| Previous Section | Index | Home Page |
Mr. Christopher Chope (Christchurch): Can the hon. Lady assure us that all the current extra-statutory concessions that apply to capital allowances will be incorporated in the Bill?
Dawn Primarolo: I cannot give the hon. Gentleman that assurance, as I do not know whether every extra-statutory concession was added to the Capital Allowances Bill. I do not have that information to hand. A rule was not set that all extra-statutory concessions should be combined; the rule was that, if a concession fitted easily into the legislation, that was the best place for it. As the hon. Gentleman may be aware, all Governments--including the Labour Government and the previous Conservative Government--consider the role of extra-statutory concessions and whether they should be moved in primary legislation. As the hon. Gentleman is particularly interested in that point, I shall ensure that I give him exactly the right answer. If I am unable to do so before the end of the debate, I undertake to write to him to explain which concessions have been included.
From the outset, the project team was committed to a full process of consultation with the UK tax community and other interested parties. That is a hallmark of the tax law rewrite. I refer hon. Members to the first volume of the explanatory notes. It lists not only those Members who were on the tax law rewrite steering committee, but the members of the consultative committee and their expertise. It goes on to list the people who have been consulted at each stage, with the proviso that only those who did not ask for their responses to be treated in confidence were included. Some people asked for that confidence and we could not, therefore, include that information.
The project's work has been overseen by a high-level steering committee, appointed by my right hon. Friend the Chancellor of the Exchequer. The right hon. Member for Fylde (Mr. Jack) sits on it and it is chaired by Lord Howe of Aberavon, whose interest in, and enthusiasm for, the process is now legendary. Other members are drawn from both Houses of Parliament, the judiciary, the legal and accountancy professions and business and consumer
interests. There is also a consultative committee, the members of which are drawn from the main representative bodies of the tax world in business and consumer affairs. For wider consultation, the project publishes periodic exposure drafts that contain blocks of rewritten legislation, with commentaries.I pay tribute to the invaluable contribution that all those involved in the consultation process have made, and continue to make, to the success of rewrite project. I greatly value their commitment to helping the project team ensure that the work is accurate and of high quality. I also recognise the time that they have devoted to the process. That should be commended.
With regard to the Bill, the House might find it helpful if I say something about the capital allowances legislation to give a flavour of the subject, which may be unfamiliar to some hon. Members. Capital allowances are relevant to everyone who is involved in business, from the largest multinational enterprise to the single trader. They broadly take the place of depreciation charges in commercial accounts for business, with some additional incentives, such as 100 per cent. first-year allowances for information and communication technology, and research and development.
Capital allowances are needed because, in general, taxpayers cannot deduct capital expenditure on investment in their businesses when arriving at their income or profits. Depreciation in commercial accounts is not allowed as a deduction for tax purposes. The estimated value to business of that regime is about £18.8 billion in 2000-01. It is therefore very important to those businesses.
Capital allowances give relief for certain types of expenditure, and the Bill deals with who gets the relief for what expenditure, when and how. The tax law rewriters addressed that and it is clearly laid out in the explanatory notes. There are different allowances for plant and machinery, industrial and agricultural buildings, research and development and various expenditure. The Government are committed to encouraging enterprise and innovation. It is, perhaps, appropriate that the subject matter of this first rewrite Bill should be directed towards that aim.
The Bill will make it easier for businesses, or the people who advise those businesses, to understand their rights and obligations in terms of capital allowances under our tax system. It brings together 300 pages of legislation. The main legislation with which it deals is the Capital Allowances Act 1990, which itself was a consolidation Act that brought together earlier legislation, much of which dated back to 1945. The House will not be surprised to learn that that has been amended every year in the 10 years since it was enacted. Other provisions, such as those dealing with patents and know-how, are included in the Income and Corporation Taxes Act 1988. Finally, other provisions are scattered throughout several Finance Acts.
I have already mentioned in general terms the extensive consultation process that is the hallmark of the rewrite project's work. For this Bill, there have been successive rounds of consultation on four separate exposure drafts, published at relatively early stages between October 1998 and February 2000. Most recently, a final round of consultation on a draft Bill was published in August 2000.
