Examination of Witnesses(Questions 20-39)
MR PETER
MICHAEL CBE, MR
PETER KNOWLES
CB, MS JACKIE
CRAWFORD, MRS
CHERYL SCOTT,
MRS WENDY
SAMPSON, MRS
ALISON BERTLIN,
MISS CLAIRE
DILLON AND
MRS JENNY
MANSON
TUESDAY 14 JANUARY 2003
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.
Chairman
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.
Chairman
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.
Chairman
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.
Chairman
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.
Chairman
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.
Chairman
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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