Joint Committee on Tax Law Rewrite Bills Minutes of Evidence

Examination of Witnesses(Questions 20-39)



  20. But not one every day?
  (Mrs Scott) That is what extra-statutory concessions are about, as is set out in the booklet IR1. It says here, "An extra-statutory concession is a relaxation which gives taxpayers a reduction in the tax liability to which they would not be entitled under the strict letter of the law. Most concessions are made to deal with what are on the whole minor or transitory anomalies under the legislation and to meet cases of hardship at the margins of the code where a statutory remedy would be difficult to devise or would run to a length out of proportion to the intrinsic importance of the matter."

  21. Coal; I agree.
  (Mrs Scott) Where we have looked at the existing extra-statutory concessions and we think they still fall within that definition, even after we have tried to incorporate them in our legislation, then we think that they deserve to remain in this book.


  22. There are two reasons why you have left some of them out. The ones you have included are some obvious ones like miners' concessionary coal and so on which was finally going into statutory form. If I understand you correctly you have two reasons for leaving these out. One is that you take up a lot of space for trivial numbers of people, probably three or four cases a year, and you have got 20 pages of legislation so it is not worth it; everybody knows where they are. Otherwise you also gave as a reason that for some of them it is too complicated to draft. Once you go into it, if I understood you correctly, you discover that it is a complete maze trying to set it out in the clear English which is the object of our whole exercise, so you decided to leave those as they were. The only thing that troubles me about that is, when you find you cannot draft it in clear English does that give some indication that the concession might itself be rather confused so that it is a bit ad hoc and discretionary and if you put it down on paper it may mean that the individual inspector in the end is left to make his or her judgment and decide where there is hardship? I am not sure that the Committee could do anything about it if you come to that conclusion, but should they perhaps be looked at by the Revenue to make sure there is some clarity that cannot for some reason be put into writing? For example, travelling expenses for directors and employees earning £8,500 a year or more is in Appendix 2 and it is on the grounds of complexity. I think there are probably quite a large number of taxpayers who have quite a dispute about the treatment of their travelling expenses because most directors and employees now earn more than that. Because £8,500 a year is now obsolete practically everybody is now getting caught by this and, rather like vehicle charges which have just been touched upon, I can think of few areas of more controversy in taxation once it gets down to the tax treatment of car and travel expenses. Is there something wrong if you cannot put that into basic English? I mean wrong in the way in which the discretion is being applied.
  (Mrs Scott) I do not think there necessarily is. Because one of the stated purposes of an extra-statutory concession is to meet cases of hardship at the margins of the code, an extra-statutory concession will generally be cast in fairly flexible terms so that it can bring in all the cases that may be grouped together under the same banner. If we start to put these things down in black and white in the legislation we lose the flexibility or we have to make it very long to cover all the possible scenarios that the extra-statutory concession could include. Talking of the example of extra-statutory concession A4, you might have to consider the position of a director's spouse who is travelling with him because he is sick or incapacitated. Then you have got to decide whether you need a definition of what constitutes sick or incapacitated.

Baroness Cohen of Pimlico

  23. Or spouse?
  (Mrs Scott) How sick do you have to be before you have somebody going with you?

  24. Does it apply to a director's companion? Yes; one sees.
  (Mrs Scott) We do not want to lose flexibility from the kind of broad definition or description of circumstances that we can use in an extra-statutory concession by having to set down a series of hoops that people have to jump through before they can qualify for it.


  25. I suppose I have been misunderstanding it. The vast majority of directors and employees, or a very large number of them, have some tax decisions to be made on their travelling expenses, but the vast majority presumably are covered by the ordinary law now.
  (Mrs Scott) Yes.

  26. The extra-statutory concession subject only deals with fringe cases, very few of them, including a lot of the extraordinary ones that you have just cited, so we are even there dealing with a very narrow point.
  (Mrs Scott) Yes.

