Tax Law Rewrite - report and plans 2007/08


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Foreword by the Paymaster General, HM Treasury

I am delighted to introduce this latest Report and Plans document from the Government’s Tax Law Rewrite project.

The past year saw completion of the project’s work on income tax, with the enactment of its fourth Bill, the Income Tax Bill. It took effect from 6 April 2007 having received cross-party support during its passage through Parliament.

The project is already well into the rewrite of corporation tax, which it aims to complete in two Bills during the next three years. The plan is to publish a draft of the first of these Bills early in 2008, for introduction into Parliament in late 2008. A draft of the second Bill should then follow early in 2009, for introduction in late 2009.

Each year I thank those outside Government, whose commitment in support of the project has been vital to its success. By the stage it reaches the statute book, the rewritten legislation has benefited hugely from the critical involvement of the project’s two Committees and more widely from all those in the tax community who scrutinize and comment on the drafts. The input of these users is invaluable in ensuring the quality of the finished product. We remain greatly indebted to them.

Dawn Primarolo
May 2007

Contents

Part 1: Introduction

This document

1.1 This is the latest in the Tax Law Rewrite project’s series of annual planning documents. It reviews our progress to date, including the work we have completed during the past year, 2006/07, and sets out our plans for the year ahead.

1.2 This document is split into four parts:

  • Part 1 (this part) provides a summary of progress so far.
  • Part 2 provides information on the main features of the Tax Law Rewrite project. It is essentially an introduction for those new to our work, covering our background, procedures and methods.
  • Part 3 provides a review, in greater depth, of our work and achievements during 2006/07 and in particular covers the new Income Tax Act.
  • Part 4 provides information on our plans for 2007/08.

Summary of progress and plans

1.3 To date the project has delivered the following:

  • The Capital Allowances Act 2001;
  • The Income Tax (Earnings and Pensions) Act 2003 (ITEPA);
  • The Income Tax (Pay as You Earn) Regulations 2003;
  • The Income Tax (Trading and Other Income) Act 2005 (ITTOIA); and
  • The Income Tax Act 2007 (ITA).

1.4 The main priority during 2006/07 was the introduction of the Income Tax Act, which was enacted on 20 March 2007. This Act completes the project’s work on rewriting the primary legislation on income tax.

1.5 We have also made good progress on the project’s next Bill, which will be the first on corporation tax and have begun work on the second and final corporation tax Bill.

Committee structure and consultation

1.6 In Part 2 we set out details of our committee structure and consultation process. As has been the case since the start of the project, our two outside Committees and many other members of the tax profession devote a great deal of time and effort to considering and commenting on our general approach and our draft material. In relation to the Income Tax Act, for example, we had great help and support for the rewrite of some long-standing and difficult anti-avoidance legislation; and on some of the more specialist tax reliefs such as the Venture Capital Trust and Enterprise Investment Scheme provisions.

1.7 The highly skilled input of those outside Government on these and many other topics continues to be indispensable. It is a voluntary contribution by very busy people. The project is most grateful for their expertise and commitment.

Part 2: Main features of the Tax Law Rewrite project

2.1 This part provides, as in previous years, details on a number of background aspects of the project, including:

  • our purpose;
  • approach and techniques used in our work;
  • the project team and its two committees;
  • our consultation process; and
  • the Parliamentary procedures that we follow.

Our purpose

2.2 The project was established in 1996. Its overall aim is to rewrite primary direct tax legislation to make it clearer and easier to use, without changing the law.

2.3 Underlying our overall aim are six critical success factors, all of which must be fully achieved if the project is to succeed. These factors are listed at Appendix A.

Approach and techniques used in our work

2.4 Our approach and techniques can be summarised as:

  • A new, more logical, structure for the rewritten legislation.
  • Use of modern language - as long as we can do this without changing the law or making its effect less certain.
  • Shorter sentences and better use of definitions.
  • Better signposts and similar rules grouped together, to make the rules easier to find.
  • A new format and layout to make it easier to read.
  • No change in underlying tax policy. But, where possible, we propose minor changes if these would further improve the rewritten legislation. Suggestions for other changes are passed to policy colleagues outside the project for further consideration.

