Joint Committee on Tax Simplification Bills Minutes of Evidence

Examination of witnesses (Questions 40 - 59)



  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 subsections—we get four subsections out of that, I think—they 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 over—there 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 us?
  (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 an example.

  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?

Lord Brightman

  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.

Lord Goodhart

  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 that?
  (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 on.

  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 yet unresolved.
  (Mr Munro) Yes.

Ms Kelly

  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[4] 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[5] 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 Clause—and general exclusion means you are not going to get first-year allowances—tells 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. Finally—I had better choose my words carefully here—it 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.

Ms Kelly

  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 or longer?
  (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.

Mr Ashton

  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 which is—

  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 message.


  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

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