Not only does this Bill represent a worthwhile project, which will modernise our current direct tax system, making it clearer and easier to use, but it is the first Bill to mark a milestone in the work of the project. Although much difficult work remains, the Bill shows that improvements are possible. It makes minor amendments to make the language and structure more accessible, to give extra statutory concessions and to remove legislation that is obsolete and therefore no longer required. The House must satisfy itself that, in suggesting those changes, the rewrite project has not questioned or changed the underlying policy decided by Finance Acts and by the House. On that basis, I commend the Bill to the House and look forward to the debate.
8.51 pm
Mr. Richard Ottaway (Croydon, South): Any proposal that simplifies the law will always be welcomed by the House. In 1986, Philip Hardman, the well known campaigner for tax law reform, said:
- Some of the finest brains in the country are trying to understand tax law when they would be better employed producing wealth.
Mr. Tony McWalter (Hemel Hempstead): Does the hon. Gentleman accept that although the finest brains might not be producing much wealth for the country, they certainly get quite a lot of wealth for themselves, and perhaps that is the object?
Mr. Ottaway: From what I heard from the Labour Members on the Committee considering the Finance Bill, I am not sure that there is a paucity of wealth, and some people may be playing poverty. None the less, I am endeavouring to make a moderately non-political speech, so I shall leave that point before I am tempted away from that aim.
In the 1998-99 Session, I led for the Opposition on the Greater London Authority Bill, which at 473 pages then set the record for the longest Bill ever. Little did I know that just 12 months later, that record would fall and yet again I would be involved. I do not know what I have done to deserve being involved in the Committee proceedings on the two longest Bills in the history of Parliament, but in the previous Session I found myself exiled to the Committee Corridor for the Finance Bill, which set records in length and complexity. Leaving aside the politics of the Finance Act 2000, at 613 pages, it represents a challenge to all involved, whether they be professional advisers, the judiciary, civil servants or politicians--not to mention taxpayers, both personal and from the business community.
As a member of the Opposition team, with just a handful of advisers and limited resources, one does one's best to test the Treasury's vast resources. However, while one can pick up a few salient political points and make the best of them, the state of the Bill is the Government's
responsibility. I shall give just one small example of a provision from the Finance Act 2000. Schedule 14, on enterprise, says:
- Paragraphs 10(7) and (8) (determination of value of shares) applies for the purposes of paragraph 47(1)(g) as they apply for the purposes of paragraph 10.
I take a quote of a schedule of the Finance Act 1986 that deals with capital allowances:
- If, in a case where sub-paragraph (1) of paragraph 10 above applies, neither sub-paragraph (1) nor sub-paragraph (2) above has effect in relation to the expenditure referred to in sub-paragraph (1)(a) of that paragraph, then for the chargeable period related to the disposal or cessation referred to in sub-paragraph (1)(b) of that paragraph, any allowance in respect of that expenditure shall be a balancing allowance.
During consideration of the Finance Bill 2000, I led for the Opposition on the subject of tonnage tax. That part of the Bill was written very much with the rewrite principles in mind. I flip to a sentence, which states:
- If the cost of providing a ship exceeds £80 million, the lessor is not entitled to capital allowance in respect of the excess.
Much of our tax legislation is incomprehensible, indecipherable and virtually incapable of analysis, and under this Government, spreading like the plague. So, it is with pleasure that I give a warm welcome to a Bill that has been well received by experts and those in the industry. It has clearly achieved its aim of making tax law easier to understand.
The tax faculty of the Institute of Chartered Accountants said:
- The draft Bill is an impressive achievement by the Tax Law Re-write Team and we congratulate everyone involved. The Capital Allowances Act 2001 will demonstrate clearly the value of the Tax Law re-write process in improving the intelligibility of the tax legislation.
- What stood out, however, was the professionalism of the job the re-write team had done and the light it shone on the notoriously opaque areas of the Tax Law.
- Although the project has taken a good deal longer than the original estimate of five years--
- the quality of the draft reflects the enormous amount of work undertaken by the revenue in consultation with organisations such as ours. It is a high quality product. It is simpler and therefore easier to understand.
| Next Section
| Index | Home Page |