2.5 Further details on this approach and our techniques are provided in Appendix B.

The Committees

2.6 A Steering Committee provides strategic guidance to the project. The Steering Committee ensures that the project is meeting its objectives of clarity and user friendliness and is taking full account of private sector concerns.

2.7 This Committee brings together a wide range of talents and experience, with members drawn from both Houses of Parliament, the judiciary, the legal and accountancy professions, consumer interests and business. It meets several times a year.

2.8 The current members of the Steering Committee are:

The Rt Hon the Lord Newton of Braintree OBE DL (Chairman)
Dr John Avery Jones CBE
Adam Broke
Baroness Cohen of Pimlico
Ian Dewar
Dave Hartnett
The Rt Hon Michael Jack MP
Eric Joyce MP
District Judge Rachel Karp
Professor John Tiley CBE
John Whiting

2.9 The Steering Committee’s Terms of Reference are:

  • To monitor and maintain the quality of the Tax Law Rewrite project’s work; and more generally to monitor, guide and maintain the overall progress and direction of the project.
  • To see that the project meets its published critical success factors.
  • To be aware of the work of the Consultative Committee and where necessary to resolve points of difficulty or disagreement arising in the consultative process.
  • To give evidence as invited during the Parliamentary process for scrutinising Tax Law Rewrite Bills.
  • To report as necessary from time to time to Treasury Ministers and more generally to guide and approve the wider publicity, reporting and consultation arrangements for the project.
  • To see that any lessons of wider value are drawn from the work of the project and to promulgate these as appropriate.

2.10 There is also a standing Consultative Committee, whose role is to ensure continuous consultation on the rewritten law with all the main private sector interests. It is chaired by the Project Director and meets several times a year. The members of the Consultative Committee who regularly attend meetings are:

Mark Nellthorp Chairman (Project Director)
Brian Atkinson - 100 Group
Adam Broke - Special Committee of Tax Law Consultative Bodies
Colin Campbell - Confederation of British Industry
Russell Chaplin - London Chamber of Commerce & Industry
Mary Fraser - Association of Chartered Certified Accountants
Malcolm Gammie CBE - QC The Law Society
Keith Gordon - Chartered Institute of Taxation
Terry Hopes - Institute of Chartered Accountants in England and Wales
Francis Sandison - The Law Society
Wreford Voge - Chartered Institute of Taxation
Professor David Williams - Office of the Social Security Commissioners

Our Internet site

2.11 The project maintains an active area of the HMRC internet site. It includes:

  • The papers and minutes of the Steering and Consultative Committees.
  • Our planning documents.
  • A consultation page, which features all of the draft legislation, explanatory notes etc that we put out for consultation.
  • All of the project’s legislation which has been so far completed and enacted.
    During the course of the year ending 31 March 2007, the project’s Internet site received around 200,000 visits.

Consultation

2.12 We are committed to proceeding with our work on the basis of full consultation. We have developed that process to meet feedback on our previous rewrite Bills.

  • As we develop draft clauses, we involve the relevant specialists elsewhere in HM Revenue & Customs and, where practicable, specialist users.
  • We make initial draft clauses available on the internet and invite comments from anyone with an interest. We also discuss the drafts with our Consultative Committee. This helps to identify issues (of substance or language) in good time.
  • We revise the draft legislation in the light of comments received. The revised legislation may be run past those who expressed comments to check we have understood them correctly. The revised legislation is invariably published as part of a draft Bill for formal consultation.
  • Following the formal consultation, we prepare a response document setting out the comments received and how we have dealt with them before the Bill is introduced into Parliament. This often involves further discussion with our Committees and others who have commented on the details of the responses.

2.13 Our consultation process has evolved somewhat over the life of the project. In the early years, we tended to put out quite large blocks of draft legislation, published formally as Exposure Drafts. Now we normally put material out in smaller parcels, more frequently, on the Internet, as and when it is ready. This precedes the full draft stage, where a Bill is published as a whole. The feedback we have had is that our consultees and users prefer the smaller parcel approach and we believe that it is working well.

2.14 We supplement all this with structured consultation on particular topics with specialist groups. This applies for example to topics such as employee share schemes, life insurance gains and tax reliefs for venture capital investments. We continue to look for ways of improving the consultation process to decrease the burden on those who review our work while maintaining the high quality of rewritten legislation.

