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I have explained that the Bill contains provisions used by companies in computing their income and certain basic provisions. It is the first of the Bills rewriting corporation tax. Some of the corporation tax rules in it originally applied to both income tax and corporation tax but, as the tax law rewrite project’s previous Acts provided a separate set of provisions for income tax, the income tax provisions have been in the rewrite style whereas the corresponding corporation tax legislation remained in its original form. This Bill starts the process
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of bringing the drafting of corporation tax back into line with that for income tax where the provisions share the same source legislation.

I come now to the point raised by the right hon. Member for Wokingham (Mr. Redwood). In the old legislation, income tax and corporation tax shared some significant bodies of legislation. In the rewrite, those two have been separated, so there is one set of provisions for income tax and one for corporation tax. Of course, that means that there are more pages, but it also means that the Bill is easier for small businesses and others to use.

Much of the ground covered by the Bill is similar to that covered by the Income Tax (Trading and Other Income) Act 2005. That similarity, I think, will make it easier for tax professionals and local accountants who deal with both income tax and corporation tax to find the provisions that they are looking for. The Bill contains provisions on trading and property income, income from other sources and provisions used in computing income that are specific to companies, such as those for loan relationships, derivative contracts and intangible fixed assets. It rewrites provisions for particular types of expenditure, such as that incurred by companies with investment business and companies incurring expenditure on research and development.

Some key basic corporation tax provisions are also rewritten in the Bill, such as the charge to tax, the rules about accounting periods and the legislation about company residence.

To sum up, the Bill is a worthwhile contribution to modernising our direct tax legislation so that it is clearer and easier to use. It maintains the project’s excellent record in improving current legislation and it has been welcomed by those who use it. I am grateful for the support that has been shown across the House throughout this process. I welcome the hon. Member for South-West Hertfordshire (Mr. Gauke), who has taken part in the debates as we considered the Bill in Committee, to the Front Bench. I commend the Bill to the House.

5.41 pm

Mr. David Gauke (South-West Hertfordshire) (Con): It is a pleasure to be able to speak in this Third Reading debate. We obviously debated the matter on Second Reading and in Committee, which had an unusual structure, and given that little has happened since I suspect that we might cover some of the same ground.

Although this is one of the longest and largest Bills that the House has ever considered, this will be a relatively short speech. I want to take the opportunity to put on record my praise for the professionalism and thoroughness of the HMRC staff and secondees who have been involved in this process. Having spoken to a number of outside experts, I know that they have been impressed by the manner in which the process has progressed. I also want to thank the outside bodies for their contributions to the process. They have plenty of other things to be doing and the demands of a Bill of this size create considerable pressures for them, but they have none the less made a full contribution to the process.

I also want to thank the Joint Committee on Tax Law Rewrite Bills for its work in scrutinising the legislation. In particular, I want to thank my hon. Friend the
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Member for Gosport (Sir Peter Viggers), who was the acting Chairman for the Committee’s deliberations. He effectively succeeded my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), who served in that role for two years with much distinction.

The Bill is essentially a rewriting of existing legislation, as the Minister has stated. Consequently, the scrutiny that the Bill received was somewhat different from the normal procedure. None the less, one or two points were raised before the Joint Committee, one of which was the powers in the Bill to amend legislation and the ability of Parliament to scrutinise those changes. I know that the Joint Committee received sufficient reassurances on that point, which I also raised on Second Reading, but I would be grateful if the Minister, if he has the opportunity to catch your eye again, Mr. Deputy Speaker, could reiterate the protections that are available and assure the House that it will not be possible to amend primary legislation through secondary legislation other than in very restricted terms.

As I said, this Bill rewrites existing law, and the Minister referred to 106 minor changes that it will bring in. Forty three will alter the amount of tax due in practice: of them, 23 will involve a decrease in tax due and 19 either a decrease or an increase. The one change that will result in an increase in the amount of tax due clearly falls within any definition of the word “minor”, as it will merely cause the threshold at which the relief for research and development expenditure to be lower by £27 in a leap year.

