CC(97)Minutes (3)
24 June 1997
The minutes of the third meeting of
the Consultative Committee are attached.
JULIE McCLATCHEY
Secretary to the Consultative Committee
Present:
John McCormick - Acting Chairman
Adam Broke (Special Committee - Deputy Chairman)
Richard Baron (IoD)
David Brodie (TaxAid)
Russell Chaplin (British Chambers of Commerce)
Matt McGrath (ABI)
Ron Downhill (Law Society)
Simon McKie (ICAEW)
Cunnie Rankin (ICAS)
Martyn Jones (Law Society - Scotland)
Jane Vass (Consumers'Association)
James Rouse (CIOT)
Bill Nicolle (CBI)
Stephen Alambritis (FSB)
Paul Tipping (BBA)
Geoffrey Sellers
Karolyn Cooper
Lynne Leeder
Clare Scott Booth
Howard Williams
Secretary:
Julie McClatchey
Welcome and Introduction
1. John McCormick began by apologising
for the absence of Neil Munro due to illness - he would be chairing
the meeting in his stead. There were also apologies from Mavis
Sargent, David Williams and Graham Aaronson. John McCormick
introduced members from the Revenue in attendance for the
first time - Clare Scott Booth who was working on the Rewrite
Team responsible for the Trading Income legislation and who was
a recruit from the private sector; and Howard Williams from the
Revenue's Business Profits Division.
Minutes of meeting on 20 May.
2. Members of the Committee made some
general points about the minutes:
3. Some specific points were also made
on the content of the minutes:
4. Copies of the minutes were being
put on the Internet, so there was no need for Committee members
to restrict circulation.
Consultation arrangements
5. The Chairman explained that the Project
Team were proposing to try to develop earlier, and less formal
consultations, at the stage where they were considering some of
the fundamental issues, and floating ideas. Some informal soundings
had already taken place, based on contacts the members of the
Project Team had, but they were keen to develop this further and
asked the Consultative Committee for their views.
6. Members of the Committee were generally supportive of such consultation. Some had already written to the Project Director on this subject.
7. There were various suggestions of
how the early consultation could best be achieved.
8. The Project Team would consider the
suggestions in deciding how to take this forward.
9. During the discussion, the Committee
again voiced concern about the timetable for their contribution
to the consultation process. Given that at this time they were
not able to examine the clauses in detail, they were concerned
that when the Exposure Draft was published it would be seen as
having their endorsement. Although, for example, the Committee
had discussed controversial issues arising from the rewrite of
trading income at the last meeting, they had not yet been able
to comment fully on them or to ensure that the list of such issues
was exhaustive. The Committee felt that there was still some
uncertainty over their role and contribution to the project (it
had been recognised in the discussion at the first meeting that
it may change and develop.)
10. The Chairman assured the Committee
that the project Team did not see the discussion of draft clauses
as providing an endorsement by the Committee. The draft was being
shown to them at an early stage partly to keep them informed about
the progress of the work, and also to flag up important issues
before publication if possible. The Project Team expected most
of the comments after publication to come from the various bodies
represented around the table, as being those with most interest
and expertise in the subject.
Paper CC(97)11 - Trading Income and
Individuals : Exposure Draft
11. The Committee made a number of detailed
drafting points on the rewritten legislation. During the discussion,
the following points of general application also emerged.
Proposed Rewrite Changes
12. The Project Team were committed
to highlighting changes to the law which were made in the rewritten
legislation. The draft flagged up at the beginning a list of
such changes. The Chairman explained that these would be called
"Proposed Rewrite Changes" in the published draft, and
that the list was intended to cover only changes in the law.
The Committee commented that there were other significant proposed
changes which should also be mentioned especially those involving
the importation of case law into statute. The most important
example was the use of accepted accountancy principles as the
basis for computation of profits. While this might be perceived
as not changing the law it was nevertheless a very important change
and the Committee felt it should be flagged.