Changes in the law

2.15 The Tax Law Rewrite project has a clear remit to rewrite existing tax law as it stands. That remit excludes the possibility of making substantive changes to the law, other than minor identified changes at the margin, intended in the main to bring clarification or consistency or to bring the law into line with well established practice.

2.16 This fact – that the project’s remit is to restate the law, not to change it – is sometimes not fully appreciated and can lead to misunderstanding. People sometimes ask: if you are going to all the trouble of rewriting the law, why not take the opportunity of changing it substantively?

2.17 At the project’s inception the Government decided that rewriting the law (to make it clearer and easier to use) itself provided major benefit and that it was important to focus fully on this aim. The agreed Parliamentary procedures for the project’s Bills, which considerably streamline the normal legislative process, are based on the premise that the Bills do not change tax law and are uncontroversial. They allow a very large parcel of legislation to be enacted, in a way which would be impossible if the Bills had to compete for space with the Government’s diverse political priorities in the main legislative programme.

2.18 Rewrite is not an alternative to simplification. Indeed, by clarifying the existing law and providing a more robust legislative base on which to build, rewrite can facilitate simplification. For example, work on the Income Tax Act led to simplification in the provisions relating to charities in Finance Act 2006. By illuminating complicated rules rewrite can help in the development of proposals for change. For example, work on the Income Tax (Earnings and Pensions) Act highlighted a relatively simple way of sidestepping liability on remuneration in the form of shares. This led to changes in the legislation to close this loophole. The project, its Committees and wider tax community participating in the rewrite process are encouraged to make suggestions for substantive improvements to tax law, even if they cannot be dealt with in rewrite Bills.

2.19 The priorities of HM Revenue and Customs are to improve customers’ experience of dealing with the department, to increase levels of compliance and to increase our internal cost effectiveness. Substantive simplification of tax law contributes to all of these. Any suggestions for changes that bear on these priorities are particularly welcome and like all suggestions for policy change will be pursued with the relevant tax specialists elsewhere in HMRC. Changes of this sort may have the potential to contribute to reducing taxpayers’ administrative costs, on which there has recently been a major measurement exercise.

Parliamentary procedures

2.20 Finance Bills are already substantial Bills and it is not practicable for the project’s rewritten clauses to be included in them. Rewrite work is therefore considered by Parliament in separate rewrite Bills. Rewrite Bills are not consolidation Bills, although they share many of the same features, and it was always clear that Parliament would not be able to deal with them under the ordinary procedure for public Bills. Parliament has therefore adopted a streamlined procedure, which allows it to scrutinise the rewritten legislation properly but without opening up debate on the full range of fiscal policy matters. This is because we aim in general to reproduce the effect of the existing law.

2.21 The House of Commons Procedure Committee published their report – Legislative Procedure for Tax Simplification Bills – on 30 January 1997. This report recommended that Rewrite Bills should be introduced in the House of Commons and then referred, on Second Reading, to a Joint Committee of both Houses. The report also proposed that the Joint Committee should have a Commons majority and be chaired by a member of that House.

2.22 These recommendations were accepted by the House of Commons and reflected in Standing Order No 60, passed on 20 March 1997. The House of Lords Procedure Committee endorsed this approach in November 2000. After our first Bill on capital allowances was introduced in Parliament in January 2001, the detailed procedures were finalised. Both Houses agreed to proposals that the Joint Committee should consist of seven members of the House of Commons and six members of the House of Lords. The Committee would elect its own chairman from among its members, determine when and how often it would meet and decide how it would tackle the task of scrutinising the rewritten legislation. All four of the project’s Bills so far have been handled successfully in this way. For all four, the Chairman of the Joint Committee has been the Rt. Hon. Kenneth Clarke QC MP.

Members of the project teams

2.23 The project’s full time members (around 30 people) are drawn from a variety of backgrounds. Most are from different parts of HM Revenue & Customs itself. Some are seconded to the project from the Office of Parliamentary Counsel, supplemented as necessary by freelance drafters (all ex-Parliamentary Counsel). The project has a researcher recruited from the academic world and has always aimed to employ a significant number of people with a background in the private sector. In 2007/08, we shall have five people on the project recruited from the wider tax profession. Three members of the project qualified outside the United Kingdom - in Australia, New Zealand and South Africa. It is one of the project’s great strengths that people bring diverse backgrounds and experience to the work.

