had a subsection every time the phrase appeared reminding people
where "accounting period" is defined. We could, in theory,
put a general provision in the Bill at the end. There is a general
definitions clause at the end in addition to the index of defined
expressions, and we could say "in this Act "accounting
period" has the same meaning as in Section 12 of ICTA".
If you are doing that it is not totally obvious that you would
be making people a lot better off by putting such a definition
in a clause in our Bill because, in fact, there is a general provision
for the Corporation Tax Acts-which will include this because of
the way the Corporation Tax Acts are defined-there is a general
provision telling people that "accounting period" is
to be construed in accordance with Section 12. This is in Section
834(1) of ICTA. There are a number of very general definitions
at the end of ICTA, that is the Income and Corporation Taxes Act
1988, which are meant to apply generally and, on the whole, we
thought the right answer is to leave them where they are, to operate
generally, but to remind people they exist. It may be that in
the fullness of time a long way down the rewrite process it might
be useful for readers to have an Interpretation of Tax Legislation
Bill so that they would realise that there was this package of
general definitions to be found (currently) at the end of the
1988 Act and it might be nice to put them in a Bill all on their
own so they stand out and people would be warned that this is
a glossary of terms they ought to know about.
Lord Howe of Aberavon
71. Can I ask a follow up. Lord Brightman's
eagle eye has directed my sparrow eye to a follow-on question.
As I understand your answer, all three of the phrases, "period
of account", "accounting period" and "chargeable
period" that appear in Section 6 have the same meaning throughout
(Dr Caldwell) "Chargeable period"?
72. And "period of account" and "accounting
(Dr Caldwell) Yes.
Lord Howe of Aberavon: If one goes to
the defined expressions one finds that "accounting period"
is there, Lord Brightman has drawn attention to it, and that refers
to Section 12 of ICTA but not to Clause 6. Then if one looks for
"chargeable period", that is in the Schedule and is
referred to in Section 6. If one looks for "accounting period"
that is there, but if one looks for "period of account",
which one will find on para 259, "period of account"
is not there.
Chairman: "Period of account"
is in 6(2). The point Lord Brightman is making is that everything
else is defined later on.
Lord Howe of Aberavon: The point is it
does not appear in the Schedule either.
73. My understandingand I was trying
to follow the explanation you were giving in responseis
that "period of account" is defined here because it
only occurs in this rather narrow context, whereas the other description
"chargeable period" has a very wide application and
occurs several times during this Bill and has a wider application
in general law and Corporation Tax. You save that until the end
so you do not have to keep reminding people all the way through
and at the end refer people back to the 1988 legislation.
(Dr Caldwell) "Accounting period" is used
all over the place in tax legislation.
74. "Period of account" is defined
here because it is a much narrower term and it is only of relevance
to this particular legislation. Is that your case?
(Dr Caldwell) Yes, it is.
Chairman: Otherwise I have got the wrong
end of the stick. I need to make sure I have understood what you
Lord Howe of Aberavon: You understood
it better than I did!
Lord Brightman: I entirely follow the
reason for not having "period of account" in the general
index. What I had in mind is the convenience of the reader. As
he goes through Section 6 it will be much more convenient for
the reader, and it will only take up one single line, to say "`accounting
period' has the same meaning as in Section 12 of ICTA . . ."
Chairman: Are you persuaded, Lord Brightman,
by the argument that you then have to do that several times all
the way through the Bill? Does that bother you?
Lord Brightman: I would not have thought
myself that consistency mattered particularly. The important thing
is the convenience of the reader. I do not mind if it is inconsistent
in the least but the convenience of the reader I think is absolutely
really what we are getting at here.
75. Given that we have the innovation of an
introduction here does that not make it different in that it does
not have to be repeated everywhere else? In other words, "period
of account" is defined in 6(2) and is not repeated every
time "period of account" appears throughout the Bill.