Defined Terms
13. The draft included footnotes to
each clause to highlight defined terms. There was some discussion
of "trade" in this context. The draft records it as
a defined term since, although it is not fully defined, it is
specifically given an inclusive, rather than a narrow, meaning.
The Committee felt that it was therefore useful to include it
among "defined terms".
Archaic terms with underlying
case law.
14. The draft clauses aimed to modernise
the term "adventure in the nature of trade" while preserving
the case law. In discussing this specific point, the Committee
noted the general difficulty of rewriting archaic terms which
have been the subject of judicial interpretation. In trying
to preserve the meaning of the law there were two potential dangers:
either fossilising the language or creating uncertainty by changing
the words. It was possible to prescribe in the statute that the
new phrase meant the same as the old but this idea was not welcomed
by the Committee. It would force users to have to continue to
refer to the old law. The Project Team hoped that the rewrite
could be taken as preserving the impact of the old law, except
on issues clearly highlighted. On the specific question of "venture
in the nature of trade" the Team promised, after lengthy
discussion, to consider whether the intended meaning could be
captured better in another way.
Boundaries
15. In discussing the specific clause
dealing with "rent from electric line wayleaves etc",
the Committee agreed that as a general rule, the phrase "apart
from this section" should not be used to draw boundaries
between sections as this phrase did not add clarity.
Monetary limits
16. In discussing the specific clause
dealing with "rent from letting surplus business accommodation"
the Committee agreed that, in legislation, clear monetary limits
were generally preferable to descriptive phrases, such as ESCs
tended to use. The fixing of the limit could be part of the consultative
process. But it was important that prescribed limits should be
readily capable of review and updating. The Team promised to
consider this general question.
17. Discussion of this clause brought
out some comment on its details. How necessary, for example was
the condition that the accommodation must be temporarily surplus?
Changing or removing this would be a policy change, but the Committee
felt that in situations like this they should be able to express
a view that the detail of an ESC should be modified when being
translated into law.
Crown option
18. Although the draft clauses shown
to the Committee included a rewrite of the Crown option (where
the Revenue has the option to decide under which case of Schedule
D some income should be taxed) it was now hoped to drop the option.
Revenue officers normally exercise the option according to departmental
guidelines which are now published. The Project Team was considering
how to translate these guidelines into statutory conditions.
The Committee noted this.
Other general points
19. Among various points of detail which
the Committee made on different clauses, the Project Team promised
to give further thought to:
20. There was further discussion of
referring explicitly to accounting principles. Some members doubted
the wisdom of doing so but the great majority favoured the attempt,
if it could safely be achieved. It was pointed out that, if the
rule was explicitly stated some details in other clauses could
be left out, eg timing provisions in bad debts clause.
Paper CC(97)12: Classification of
Income
21. The Committee were generally in
favour of the proposal in the paper that the various forms of
taxable income should be classified in a different way from the
present Schedules. They recognised that reclassification did
not involve changing the underlying rules of computation.
22. The Committee made some points of
detail on the paper:
Paper CC(97)13: Capital Allowances
23. The Committee noted the report on
the work on Capital Allowances and the change of timetable for
publication of the First Exposure Draft in October.
Paper CC(97)14: Design and layout
24. The Project Team explained that
this paper represented their current preferred style as developed
during the drafting work. They had drawn from design work in
other areas, and would be grateful for comments from the Consultative
Committee before showing it further afield. The Committee agreed
that external views might be helpful.
25. The Committee made the following
detailed comments:
26. The Chairman said that the Project
Team would welcome further comments in writing at any time.
Paper CC(97)15: Minutes of Steering
Committee meeting.
27. The Committee noted these. The
Chairman agreed that the agendas for the Steering Committee meetings
would be copied to the Consultative Committee.
Paper CC(97)16: Gender neutral drafting
28. The Committee agreed to consider
this more fully at the next meeting.
Julie McClatchey
Secretary
24 July 1997
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