Costs and benefits of the project

2.24 The direct costs of the project for HM Revenue & Customs are about £m3 per annum. These are the direct costs of the project itself; in addition there have also been some costs elsewhere, in terms of policy specialists vetting drafts and so forth, though these have not been large. The project does not take up any IT development costs.

2.25 Consultants have questioned users about the benefits of rewritten legislation and in particular whether benefits can be quantified. Not entirely surprisingly, the general consensus is that it is difficult to measure benefits accurately. The new law is seen to be a considerable benefit to new entrants to the profession. Respondents indicate that for existing users there is an initial transitional period in which they take time to familiarise themselves with the rewritten law. They predict confidently that after this initial period the legislation will give rise to time and efficiency savings. However, they find this very difficult to quantify. Where people are able to put some value on the benefits, it tends to be with rather vague expressions such as “around an hour a week”; “maybe an hour a month”; or “a few hours a year”.

2.26 This makes actual quantification of benefits problematic. However, some attempt can be made by using the Department’s management information about numbers of tax professionals. A time saving of (say) 3 hours a year per person on average would be the equivalent of an annual benefit of around £m18. A time saving of one hour a month would be the equivalent of an annual benefit in the order of £m70. The benefit from the project is likely to be something within this range. For the same reasons as in the private sector, the work of the project is likely to produce efficiency savings within the Department but these are similarly difficult to quantify.

2.27 The figures above do not take account of what one might term unregistered tax professionals. Increasingly, with the advent of tax credits, many more advisers (e.g. TaxAid and Welfare Rights offices) are being drawn into relevant income tax law by the tax credits legislation’s reliance on income tax law to determine income of claimants (rather than Social Security law as in the past). For this growing constituency rewritten legislation is a very useful improvement.

Part 3: What we achieved in 2006/07

Progress in 2006/07

3.1 During the year we:

  • Prepared for introduction into Parliament the Income Tax Bill – taking account of responses to the published draft;
  • Assisted Government Ministers during the passage of the Bill through Parliament, which finished with Royal Assent in March 2007;
  • Made considerable progress in the drafting of clauses for the project’s fifth Bill, which will be its first corporation tax Bill; and
  • Began work on drafting clauses for the project’s sixth and final corporation tax Bill.
    The Income Tax Act (“Bill 4”)

3.2 The project’s fourth Bill received Royal Assent on 20 March 2007 and came into force on 6 April 2007 as the Income Tax Act (ITA). This Act completes the project’s work on rewriting the income tax code.

3.3 It contains rewritten legislation for the following:

  • basic provisions about the charge to income tax, income tax rates, the calculation of income tax liability and personal reliefs;
  • various specific reliefs, including relief for losses, the enterprise investment scheme, venture capital trusts, community investment tax relief, interest paid, gift aid and gifts of assets to charities;
  • specific rules about settlements and trustees, deduction of tax at source, manufactured payments and repos, accrued income profits and tax avoidance; and
  • general income tax definitions.

3.4 The Act also contains, in sections 1028 and 1029, powers to enable an order to make additional consequential amendments or to correct any errors which might be made by the Act. The power to make additional consequential amendments is on all fours with that in section 882 of ITTOIA.

3.5 The power to correct errors is new. It will be limited to undoing changes made by the Act so as to restore the law to what it was before the Act was enacted. In particular, it is envisaged that it will serve to enable errors in making consequential amendments to be corrected. Neither power can be used after 5 April 2010 (three years after the Bill is due to come into force). An undertaking has been given in Parliament that neither power will be used without the agreement of both the Tax Law Rewrite committees.

3.6 The Act has no direct application to corporation tax, but where provisions previously applied to both income tax and corporation tax those provisions have been amended so that they now apply to corporation tax only.

Consultation

3.7 The formal 12 weeks consultation on this Bill ran from March to May 2006. During this period we issued over 400 copies of the draft Bill and received over 3,000 visits to our internet site, which contained a copy of the draft Bill.