I do not think that that is an attempt by the Government to fill in by stealth the black hole in the public finances, but it would be helpful if the Minister could give some guidance to the House about what, precisely, a “minor” change is. We may say that we will know one when we see one, and these changes certainly fall into the “minor” category, but some guidance from the Minister would be helpful.

Mr. Robert Syms (Poole) (Con): My hon. Friend makes a good point. The documents accompanying the Bill are full of boxes to be ticked when more or less tax ends up being paid, but does he agree that we also need to know the net effect of the measures? What is the overall effect of these minor changes? They may add up to very little, but it would be useful to get the relevant figures from the Minister.

Mr. Gauke: I am grateful to my hon. Friend, who raises an important point. I do not know whether the Minister will want to give us a break down of the Bill’s annual net effect for most years or just for leap years, but some guidance from him on the effect of the minor changes would be very helpful.

Mr. Redwood: Am I right in thinking that this Bill—assuming it is passed—will come into effect on 1 April? We have a Budget only 22 days later, so this could be a 22-day regime for corporation tax that will be replaced by whatever the Chancellor wishes. How does it simplify life if people have to mug up on this Bill, only to discover 22 days later that everything has changed?

Mr. Gauke: My right hon. Friend makes an interesting point, and I hope that the Minister will respond to it. We will have another Finance Bill in the summer that I
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suspect will involve changes to corporation tax. The rate at which tax law changes is a problem: some changes are unavoidable, but many are not.

The Bill is concerned with drafting problems and its intention is to make corporation tax law much clearer, but it does so at the expense of volume, as my right hon. Friend noted earlier. However, my main criticism is that it does not address the fundamental problem of tax law complexity. To be fair, it does not attempt to do so, but that is one of its weaknesses.

Our tax system is widely regarded as over complex. Professional bodies and business groups such as the Association of Chartered Certified Accountants, the manufacturers’ organisation EEF and the Chartered Institute of Taxation have all made that point again and again in recent months. It is notable that, when the firm United Business Media relocated from the UK to the Republic of Ireland, it cited tax complexity as one of the reasons behind the move.

It is also worth reminding the House of the survey undertaken by the Tax Reform Commission in 2006. There were 600 responses from businesses of various sizes: 60 per cent. said that they were increasing spending on tax planning and compliance, and 78 per cent. said that tax complexity had increased in the previous five years. It is therefore clear that we do have a problem with tax complexity.

Mr. Mark Field (Cities of London and Westminster) (Con): My hon. Friend is making very clear the grave limitations of this Bill. Does he favour establishing a tax commission, with wide-ranging powers not dissimilar to those of the Law Commission, that would be able to advise the Treasury about tax? Or does he think that we are going down the right route by taking some steps towards simplification and that such advice should be given through the usual channels?

Mr. Gauke: My hon. Friend anticipates my next remark almost perfectly. I made the point on Second Reading that the tax law rewrite team is a very useful structure. It is a dedicated team consisting of HMRC staff and secondees. There is a steering group made up of Members of both Houses and accountants, lawyers and academics, and there is scrutiny by a Joint Committee, again made up of Members of both Houses, but it has a limited role, looking only at the drafting.

What we propose, and as was advocated by my noble Friend Lord Howe in his report last summer, is that we do exactly as my hon. Friend the Member for Cities of London and Westminster (Mr. Field) suggests and move towards expanding the remit of the tax law rewrite process or, to use the analogy of the Law Commission, that we move towards a body that is consistently looking at ways we can simplify our tax system, that we see that as a long-term objective that is clearly to the benefit of the UK economy, and that we therefore do not spend our time producing reports and new laws that have value, but are not as valuable as they might be if we made a proper attempt at rewriting our tax law to make it much simpler.

