Second Exposure Draft - Savings and Investment Income of Individuals: Part 1

Part 1: Introduction

Background

1.1 In December 1995 the Inland Revenue published a report ("The Path to Tax Simplification") reviewing the scope for simplifying the UK tax system. This report concluded "... that the language of existing tax law can be simplified; that the benefits should substantially outweigh the costs; and that a rewrite of most of the existing code could be accomplished over a period of about five years". That judgement had been foreshadowed in the then Chancellor of the Exchequer's statement, in his Budget Speech of 28 November 1995, that he hoped to "make a start on a major project to simplify tax legislation" in 1996.

1.2 This announcement was generally very well received. But, before a final decision could be taken, a number of important practical issues needed to be clarified. In July 1996, we published a consultative document ("Tax Law Rewrite: The way forward") with detailed proposals for taking the project forward.

1.3 After a very constructive and worthwhile round of consultations with the main interested parties, we published a response document in December 1996 ("Tax Law Rewrite: Plans for 1997"). This outlined how, in the light of comments received, we would take forward the rewrite work. In May 1998 we published a further document setting out our programme for 1998/99 ("Tax Law Rewrite: Plans for 1998/99"). The project is now fully under way and this Exposure Draft contains the second batch of draft rewritten legislation for consultation with interested parties. We have also published two Technical Discussion Documents.

Our purpose

1.4 The project will rewrite all (or most) of the United Kingdom's existing primary tax legislation in order to make it clearer and easier to use, without changing or making less certain its general effect.

1.5 The work is organised on project lines, and we have identified six critical success factors which must all be fully achieved if the project is to be judged a success. In some cases, we will not be solely or even mainly responsible for ensuring that these are met, but we will have a contribution to make to all of them at appropriate times. The six critical success factors are as follows.

• The rewritten legislation must be accepted by all the main users as clearer and easier to apply and as preserving the effect of the present legislation apart from minor agreed changes in policy.

• Parliament must be able to scrutinise and enact the rewritten legislation in accordance with clearly defined and appropriate Parliamentary procedures and an agreed timetable.

• The main users, both inside and outside the Inland Revenue, must be kept fully informed about progress throughout the life of the project and, when appropriate, properly consulted in good time for their views to influence the rewrite work.

• The operational implications of the rewrite work for the Inland Revenue must be identified and properly addressed.

• The lessons learned from the experience of successfully rewriting the legislation should be developed, in close consultation with the main users, into new best practice for producing tax legislation in the future.

• The project - including all the people in the project team - must be managed effectively and efficiently and all the project's objectives must be achieved within the agreed programme and budget.

1.6 From these high level objectives, a detailed project plan has been developed and this is used to keep track of progress.

The project team

1.7 We have set up a separate project team to carry out the rewrite of tax law. The team currently has the following structure:

• an Inland Revenue Project Director;

• a drafting team headed by a senior Parliamentary Counsel on secondment to the project;

• four mixed-discipline rewrite teams, each responsible for a different area of legislation;

• a small policy team;

• a project management and support team; and

• secretarial support.

1.8 One member of the drafting team works closely with each rewrite team on the actual rewriting of the legislation. Each rewrite team has three members from the Inland Revenue - a tax inspector, a lawyer and someone with a tax policy background - and also someone from the private sector who provides vital input from an outside perspective.

1.9 We are taking an innovative approach to the work in several ways. It is unusual for members of the Inland Revenue Solicitor's Office to be dedicated full-time to the preparation of legislation. It is a new departure for people with a private sector background to be involved in such work. And there are no precedents for Parliamentary drafters to be so closely involved, on a day to day basis, in the process.

Steering Committee

1.10 The main role of this Committee - which is chaired by Lord Howe of Aberavon - is to provide strategic guidance to the project. It needs to satisfy itself that the project is meeting its objectives of clarity and user-friendliness and is taking full account of private sector concerns.

1.11 The Committee clearly cannot scrutinise the rewritten legislation line by line to testify to its accuracy. Ultimately that is the responsibility of the project team. But it can verify that the project is being properly managed and has in place all the necessary processes to ensure that these objectives can be met. This will assure Ministers, Parliament and the outside world about the quality of the rewrite, thereby smoothing the passage of the rewrite Bills in Parliament.

Consultative Committee

1.12 Taxpayers and the professions (accountants, lawyers, etc.) are involved in the rewrite through the Consultative Committee. This has three elements:

• a core group of the main representative bodies will be involved throughout the project. This group includes representatives of the main tax professional and business bodies plus some others;

• a group of specialist representative bodies who receive the Committee's papers and who will be invited to attend meetings when a subject relevant to their interests is being discussed; and

• Inland Revenue and other government officials. The officials attending will vary depending on the subject matter being considered.

1.13 The role of the Committee is to ensure full consultation on the rewritten tax law with all the relevant private sector interests.

1.14 To provide a link between the two Committees, a representative of the private sector side of the Consultative Committee attends meetings of the Steering Committee as deputy chairman of the Consultative Committee, together with the Inland Revenue Project Director and other project team members as appropriate.