3.8 We received 16 written responses chiefly from representative and professional bodies, reflecting the comments of their members. The majority of the clauses in the draft Bill had been published previously and respondents tailored their comments accordingly. In the main supportive and helpful suggestions to further improve our clauses were offered and accepted.

3.9 We also published revised drafts of legislation for consultation over the summer, to address provisions in Finance Act 2006 relating to trust modernisation and Charitable Trusts.
3.10 In September 2006 we issued a response document setting out the results of the consultation on the draft Bill and on the material picking up the changes made by Finance Act 2006. We also published a revised draft of the Bill on the internet to enable our respondents to monitor progress.

3.11 In December 2006, after the Bill was introduced, we published revised draft legislation on the Accrued Income Scheme. These clauses had been developed from those previously included in the draft of our third Bill (which became ITTOIA) in early 2004 but had not been included in that Bill when it was introduced as a reform of the legislation had been anticipated. As that reform did not materialise, it was judged desirable to include the rewritten material in this, the final income tax Bill to be produced by the project. This legislation, exceptionally, was included in the Bill at the Joint Committee stage.

3.12 The draft Bill contained details of 141 proposed minor changes to the statute. These proposed changes were overwhelmingly supported by respondents. Their responses and our own ongoing work led to the introduction of some additional changes all of which were discussed by the Tax Law Rewrite Committees. There were also 7 changes relating to the addition of the Accrued Income Scheme clauses. In total 162 changes were made by the Act. These are listed and explained in detail in the Explanatory Notes to ITA.

3.13 We are very grateful to all those who commented on these drafts and to those with a specialist interest in particular subjects who assisted us. In particular we are grateful to those who commented on the draft clauses on accrued income profits in the short period available at the turn of the year.

Parliamentary process

3.14 The Bill was introduced in Parliament, as planned, in December 2006 where it followed the now established special procedure for a rewrite Bill.

3.15 The proceedings are documented in Hansard. The key dates are:

  • Second Reading Committee - House of Commons – 17 January 2007
  • Scrutiny by Joint Committee of both Houses – 24 January 2007
  • Third Reading - House of Commons – 20 February 2007
  • Second and Third Reading - House of Lords – 19 March 2007.

3.16 The project prepared a Memorandum of Evidence for the Joint Committee. This is available in full in Hansard as an annex to the Joint Committee’s minutes. The memorandum covered issues such as:

  • the purpose and content of the Bill;
  • an analysis of the proposed changes in the law and their effect in principle and practice;
  • a discussion of some particular features of the Bill, such as the calculation of income tax liability; and
  • the amendments about accrued income profits.

3.17 The Memorandum of Evidence supplemented the detailed Explanatory Notes (which comprise commentary on the legislation and details of the changes in the law made by ITA). In addition to the written evidence the Joint Committee heard oral evidence from members of the project.
3.18 In its report the Joint Committee stated:

“The Committee is of the opinion that the Bill is a welcome clarification of the existing law and will be easier to use and more accessible to Parliament, the judiciary, informed professionals, business people and other users of the legislation. The Committee is satisfied that the only changes that the Bill makes to the existing law are of such minor significance that they need not be referred to the attention of Parliament. The Committee looks forward to the preparation of future Bills under the auspices of the Tax Law Rewrite Project.”

3.19 The Joint Committee particularly recognised the valuable contribution of all of those who had commented on the draft Bill and earlier consultation papers. This was echoed in the debates in the Commons and the Lords where the Bill received cross-party support.

The corporation tax Bills (“Bills 5 and 6”)

3.20 Work is well under way on rewriting corporation tax legislation. Draft clauses rewriting for corporation tax purposes legislation that shared a common source with provisions rewritten in ITTOIA were published in the summer of 2006. These were deliberately drafted to reflect the drafting of ITTOIA wherever possible to ensure consistency and ease of reference for readers. The project has also published for consideration draft clauses on a variety of other subjects.

3.21 The approach taken for the corporation tax rewrite reflects many of the principles adopted for income tax. For example, the first of the two corporation tax Bills covers provisions relevant to computing a company’s income (the same ground as covered by ITTOIA for income tax). It will include provisions that are particular to companies such as those for loan relationships, derivatives and intangible fixed assets as well as those that mirror provisions within ITTOIA.