We have an introduction here so can we not in the introduction
define "accounting period" without having to repeat
(Dr Caldwell) "Period of account" is not
used elsewhere in the Bill. It is used to help define what "chargeable
Lord Blackwell: My point about the difference
of the introduction is still relevant, is it not?
76. Just to follow up on what Lord Brightman
and Lord Blackwell were saying. "Accounting period"
is generally used so it would be irritating if every time the
word was used it was followed by a reminder to the reader what
it is, but Lord Blackwell makes the point that Clause 6 is a rather
unique part of the Bill with its introduction, and we could do
it there to remind people what you mean. It does not mean that
every time in any subsequent legislation or later parts of the
Bill you are doing it over and over again. That might meet Lord
Brightman's point about the reader who wishes to read this introduction
to get a general guide to the whole. That is the point being put
to you. What is your reaction to that? Does it distress you the
idea that you might put the definition there? You are not changing
the definition. You put it in as Clause 6. Is there any harm in
(Dr Caldwell) There is no real harm in it. But it
is the case that people who have to read tax legislation will
very quickly discover that they need to know the meaning of "accounting
period" because it does turn up all over the place and there
is a general definition telling you where to find it in the Income
and Corporation Taxes Act. So it would be possible to put a subsection
in but for a lot of people it would be telling them what they
know so you have to weigh up the interests of the newish reader
against those of the more experienced reader.
77. A slightly different point on the same subject.
The fairly newish reader reading this will presumably want to
look up any term that is not understood in the defined expressions
bit at the back. Part of the logic or rationale behind this was
that you did not have to hold very much in your head at all, so
the newish reader looks up "accounting period" and is
referred elsewhere to Section 12 of ICTA. Would it not be more
sensible to define it rather than refer the new reader to something
else? Similarly, for all the other references to ICTA, and I can
see there are not that many, all the other terms seem to be defined
in the actual Bill itself.
(Dr Caldwell) I think that would create a very awkward
precedent because it would mean that perhaps in the future if
you use "accounting period" you will have to copy out
the whole definition in every Bill.
78. It is long, is it?
(Dr Caldwell) It is fairly long.
79. It is not as short as the period of account?
(Dr Caldwell) No.
Ms Kelly: That settles it.
80. I have seen suggestions that words that
are defined in an index or definition clause could be underlined
or asterisked or somehow else given an indication that if you
want to know what this means you will find it in the index. Has
that been considered for this Bill?
(Mr Munro) Perhaps I could answer that question. There
certainly were proposals put a couple of years ago that changes
like this should be made as part of a general consideration of
statutory format that was undertaken anyway, to a large part influenced
by some of the experiments that the project tried out for their
consultative material. A working group was set up which reported
on these various changes which proposed a considerable number,
which resulted in the new statutory format that we now have from
the beginning of this session. Other changes of this sort were
expressly considered and not felt to be improvements and were
not therefore recommended and that was the decision which was
endorsed by the Procedure Committee of the House of Lords and
the Modernisation Committee of the House of Commons and then by
both Houses generally. I think the short answer is that these
possibilities, which I know exist in other jurisdictions, have
been considered but have not been supported.
81. I see Mr Broke our witness is still at the
back of room. You are still here as our witness, Mr Broke. Would
you have any opinion on this question of
(Mr Broke) Chairman, yes I do, and I think Neil Munro
has gone through one of the points. The team have come up with
a number of ideas on how you deal with these things, that you
either italicise, underline or put in bold print words that have
defined expression that you will find somewhere else. Something
I found a lot more helpful because I found italics slightly broke
up the text, was the idea of having a footnote after each section
which had defined terms"accounting period", "period
of account"and that meant you would find it at the
back. If there was a definition and that was in the section that
was fine but if something was defined somewhere else you had a
little footnote. Again, the project team were told that that was
not acceptable as a way of producing legislation. As a user I
regret it. Having been told that that is so, there it is, one
must live with it, and it does mean compromises. I think that
what Lord Brightman has proposed is an example of where the compromise
does not necessarily fit all circumstances. Here we have got one
definition that does stick out like a sore thumb in Section 6
and the rest are all found at the back in the table of definitions.
