Instrument reported
At the Committee's meeting on 20
May 2008, it scrutinised a number of instruments and decided to
draw the special attention of the House to one of them
in accordance with its Standing Orders. The Instrument and the
ground for reporting it is given below. The relevant Departmental
memoranda are published as an appendix to this report.
1
S.I. 2009/695: reported as requiring
elucidation
Income Tax (Exemption of Minor Benefits) (Revocation)
Regulations 2009 (S.I. 2009/695)
1.1 The Committee draws the special attention
of the House to these Regulations on the ground that they require
elucidation.
Background
1.2 Section 210 of the Income Tax (Earnings and Pensions)
Act 2003 ("the 2003 Act") enables the Treasury to make
regulations which remove from the charge to income tax minor benefits
provided by an employer to an employee, on condition that the
benefit is made available to the employer's employees generally
on similar terms. The Income Tax (Exemption of Minor Benefits)
(Amendment) Regulations 2007 amended the Income Tax (Exemption
of Minor Benefits) Regulations 2002 ("the principal Regulations")
by inserting a new regulation 7, which added an exemption for
the provision of health screening and medical check-ups, and inserting
associated definitions of those expressions into regulation 2.
The 2007 amendment Regulations came into force on 14 August 2007.
Provisions of these Regulations
1.3 Regulation 1 provides for citation and commencement
on 6 April 2009. Regulation 2 revokes the 2007 amendment Regulations.
Regulation 3 contains a saving which provides for those Regulations
to continue to have effect until the exemption which they provide
is re-enacted (with or without modifications) by amendment of
the 2003 Act. The Regulations make no other provision.
Effect of the revocation on the principal Regulations
1.4 The Explanatory Note states that the result of
the revocation is to remove the following provisions from the
principal Regulations: regulation 7 and the definitions of "health
screening" and "medical check-ups" in regulation
2. In paragraph 2 of a memorandum dated 15 April 2009 (printed
at the Appendix) HM Revenue and Customs explains that the same
legislative result could have been achieved by amending the principal
Regulations and consequentially revoking the 2007 Regulations.
But in this case the Department considered the best course was
"the more direct method" of simply revoking the 2007
Regulations. This was considered the simplest way of removing
from the principal Regulations the material that the 2007 Regulations
added, and was in accordance with the principle that amending
provisions are "always speaking" (see Craies on Legislation,
9th ed, paragraph 14.3.5).
1.5 In the present case the Committee is prepared
to acknowledge that that principle (taken together with the clear
legislative intent which is evident from the juxtaposition of
regulations 2 and 3) operates to achieve the result argued by
the Department. The Committee considers that it would have been
good legislative practice also to have expressly revoked regulation
7 and the associated definitions in the principal Regulations,
but it accepts that the Explanatory Note adequately draws the
reader's attention to the position regarding the effect on the
principal Regulations.
Timing of these Regulations
1.6 The Explanatory Note explains that —
it is proposed that the exemption added by the 2007
Regulations will be provided for by a new section inserted in
the 2003 Act by the proposed Finance Act 2009,
the new section will remove the condition that an
employer must offer health screenings and medical check-ups to
all employees;
if that provision is enacted, the 2007 Regulations
will not be required; and accordingly
these Regulations revoke those Regulations with effect
from 6 April 2009 but with a saving so that the revocation takes
effect only once the new exemption takes effect.
1.7 The Committee asked the Department to explain
the timing of the Regulations, given that they appeared to have
no effect in practice, that to have any effect they depended on
an uncertain occurrence (the amendment of existing legislation
by future legislation) and that the amendment in question, if
it happened, could itself achieve, or provide for the achievement
of, that effect. In its memorandum of 15 April and in a subsequent
memorandum of 12 May (also printed at the Appendix) the Department
explains the link between these Regulations, the Finance Bill
and a related statutory instrument (S.I. 2009/600, concerning
a National Insurance Contributions disregard for non-cash vouchers
made available for health screening and medical check-ups) and
gives its reasons for these Regulations coming into force on 6
April.
1.8 The Committee, while accepting the accuracy of
the material presented, considers that it could be usefully amplified
by drawing out some further features:
first, it has been assisted by the appearance, in
the text of the Finance Bill that had its first reading in the
House of Commons on 28 April 2009, of the proposed new section
(320B)—a planned free-standing exemption from the charge
to income tax of benefits to employees comprised in the provision
of health screenings and medical check-ups (as opposed to the
removal of the condition in the 2003 Act enabling power, which
appears to be intended to survive unscathed);
secondly, it notes in particular the intention (set
out in clause 55(5) of the Bill as introduced) that the exemption
will be applied from the start of the 2009-10 tax year;
thirdly, it accepts that—as that exemption
would be wider than that provided for in the 2007 amendment Regulations,
the revocation is desirable to remove unnecessary legislation;
fourthly, it notes that the 2003 Act enabling power
does not appear to contain any power to act retroactively—it
follows that it could not have been used at a later stage to remove
the inconsistency from the start of the 2009-10 tax year.
1.9 It can therefore be deduced that the options
open to the Department in the particular circumstances were—
to make these Regulations;
to provide (as the Department accepted was possible)
the same effect in full in the Finance Bill, which they saw as
an undesirable merging of primary and secondary legislation; or
to provide a free standing power in the Bill to achieve
the same effect retroactively in secondary legislation—not
a possibility addressed in the memoranda but likely to be regarded
as avoidably complex.
1.10 Finally, it should be noted that in taking the
first of these options, the Department has not made the error
(as sometimes appears where legislation depends on the passing
of future legislation) of failing to provide expressly for the
possibility that the future legislation might not be made; regulation
3 clearly covers both possibilities.
1.11 The Committee accordingly reports these Regulations
on the ground that their structure and timing calls for the elucidation
provided in the Department's memoranda, as amplified above.
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