3.22 Work has also started on Bill 6 which, like the Income Tax Act, is concerned with reliefs and special circumstances, such as avoidance. It is where we expect to rewrite provisions specific to groups, such as group relief, as well as those about the interaction between a company and its owners, such as those dealing with distributions.

3.23 The draft legislation that we issued for consultation during the year on a variety of subjects within Bill 5, and relevant response documents (all of which are available still from the Internet) were:

 

Paper

Date of issue

Paper CC/SC (06) 06 – various ITTOIA related provisions

May 2006

Paper CC/SC (06) 07 – ITTOIA related provisions on Trading, Property and Partnership Income

July 2006

Paper CC/SC (07) 02 – Accounting periods

February 2007

Paper CC/SC (07) 03 – Company residence

February 2007

Paper CC/SC (07) 04 – Non-UK resident companies

February 2007

Paper CC/SC (07) 05 – Other relief for employee share acquisitions

February 2007

Paper CC/SC (07) 06 – Additional relief for expenditure on research and development

February 2007

Paper CC/SC (07) 07 – Companies with investment business

February 2007
Responses

Paper

Date of issue

Responses to Paper CC/SC (06) 06 – ITTOIA related provisions

April 2007

Responses to Paper CC/SC (06) 07 – Trading, Property and Partnership Income

April 2007

3.24 We are very grateful to all those who have commented on these drafts and to those with a specialist interest in particular subjects who have assisted us.

Links between project and Finance Bills

3.25 As many people involved in the project are aware, it is important for it to keep in regular contact and discussion with those responsible for preparing Finance Bills, and vice versa.

3.26 The project has maintained close links in 2006/07 with members of the Office of the Parliamentary Counsel who are working on the Finance Bill. We have also kept up a dialogue with policy people in HM Revenue & Customs. We plan to maintain these links in 2007/08.

Review of the project’s third Act

3.27 In line with our approach on earlier Tax Law Rewrite work, we are planning to commission a review of ITTOIA during 2007/08.

Acceleration of the Rewrite

3.28 Up to now there has been a gap of two years between rewrite Bills. We have discussed and agreed with the two committees plans to accelerate the work on the second of the two Corporation Tax bills. This affects our work plans for 2007/08 set out in Part 4. We hope that this acceleration will be welcome because it will mean that the income tax and corporation tax codes will be brought more rapidly into line and the benefits of rewritten legislation will be realised more quickly. We have been mindful of the impact of acceleration on consultees and have discussed with our committees how to ensure the consultation process remains as effective as it has been to date.

Part 4: Programme of work for 2007/08

4.1 We are continuing with our approach of publishing self contained coherent Bills that represent a staged rewrite of the law.

4.2 On the basis of the resources now available to the project we are working to the following timetable:

  • Following a period of consultation, we aim to have our fifth Bill ready to introduce into Parliament late in 2008; and
  • In parallel, we shall push ahead with substantive work on the project’s sixth Bill, on a timetable that would see it ready for introduction into Parliament late in 2009.

4.3 The following paragraphs set out in more detail what we expect to achieve in the next 12 months.

First corporation tax Bill (“Bill 5”)

4.4 Our main task is to finalise the content of Bill 5. We intend to issue a draft Bill early in 2008. This will allow sufficient time for full consultation and enable us to take account of comments received in good time for introduction of the Bill in Parliament before the end of 2008.

4.5 Our present plans are for Bill 5 to include provisions on:

  • trading and property income;
  • loan relationships;
  • derivatives; and
  • intangible fixed assets.

4.6 We expect to have a large proportion of draft clauses and explanatory notes exposed for consultation by July 2007.

4.7 To achieve this we need to:

  • adjust clauses to take account of responses received to the draft clauses published;
  • complete in line with our timetable work currently in progress or planned;
  • adjust clauses to take account of the Finance Act 2007 as necessary;
  • finalise the consequential amendments, transitionals and repeals Schedules; and
  • review the drafting style and consistency of approach.

Second corporation tax Bill (“Bill 6”)

4.8 Our present plans show that Bill 6 will include clauses on:

  • losses, various reliefs and distributions;
  • close companies and exempt bodies;
  • groups of companies, controlled foreign companies and transfer pricing;
  • activities subject to special treatment and avoidance;
  • the calculation of tax; and
  • general corporation tax definitions.