We could have got round that with either a footnote or perhaps
italicisation. We have not got that and I think we do finish up
with a compromise. Once you have got a compromise, I would suggest,
with diffidence, it is probably best to be consistent about how
you apply your compromise although there may be cases where you
would depart from that.
Lord Howe of Aberavon: I wonder if I
could be a quasi witness, if that is possible. I think I am right
in saying that our original proposals did commend italicisation
of defined words. It has been through several stages, consideration
by the project team and then kindly submitted to the working parties
set up in the Palace of Westminster, and then put before the Procedure
Committee and the Modernisation Committee, and different pieces
have dropped off the proposals put forward at each stage, so we
are left with the core, so to speak. If I may offer an opinion,
if we here in this Bill seek to go over all those possibilities
then we shall find ourselves taking a great deal of time. If they
are to be considered it might be worth this Committee, or something
like it, looking at them for future tax law rewrite bills to see
at an early stage in the process whether there is any aspect that
might be reconsidered.
Chairman: I think to go over all of them,
as you say, might be difficult, but this is quite an interesting
example. I am not quite sure, having listened to this so far,
why on balance people came down against using italics as has been
suggested, or a footnote, and Mr Broke obviously preferred a footnote
as opposed to italics. Was it at the House of Lords Procedure
Committee that this finally got upended? Was it simply because
we do not do that in legislation or was there some practical reason
why it could not be done?
Lord Howe of Aberavon: The italics proposal,
if it was a firm proposal, fell at a fairly early stage. The one
that fell in the Procedure Committee was three part numbering
to which many of us are still attached, but I do not think we
ought to re-open that.
Chairman: I read some of the stuff on
three part numbering and we can return to that at leisure later.
That was obviously debated at considerable length and lasted quite
a long way before it finally got dropped.
Lord Howe of Aberavon: On italicisation,
I think I proposed to the then Parliamentary Counsel Sir John
Fiennes italicisation of defined clauses and I received a six-page
single-space letter telling me why it was not acceptable. I may
even have a copy of it around somewhere. I think it shows that
it is a case that requires a great deal of argument and it is
not as easy as it looks.
Chairman: I have been passed a helpful
note by one of those assisting us which says that italics have
a separate meaning in Commons' Bills where they are always used
to indicate that that part of the Bill has expenditure implications.
That sounds familiar.
Baroness Cohen of Pimlico: That is the
Chairman: Which would complicate our
Lord Goodhart: Halsbury's Statutes
include at the end of each section a footnote which does explain
where definitions can be found. That is one of the reasons why
I think practitioners would use Halsbury or a similar book
always in preference to an actual copy of the statute itself.
There may be an argument that if Halsbury does it then
the statute does not need to.
Chairman: Where does that leave us? Those
pressing the use of italics, are you happy at the moment who have
asked me to look at that that it has been so far rejected? I do
not know what the answer is to the point handed to me about the
problem that Parliament has a different sense of italics. It is
certainly the case in all these things we read Halsbury
as opposed to the Act of Parliament and that may be a comment
on the user-friendliness of Acts of Parliament. I made a reckless
remark about the Parliamentary text of the Treaty of Maastricht
and to this day I do not believe that a sane man or woman could
understand the Treaty of Maastricht when I waved it way high.
One had to get the Treaty as amended if one wanted to use it for
any sensible purpose. On this question it may be that we ought,
in due course, to consider the fact that everybody in practice
has to use not the text but a text laid out with more explanatory
notes and footnotes and references as in the case of Halsbury.
Shall we explore that further now? Going back to the narrow point,
does Lord Brightman wish to press this point? Does anybody else?