The administration of tax law and the complexity of tax law are important issues. The tax burden is enormously important, but the way our tax law works is proving to
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be a disadvantage to the UK. We could once be proud of our tax law, but I fear that that is not the case any more.

In conclusion, we support the Bill. We note that it adds to the length of our tax code, but the attempt at greater clarity is to be valued. The Bill does not do all that it could do. We would benefit hugely from greater simplification of corporation tax. The Bill does not provide that, so it is of more limited use than it might be. I urge the Government once again to examine the process whereby tax law is made. A permanent body seeking to achieve greater simplification would be of enormous benefit to the UK.

5.53 pm

Mr. Jeremy Browne (Taunton) (LD): I am grateful for the opportunity to contribute briefly to the debate. So far everyone who has spoken also contributed to Second Reading, so I shall not detain the House for longer than necessary by going over too much ground that has already been covered.

I, too, place on the record my congratulations and appreciation to Lord Newton of Braintree and others, including outside experts, who contributed to the process and gave a great deal of their time and expertise to assist British business directly by seeking to simplify the corporation tax code. Like the hon. Member for South-West Hertfordshire (Mr. Gauke) and no doubt everyone who participates in the debate, I welcome all attempts to consolidate our corporation taxes, to make the system easier to digest and to simplify the structures.

I accept that, as was pointed out on Second Reading, we are unlikely ever to reach a situation where the corporation tax code, the rules and regulations, are easily understandable for the man and woman in the street. One could argue that if they were easily understood by the layman, they would probably be insufficiently detailed to serve their function. Nevertheless, it is helpful to have a system that is as simple as possible. That must be good for business at a time when it is seeking to minimise overheads. In legislative terms, it must be good that we do not have to employ, at great expense, huge numbers of people with great expertise, in both the public and private sector, to try to understand what the law means and how it applies to the companies affected. That is not productive endeavour. It is not a wealth-creating process, but all businesses and Government have to participate in that exercise. To the extent that it can be minimised consistent with keeping the law fair in its application, we would all welcome that.

There is still a long way to go. The United Kingdom has the longest tax code in the world. There are five volumes of the Bill and four volumes of explanatory notes. There are 1,330 clauses divided into 21 parts. Following the intervention from the right hon. Member for Wokingham (Mr. Redwood), I calculated that if there are 21 days between the law coming into effect and possibly being overtaken by events when the Chancellor delivers his Budget in the House, there would be one part to digest every day over the sadly brief three-week lifetime of the Bill—roughly 60 clauses a day with which tax lawyers and accountants had to familiarise themselves before the law potentially became redundant.

Even in its consolidated form, the Bill is an enormous piece of legislation. There are four schedules divided into 25 parts, the contents list alone is 63 pages long,
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and at least 33 Acts of Parliament and 16 statutory instruments are affected by it. The table of origins, which details the origin of all the provisions, is 174 pages long, and the table of destinations, which details whether a provision has been rewritten or repealed, is 196 pages long. It is a huge work, which shows what an achievement it was that those experts managed to get to grips with it at all. The idea that as a result we have a tax code that is simple is far from the truth.

I finish with an observation from the CBI tax task force, which I quoted on Second Reading. It stated:

since the first Budget of the former Chancellor, now the Prime Minister—

Inasmuch as the work under discussion today is designed to address that problem, it is welcome, but I fear that I share the instincts and observations of many hon. Members when I say that there is much work still to be done.

5.58 pm

Sir Peter Viggers (Gosport) (Con): The Bill is important because, as the Corporation Tax Act 2009, it will be the Act that students and practitioners will have to study in future. I hear the right hon. and hon. Members who point out that the Budget of 22 April will overtake some of the contents of the Act, as it is to become, but the Act will endure on the statute book and the Budget of 2009 will only make some changes to it.