4.9 We plan to have some draft clauses, together with draft explanatory notes, ready for our Committees during the autumn of 2007. Our aim is to publish most of the remaining draft clauses, again with explanatory notes, during 2008.

Appendix A

Critical success factors

Underlying our overall aim are six critical success factors, all of which must be fully achieved if the project is to succeed.

  • 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 continue to scrutinise and enact the rewritten legislation in accordance with the clearly defined and appropriate parliamentary procedures to an agreed timetable.
  • The main users, both inside and outside HM Revenue & Customs, 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 HM Revenue & Customs 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 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 the project’s objectives must be achieved within the agreed programme and budget.

Appendix B

Rewrite Techniques

We use a number of techniques when rewriting legislation. These are all different ways of making the legislation easier for the reader to understand, while preserving its technical effect.

Structure

By far the most useful of these is to establish the best structure for the legislation. As time goes by and legislation is amended, its structure begins to creak and it is often possible to improve it considerably by taking it apart and setting it out in a better order. This process involves the detailed analysis of all the existing legislation on a particular topic, as well as any relevant extra-statutory concessions and other non-statutory material. We then reconstruct the propositions in the most logical order. This initial analysis is usually much harder and more time-consuming than first expected.

This reordering at a detailed level is complemented at a higher level by the reordering of material within the Acts and between Acts.

Drafting style

We use colloquial English wherever we can, adopting shorter sentences in the active, rather than passive, voice. We replace archaic expressions with more modern ones, taking care not to change the law inadvertently by rewriting words or expressions that have a well understood meaning. We harmonise definitions across the Acts where possible, and then make it easier for the reader to find defined terms. We group similar rules together in one place, and make greater use of signposts to guide the reader to other relevant provisions. And we continue to explore other techniques for making legislation more accessible.

These techniques include:

  • the use of shorter subsections and sections as well as shorter sentences;
  • method statements;
  • formulas;
  • the use of tables where appropriate;
  • the use of abbreviated references to Acts;
  • the use of lettered conditions;
  • the use of informative labels for definitions wherever possible;
  • our attempt to achieve gender neutral drafting so far as it is practicable to do so at reasonable cost to brevity and intelligibility; and
  • the use of non-statutory explanatory materials such as Explanatory Notes and Tables of Origins and Destinations.

We remain willing to consider new techniques and to develop existing ones if we can improve the legislation still further by doing so.

Format and layout

We have always recognised that the way the text is presented on the page can make an important contribution to the overall clarity of the legislation. But we also acknowledge that any decision on the format of Bills remains a matter for Parliament. In February 1998, partly as a result of our work, a working group was set up under the chairmanship of the Clerk Assistant, House of Lords, to review the format of the statute law. This working group recommended a new format for all public Bills, which drew heavily on our research. Their recommendations were considered by both Houses in 1999 and accepted.

The new statutory format now applies for all public Bills and has been used for all our rewrite Bills. It incorporates many – although not all – of the new features developed by the project. We are pleased that our work has been influential in contributing to this significant improvement.

Minor changes

To achieve our overall aim our rewritten legislation has to be not only clear, but also technically accurate. It must reproduce the effect of the existing legislation, except where we can make a minor change in the interests of further simplification. The Project Team is responsible for the overall accuracy of the rewritten legislation. Accuracy is assured largely by exposing the draft clauses to the close scrutiny of a series of internal and external experts through our extensive consultation processes.

The minor changes in law or in approach that we propose typically involve correcting small errors, legislating an extra-statutory concession, or dropping material from the existing legislation which is no longer necessary. We aim at every stage of the consultative process to identify clearly all such changes and to highlight any issues that may arise. In this way we seek to ensure that each minor change is fully examined before Parliament is asked to enact it.

It is difficult to define in precise terms what constitutes a “minor change” for the purposes of the project. The project’s Steering Committee have suggested that we should take a reasonably bold approach in the first instance, in identifying and proposing such changes as part of the project’s work. All changes are subject to the thorough and open consultative process through which our product is scrutinised; those which go too far can be (and are) challenged by users and rejected. Ultimately, the rewrite Bills are considered by Parliament and it is for Parliament to decide what is acceptable and should be enacted.