What is the reaction to the specific point made by Lord Brightman
about the way in which one definition rather anomalously crops
up in Clause 6 whereas all the other definitions are at the back
of the Bill? Do you have a reaction, Lord Brightman? Do you wish
to take it any further? What is your reaction to the discussions
we have had so far about this anomaly. Are you satisfied with
that explanation? Do you want to refer to it next time? Are you
going to table an amendment so we can consider it again next time?
Lord Brightman: I would like myself to
table an amendment for your consideration because it seems to
me that it is helpful to the reader and the cost is nil and I
do not think myself there is any obligation to have the same process
throughout the Bill. It is stark. You have got "period of
accounting" expressly defined in 2 and "accounting period"
is left hanging, and it seems to me simply from the point of view
of simplification, making things easy for the reader, this is
an exceptional case when it is worth referring.
Chairman: I wonder if I might ask one
of our witnesses to draft a suitable amendment for us to look
at next time and maybe you can come back and try and persuade
us not to make it or some member of the Committee may disagree
with Lord Brightman and think it ought not be made. Let us finish
the discussion at this stage on Lord Brightman's narrow point
about the particular definition. If we can have an amendment prepared
next time the Committee can either decide on reflection what it
wants to do about it or talk about it again.
Dawn Primarolo: If we look at the amendment
as well to see does it really make any difference? So far I have
sat here and thought does it really? We will put something in
but does it make substantially any difference to the ease of the
use of this Bill? I am tempted to use the measurement that if
there is not an improvement then do not put something else in.
I cannot see what it adds but, equally, I do not have a strong
view. Why add to legislation if what you add does not improve
what you have?
Chairman: The key argument is user-friendliness,
as I understand it. If there is a general introduction, it saves
you having to flick to the back to remind yourself of where you
find definition of "accounting period". Most practitioners
are probably even more familiar with it than I am. Let us have
an amendment drafted and then return to this point next time and
by that time people will have reflected upon it and we will probably
find that we will come to one view or the other. I am not sure
whether this Committee is allowed to ask you to produce an amendment
and then come back and review it. It is part of the unique nature
of these proceedings. I take the general sense of the Committee
that we have discussed things like use of footnotes or italics.
Is any member of the Committee minded to take that further? I
know that it will be debated again frequently in future. I think
there are some members of the Committee who do not disagree and
they want the question to be left open and considered again in
the future as this process goes on. What is your view, Lord Goodhart?
It would involve rather a major process at this stage.
Lord Goodhart: I think it would. I am,
in principle, in favour of it but I would not at this stage press
for it to be incorporated into this Bill.
82. Any further points on the introduction?
Then we go to Part 2 of the Bill, Chapter 2 onwards. This is plant
and machinery. It is the part of the Bill with most meat, it is
the part of the Bill with the most revenue implications, it is
the part of the Bill loaded with the most policy implications,
it seems to me, and it has no fewer than 31 minor changes made
in the course of it. We have not discussed how we handle this.
We have only got a few minutes left. Do members of the Committee
wish to go through change by change with the brief explanation
or are we content to be guided by the explanatory note and brief
description of each one? Should we ask the witnessesand
they may need notice of this questionwhether there are
amongst these changes those which do have implications in shifting
the burden? Are there any winner and loser type changes made in
this part of the Bill?
(Dr Caldwell) One of the pieces of paper that has
been supplied to the Committee is CA5.
83. The piece of paper gives a brief explanation
of each and why it has been made.
(Dr Caldwell) It is a landscaped table.
(Mr Munro) It is a very recent paper, not the one
we circulated a few days ago.
84. So these are the clauses that are covered
by the ways and means resolution?
(Dr Caldwell) They are the ones with italics in.
