TAX LAW REWRITE CONSULTATIVE COMMITTEE
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MINUTES OF THE TWENTY NINTH CONSULTATIVE COMMITTEE MEETING
Note by the Secretary
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I attach the minutes of the twenty ninth meeting of the Consultative Committee,
held on 5 December 2000.
DAVID MUTTON
Secretary to the Consultative Committee
MINUTES OF THE TWENTY NINTH MEETING OF THE CONSULTATIVE COMMITTEE HELD ON TUESDAY 5 DECEMBER 2000 IN THE NEW NELSON ROOM, SOMERSET HOUSE, LONDON
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Present: Neil Munro (Chairman) Secretary: David Mutton |
Neil Munro Helen Caldwell Margaret Leates John Pearce Patrick Linford Cheryl Scott Alex Hardaker Wendy Sampson Mike Steward |
Apologies and welcome
1. Apologies had been received from Richard Baron, Adam Broke, Colin Davis, Malcolm Gammie, and Simon Mackintosh.
2. The Chairman introduced Cheryl Scott who joined the Project in October as Leader of Rewrite Team D and who was attending her first Consultative Committee meeting. He also welcomed Patrick Linford and Team D together with Helen Caldwell and Margaret Leates from the Drafting Team. Patrick Linford had been working with Team D on Employment Income since July this year.
Item 1: Minutes of the meeting held on 7 November 2000 and matters arising
3. The minutes of the meeting held on 7 November 2000 were agreed.
4. There were no matters arising from those minutes.
Item 2: Paper SC(00)20: Draft Exposure Draft: Employment Income Part 2
5. The Chairman said that the draft before the Committee would form the basis of the Project's eleventh Exposure Draft which was to be published at the end of January 2001 and he invited Patrick Linford to introduce the paper.
6. Patrick Linford explained that this is the second part of the Project's work on Employment Income, the first part having been published as Exposure Draft No 6 in May 1999. The earlier Exposure Draft dealt with the main charging provisions under Schedule E Cases I, II and III, emoluments and the benefits code. Exposure Draft 11 will cover exemptions, deductions and a couple of free-standing Schedule E charges plus some material relating to the first Exposure Draft including exceptions to the benefits code. More work remains to be done on share-related remuneration and share schemes and the provision of services through intermediaries (IR35).
7. The Exposure Draft will be published in two volumes. Volume 1 will contain the commentary and Volume 2 will contain the clauses, including a chapter arrangement and a table of contents. In due course there will also be a table of origins. There are two main blocks of work: exemptions in Chapters 4.13A to 4.13H and deductions in Chapters 4.14AA to 4.24. Three part numbering will be used for this Exposure Draft, to facilitate cross referencing with Exposure Draft No 6, even though it has not been adopted for parliamentary Bills. The Committee indicated that they were content with that approach.
8. The draft Exposure Draft contains 180 clauses plus the commentary. It includes 93 proposed rewrite changes set out in the usual format. The team had found the legislation particularly difficult to rewrite because of its complexity. There were many issues to unravel, many connections between provisions to untangle and a number of fictions and hypotheses to sort out. A good example was section 198, which seems relatively uncomplicated in itself but is used by other provisions in a variety of ways. Sections 156(8), 193(3), 193(7) and 200A all latch on to the rule in section 198 in different ways.
9. The team have also had difficulty in finding the best arrangement for the rewritten provisions. A number of arrangements had been tried and all involved some element of compromise. What works well in one respect does not work well in another, but the current arrangement is seen as the best compromise. Deductions now appear after exemptions. Certain payments that are treated as earnings (for example, sick pay) have been moved and now follow the benefits code. The provisions relating to agency workers will probably also be moved to follow the main earnings provisions. Within the two main blocks of work the problems were what Chapters to include and how to arrange the clauses within those Chapters.
10. Exemptions were easier to arrange than deductions. They have all been put together in 13 Chapters so they are easy to find and are arranged by subject, so that it is easy to find any particular exemption. The lack of coincidence between the treatment of benefits provided as assets and the benefits provided as vouchers causes problems. By way of compromise, Chapter 4.6 currently includes as exceptions things which would be exempt if provided as benefits. Work is continuing on this.
11. Deductions proved more difficult to dealt with than exemptions. There are a variety of ways in which expenses may be met and the resulting tax treatment may vary accordingly. The example of a higher paid employee undertaking a train journey on behalf of his employer reveals many of these complexities. There are at least half a dozen ways in which the employee's expenditure may be met and at least four different routes through the legislation to determine whether a deduction is allowed for that expenditure. The deduction rules have been put into four principle chapters reflecting the way the expenses are met - paid by the employee, met by the employer in the form of a benefit, covered by fixed allowances or otherwise borne by the employer.
12. In conclusion, Patrick Linford said that the team had tried to put the most commonly used provisions first and where possible, had tried to avoid repetition.
13. In general discussion the following main points were made:
(i) It was suggested that all share-related provisions should be grouped
together. The team explained that if all the share-related provisions
were put together it would mean removing them from the existing blocks
and having to repeat the basic rules. It would also break down the block
structure which the Committee agreed was one of the main benefits of the
rewrite.
(ii) Similarly the position of the block of work on exemptions was discussed.
The Committee agreed that it was probably more important to have all the
exemptions in a block than to worry about where the block was positioned.
(iii) The Committee asked if consideration could be given to increasing the number of cross-references and supplying as many navigational aids as possible. The team agreed that this was desirable but at this stage they have not found the perfect answer to these problems.
(iv) The Committee thought that the commentary should include more detail on extra-statutory concessions that the team was not proposing to legislate. It was confirmed that the Project's approach was to legislate extra-statutory concessions unless there were compelling reasons for not doing so (for example because a relatively trivial concession would have take pages to enact).
(v) In response to questioning, Patrick Linford said he thought that the Exposure Draft was unlikely to change much before publication. There was some polishing and possibly minor redistribution of some of the clauses to be done. But as the Exposure Draft would only be a step on the road to the Schedule E draft Bill currently scheduled for autumn 2002, the Exposure Draft might not reflect the final way the legislation would be rewritten.
Item 3: Other business
14. Meetings for the first half of 2001 have been arranged for 6 March, 24 April, 29 May and 26 June. The Secretary will confirm these dates in writing. The first of those meetings would probably be to consider Plans for 2001/2002.
15. There being no further business, the meeting concluded.
DAVID MUTTON
Secretary to the Consultative Committee
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