CC (02)Minutes (39)
22 October 2002
TAX LAW REWRITE CONSULTATIVE COMMITTEE
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MINUTES OF THE THIRTY NINTH COMMITTEE MEETING
Note by the Secretary
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I attach the minutes of the 39th meeting of the Consultative Committee, held on 22 October 2002.
SIMON WILLIAMS
Secretary to the Consultative Committee
Present: Cheryl Scott (Chair) Derek Brownlee Colin Campbell Russell Chaplin Terry Hopes Liz Lathwood Secretary: Simon Williams |
In attendance: Peter Knowles Alison Bertlin Cathryn Swain Robin Willis Guy Lawrenson Matthew Sawyer Satnam Singh |
Apologies and welcome
1. Apologies had been received from Peter Michael (unable to attend for personal reasons), Mavis Sargent, Malcolm Gammie, Simon Sweetman and Wreford Voge. The Chair introduced and welcomed Derek Brownlee as the new representative from the IOD and Simon Williams as new Committee Secretary.
2. The Chair sought agreement to restructure the agenda to address PAYE items first to allow Cathryn Swain to depart; the Committee were content.
Items 1 & 2: Minutes of 38th meeting held on 3rd September 2002 and matters arising
3. The minutes of the meeting on 3rd September 2002 had already been circulated. In a brief discussion the consensus was that, for the future, the minutes should be more concise and non-attributable.
4. As regards matters arising, paragraph 4 of the minutes referred to Schedule 6 (consequential amendments) which had been subsequently circulated as Paper CC(02)15 on 9 September. The Press Conference on draft Bill 2 had also been held on 9 September.
Item 6: PAYE - Paper CC(02)11 Third Progress Report
5. The project opened discussion on Paper CC(02)11. This Paper contained a quarter of PAYE regulations and 40 pages of commentary on them. It had been placed on the Internet in mid-July. Comments had been received from a number of respondents. An open meeting had been held on 22 October to discuss the draft regulations.
6. At this stage the project was primarily seeking the Committee's views on two general questions relating to the suitability of the draft regulations for inclusion in the complete draft for formal consultation in 2003.
a. Is the restructuring and reorganisation of the draft regulations on the right lines?
The Committee was advised that the first batch of draft regulations did not make wholesale reorganisation of material covered. This was mainly to ensure the drafts covered all existing material and accurately reproduced their substance - except where changes were explicitly proposed. Further revisions were expected. But the PAYE team had, as the Consultative Committee had noted in connection with the earlier tranche of draft regulations, deliberately taken this incremental approach in order to avoid false starts and the risk of back-tracking when the fuller picture emerged.
The restructuring and reorganisation had been well received by most respondents. Comments included; "a great improvement on the current regulations," and "undoubtedly emerging ...in a better structure."
The Committee indicated that they were content that the restructuring and reorganisation of the draft regulations was on the right lines.
b. Do the draft regulations make the law clearer while making only appropriate minor changes?
The Committee were advised the general view in responses was that the drafts made the law clearer. But some had suggested that reorganisation had received more attention than rewriting. The PAYE team felt this was fair comment. They would be going on to revise the language further and to look at breaking up long sentences and other drafting suggestions made.
With regard to making only appropriate and minor changes, the responses indicated that two of the minor changes proposed be reconsidered. But other responses accepted those two minor changes. The conclusion the PAYE team drew from this was that the suggested changes were only minor but may not in all cases be appropriate. The team undertook to consider whether to maintain those proposed changes when they revised the regulations.
The Committee indicated they were content that the draft regulations made the law clearer and proposed only changes that are minor and appropriate subject to further work on those changes which had attracted comments to the contrary.
7. In response to a question about the timing of future papers the PAYE team indicated that a substantial amount of further regulations remained to be seen by the Committee. Much of this remaining material was, however, of more narrow interest - e.g. the provisions for social security, councillors, holiday pay and armed forces reservists. The team intended to expose working drafts of all this and invite initial comments by Christmas. This would keep work on course for formal consultation to start around the end of March 2003. But there would then be another 6 months or so before the regulations needed to be made in autumn 2003.
Item 3: Progress on Response Document - draft Income Tax (Earnings and Pensions) Bill.
8. The Committee was advised of the importance of distributing this document given previous criticism regarding lack of communication in the run up to the introduction of the Capital Allowances Bill. This was a first draft only and had not been viewed by the drafting or technical teams; the final version would contain a firm indication of how the Project had dealt with each point. It was noted that at a general level comments on the Draft Bill had been positive although a lot of detailed points had been raised.