Chairman: Italics because they have expenditure
implications, as was pointed out earlier. And the expenditure
implications means they have an impact on revenue which means
they have an impact on individual taxpayers. So that is the answer
to my question. It identifies which of the changes have such an
Lord Blackwell: Chairman, if we are going
to consider whether or not these are minor or more significant
changes, it seems to me, if it were possible, it would be helpful
as well as a description of what the changes are to be able to
have some assessment, in total, of what level of revenue might
be affected by this. Is there an aggregate amount of change in
Inland Revenue income that might be affected by this as one indicator?
It may or may not be possible. The other thing is a small change
in total may be very significant for particular individuals or
particular enterprises. Is there a way of calibrating whether
there are individual enterprises for which these changes might
have significant impact? Unless we know those two I am not sure
how we can judge whether these are minimal or not.
Lord Howe of Aberavon: I wonder if I
might make another suggestion. If one looks at the notes on these
changes, the larger document, you find that the notes on change
5, which is the first one identified as having italics, that note
occupies a page and a half of explanatory notes and is pretty
full. It may be that if we focus our attention on those that are
identified in 5(a) as being italicised we will then find that
the note on that clause gives us a broader insight into it and
therefore gives the background for considering the question raised
by Lord Blackwell. That also focuses primarily, if not exclusively,
on the changes which are italicised. If one looks at the other
matters, many of them are dealing with glitches and omitted cases
and so on. I think that to focus this Committee's purpose on the
italicised ones might be the most sensible way of enhancing the
concentration of our work and a supplementary answer to the question
raised by Lord Blackwell, if such an answer is available. I do
not know whether that strikes the Committee, or indeed the project
team, as being a sensible way of approaching it.
85. It seems quite sensible to me. We all seem
to share the view that insofar as we are concerned with minor
changes, we accept as minor those which are aligning with existing
practice and putting in statutory form long-established rules
of course and so on. It is this question of winners and losers
in the tax burden. Lord Howe's approach is that we might concentrate,
as he says, on the italicised changes, the ones that are subject
to the ways and means resolution. I do not know whether this morning
the team is in a position to give an answer to Lord Blackwell's
question on how far can one quantify? Will you be able to answer
(Mr Willis) Chairman, perhaps I could offer the best
help I can in response to Lord Blackwell's very reasonable question.
Both in aggregate and individually the answer would be a negligible
effect on revenues is our best estimate. The ten changes which
involve italics in the Bill because they might impose charges,
we can certainly go through those individually. I do not have,
for the reasons touched on earlier, hard estimates of the number
of people in those circumstances let alone the number of those
who have not been doing what we are legislating. Similarly, where
the change is relieving, in principle at least, it is giving people
a statutory entitlement to more allowances, our best estimates
are there are so few people who are not already taking that view
or getting that treatment, that the net effect on revenues is
going to be negligible. The other part of the question, obviously
very reasonably, was it might be negligible in aggregate but could
there be individuals that are very seriously affected by change?
The honest answer to that is in a sense a reprise of what I said
in answer to the Paymaster General. I do not think so. It has
been one of our criteria for assessing this as a minor change.
It is impossible to give a guarantee because the circumstances
might be that one person has incurred a lot of expenditure thinking,
from their reading of the legislation, that the answer is allowances,
and the Bill says the answer is no allowances, but in all the
consultation undertaken no one has come back and said that.
Chairman: At this stage we must adjourn.
Has anybody got any quick point they would like to make on the
procedure next time? I suggest when we resume next time that what
I will doand I am open to suggestions made to me meanwhileis
turn to this part of the Bill and go down and ask has anybody
got any points on changes one to five, tending to stop when we
get to the italicised ones for the reasons Lord Howe gave and
have an explanation of those. That gives us some idea of how we
will proceed when this Committee next sits. We can explain that
in some of these cases we are not even sure there is anybody who
is going to be affected one way or the other by the ways and means
resolutions or we might discover that one of these very narrow
cracks does indeed have at the bottom of it somebody who will
have to change their behaviour. On that happy note, I will adjourn.
6 Evidence, p 11. Back
7 Evidence, p 15. Back