Lord Howe of Aberavon

  27. You have touched on, have you not, an illustration of the many examples we get all the time where people one consult suggest policy changes? We are accumulating a raft of policy changes, some of them extremely wide-ranging. Some, for example, suggest doing away with the whole structure of motor benefits and starting again. I think that everyone concerned with the project must be frustrated to some extent by their inability to tackle these areas. It is bad enough to try and state in simple language what already exists and needs to be clear. The other point I want to make is that the Steering Committee and the Consultative Committee do look very carefully at the extent to which we may or may not be touching on something which involves a policy change. We did have a long discussion on it, during last summer, and our minutes show us studying three ESCs in particular, but we decided that two of them would involve changes in underlying law and should not be done by ESCs. One we thought was just on the right side of the margin. We are very anxious not to appear to slip in covert removals of tax avoidance opportunities, however tempting it may be to the Revenue to do so. It is something that we look at very carefully and they are flagged up, are they not, in the evidence before us?
  (Mrs Scott) The policy changes have not actually been listed in the memorandum of evidence as such but they are listed as an appendix to the response document which we issued to the draft Bill, which was put out to consultation in the summer. We issued a response document to that consultation in November and all of the policy suggestions that were made, including the very far-reaching and very detailed, were listed at the back of that document. I can say more about how we have drawn the distinctions which we can make or not if the Committee is interested.


  28. You have set out policy changes as suggestions to be made, but you did not address any of them in this exercise. Presumably, if it is thought that some merit in looking at them they are taken off by the Revenue and considered as possible candidates for Finance Bill preparation?
  (Mr Michael) That is absolutely right.

  Lord Howe of Aberavon: There are in fact no less than 84 policy changes proposed in the annex to the response document here, one of them being, as an example, allowing earnings on employment as stated in the Rewrite Bill to be calculated in the same way as earnings related to the national insurance contributions. Thereby hangs a tale of enormous complexity.


  29. And a long-standing policy argument.
  (Mr Michael) But outside the scope of our project.

  30. On the extra-statutory concessions in this part of the Bill you have ditched three on the basis that they are obsolescent or of very limited application, so you found three that there is no point in extending, and you are satisfied that absolutely nobody is going to be affected by ditching those concessions, or you are not aware that any taxpayers are going to emerge claiming that their concession on widows' pension paid to widows of Singaporean nationality and so on is going to cause trouble?
  (Mr Michael) Those concessions will still continue.
  (Mrs Scott) Those concessions will continue just in case there is an odd one cropping up now and again.

  31. So when you say they are omitted because they are obsolescent,—
  (Mr Michael) Omitted from the Bill.

  32. So it does not mean they are changed? You are not ditching them?
  (Mr Michael) Absolutely not, no.

  33. And so if some Singapore widow resident in the United Kingdom turns up the concession could still be available to her?
  (Mr Michael) Yes.

Baroness Cohen of Pimlico

  34. Provided her husband is a UK national.
  (Mr Michael) Yes. All of the extra-statutory concessions that are not incorporated in the Bill, for whatever reason, will continue.


  35. Although these concessions are all subject to change by the Inland Revenue, the ones that have gone into the Bill will in future require legislation to amend them?
  (Mr Michael) Correct.

Lord Goodhart

  36. What is the significance from the legal point of view of changing something from extra-statutory concession to included in the Bill? As I understand it, once it is in a Bill the terms are subject to interpretation by the Commissioners, the Special Commissioners and the courts in the usual way. While it is an extra-statutory concession the courts do not have that kind of power but the decision to withhold an extra-statutory concession in any case would presumably be subject to judicial review on the grounds of irrationality or defeat of a legitimate expectation, something of that kind?
  (Mrs Scott) Yes.

  37. So there is a significant legal difference between having something as an extra-statutory concession and including it in a Bill?
  (Mrs Scott) Yes. There is a significant difference in that regard.

Baroness Cohen of Pimlico

  38. You are presumably jolly careful about it in case it embodied some things which you did not mean it to?
  (Mrs Scott) Yes.

  Chairman: We did not do capital allowances as I recall, unless my memory is playing tricks.

  Baroness Cohen of Pimlico: We did.


  39. Because it is actually quite a significant change. As you say, it all becomes subject to the jurisdiction of the courts. To change a concession now requires primary legislation and not just a change of policy announcing a change of concession, so we did do it in the Capital Allowances Bill, did we?
  (Mr Michael) Yes.

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