The procedure is unusual, as has been commented. The Bill was referred to a Joint Committee on Tax Law Rewrite, which I chaired, of hon. Members of this House and Members of the other place. We received a memorandum from the tax law rewrite project team, to whom I join in paying tribute, and we took oral evidence from it. We satisfied ourselves that there had been extensive consultation with representative bodies, and we satisfied ourselves by inquiry that the 106 changes in tax legislation were properly accommodated. The legislation that we are considering is part of the rewrite of corporation tax law, income tax law having already been rewritten. As the Financial Secretary pointed out, the income tax legislation is in rewrite form, whereas the corporation tax legislation is now moving into rewrite form. A second corporation tax Bill is to come before us later this year, followed in due course by a further Bill to deal with international aspects of the law.

This Corporation Tax Bill deals mainly with income, while the second one later this year will deal mainly with allowances. We on the Committee satisfied ourselves that the House of Commons would have the power to amend the legislation and the ability to scrutinise any changes that had occurred. We satisfied ourselves generally that the Bill should be passed by the House of Commons. I join my hon. Friend the Member for South-West Hertfordshire (Mr. Gauke) in saying that the emphasis among legislators and professionals is always to programme towards complexity, whereas the consumer’s voice would no doubt plead for simplicity, if possible. I add my voice to my hon. Friend’s in pleading for simplicity wherever possible.

The hon. Member for Taunton (Mr. Browne) referred to the Bill’s 1,330 clauses, 63 pages of contents, 174 pages of tables of origins and 196 pages of tables of destinations.
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I intend to submit it to the “Guinness Book of Records” as the longest Bill ever, a position that it has taken from the Companies Act 2006. There is, however, a rival: in 1821, this House passed an Act written on 757 membranes of vellum; it would have stretched for 348 m or 382 yd. I suppose one could claim that that Act holds the record, although I would maintain that, having been written on membranes, it is not entirely comparable.

I confirm that the tax rewrite Committee carried out its duties in the proper form, and I join those who have spoken in this brief debate in commending the Bill to the House.

6.2 pm

Mr. John Redwood (Wokingham) (Con): I have declared in the Register of Members’ Interests that I am a company director, although obviously I am not pursuing those interests in these remarks. I wish to talk about the general impact of this style of legislation on the business community and to ask the questions that underpin this debate. Is length a good thing and a simplification in itself because it makes things clearer, or is it a good thing because it provides plenty of opportunity for advisers to make an honest living from giving advice on the lengthy legislation that we see before us?

Colleagues have mentioned the fact that this Bill involves 821 pages of law and 1,330 clauses—it is a blockbuster of a Bill. We have now heard from my hon. Friend the Member for Gosport (Sir Peter Viggers) that it is only part of the corporation tax framework and that, having had this wonderful Bill, we can look forward to an exciting sequel to deal with allowances, which relates to taxing the income of companies.

I pay tribute to my hon. Friend, because he and his colleagues have worked extremely hard, and I am sure that they have done a good job within the framework laid down by the consensus. In this Third Reading debate, we need to ask ourselves whether this style of revision and legislating is a worthy way for certain colleagues to spend a lot of legislative time—the rest of us spend rather less—and whether it results in a simplification that will make a material difference.

Like my hon. Friend the Member for South-West Hertfordshire (Mr. Gauke), I am worried by the exodus of quite a number of companies from this country. They complain about not only the level of company taxation, but its complexity. That should be in our thoughts, given that we are in a competitive battle to keep and increase the number of jobs in this country; against the current background, we as legislators should have that in mind with everything that we do. Do we think that this blockbuster Bill will reassure people? If we pass it, will lawyers in leading companies who are thinking of emigrating seize it and say, “At last! Parliament has got the message. We now have a simple and comprehensible system of company taxation”?

David Taylor (North-West Leicestershire) (Lab/Co-op): The right hon. Gentleman is expressing concerns about the rationale of companies that move to other countries; it is hard to say whether that is due to high corporation tax or complexity. However, is he reassured by the fact that the majority of FTSE 100 companies pay nugatory or nil amounts of corporation tax?

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