9. In discussion, the Committee felt that the draft Response Document was valuable and useful. It was noted that the final version would include details of how the Project had acted on the comments received as well as why the Project did not intend to pursue others.
10. Some members of the Committee noted that only limited feedback was available on suggestions for Policy changes outside the scope of the rewrite Project. The Chair suggested that this issue should be pursued with other parts of Revenue Policy with policy responsibilities.
11. The Committee raised a concern on the method of quantifying the benefit of provided living accommodation regarding the use of gross rateable value or annual market value. One member of the Committee suggested that the current wording of section 837(2) of ICTA (which referred to Section 23 of the General Rate Act 1967) required that a gross rateable value must be used to determine the value of such a benefit. If this cross-reference was removed this might affect the entitlement for a taxpayer to challenge a decision to base the benefit on anything other than the rateable value. The Committee also asked whether there was any intention to withdraw Extra Statutory Concessions in this area.
12. The Project did not concur with the view that the reference to the General Rate Act (GRA) in section 837(2) had any such effect. In any event, the GRA 1967 had been repealed in 1988 without any saving for this purpose. The reason for the use of gross rateable value stemmed from Inland Revenue practice and was set out in SE11434. It was not open to the Inland Revenue to increase or decrease the tax burden on taxpayers without Ministerial agreement. And any change in the legislation would require Ministerial and Parliamentary approval.
13. The Project also advised that the living accommodation clauses were currently being reworked and that the label "annual market value" could certainly be revisited. The Committee stated it would be helpful if they could see the final draft of clauses 103-104 regarding living accommodation and the final draft explanatory notes.
Item 4: Paper CC(02)17 - Annexes
14. The Committee were advised that this document covered all the Proposed Rewrite Changes (PRC's) covered in previous Exposures Drafts and those discussed at the last meeting of the Committee.
15. In discussion, the Committee felt that some of the language was formulaic and in some places did not capture with the necessary degree of accuracy the nature of the proposed change. The Project noted that further work on the drafting of the Annexes was underway.
Item 5: Technical Issues - New and Dropped Proposed Rewrite Changes
16. A copy of Paper CC(02)19 was distributed. It was explained that for completeness it included details of those PRCs that, since publication of the draft Annexes, were now to be dropped (other than those mentioned in the RD).
17. It was also confirmed that the Project did not propose to proceed with PRC 18 and PRC 72 of ED 12. A brief summary of the content of Paper CC(02)19 was provided. The Committee was invited to submit any comments or questions, once they have had the opportunity to review the content.
Item 5a: Technical Issues: Basis of Assessment for certain Social Security Benefits.
18. The project outlined a problem in two areas of social security income, namely; job seeker's allowance (JSA) and, secondly, statutory payments paid by the Inland Revenue instead of the employer i.e. statutory maternity pay, statutory sick pay and, from April 2003, statutory adoption and statutory paternity pay.
19. The Project explained that there was no explicit basis of assessment for these benefits. In practice, JSA was assessed on the accruals basis, whereas the practice for statutory payments was not clear. The Committee had been approached twice previously on this matter and on each occasion had decided the only alternatives were to use the accruals basis or to leave a gap.
20. The Committee were advised that leaving the gap was unsatisfactory but no practical alternative presented itself. The Committee were asked again to confirm that they were content that the gap should be preserved.
21. Discussion took place regarding the merits/demerits of each option including the suggestion of using the receipts basis. The Project pointed out that this too could include payments that a claimant was entitled to receive not just payments that had been received. The receipts basis seemed a simpler approach but the quarterly payment cycle could have an anomalous effect. Moreover, a move from the receipts to the accruals basis would need transitional measures to ensure a taxed accrual would not be taxed again when it was received.
22. The Committee were informed that the adoption of the receipts basis for all benefits (including State Pension) was a suggestion for policy change that the Project had undertaken to pass on to other Revenue colleagues.
23. After further discussion the Committee felt on balance, having regard to the parameters of the Project's remit, that the gap in the existing legislation should be preserved.
Item 7: Any other business
24. The project mentioned that it was publishing later that day updated versions of Schedule 7 to the draft Bill (transitional provisions) and Schedule 8 (repeals and revocations). Copies would be sent to Committee members. There would also be available a marked-up version of the updated Schedule 7 highlighting differences between that version and the one that appeared in the draft Bill. The project would be particularly interested to hear comments on the usefulness of such a marked-up version.
25. The next meeting of the Consultative Committee will be on the 26 November 2002 at 14.30pm in Room G23, South West Wing, Bush House, Strand.
SIMON WILLIAMS
Secretary to the Consultative Committee
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