Capital Allowances Bill — 15 Jan 2001

Motion made, and Question proposed, That the Bill be now read a Second time.--[ Mr. Allen. ]

The project will bring the benefits of clarity and certainty to businesses and ordinary taxpayers. It has been widely welcomed and deserves the continuing support it has enjoyed in all parts of the House.--[ Official Report , 26 November 1996; Vol. 286, c. 170.]

I need to be able to find the legislation that is applicable, understand how it operates and advise my clients accordingly. For me, the Capital Allowances Bill represents a revolution in accessibility. It has a logical structure and for the first time in my experience it has actually been designed to help the user.

Some of the finest brains in the country are trying to understand tax law when they would be better employed producing wealth.

Paragraphs 10(7) and (8) (determination of value of shares) applies for the purposes of paragraph 47(1)(g) as they apply for the purposes of paragraph 10.

If, in a case where sub-paragraph (1) of paragraph 10 above applies, neither sub-paragraph (1) nor sub-paragraph (2) above has effect in relation to the expenditure referred to in sub-paragraph (1)(a) of that paragraph, then for the chargeable period related to the disposal or cessation referred to in sub-paragraph (1)(b) of that paragraph, any allowance in respect of that expenditure shall be a balancing allowance.

If the cost of providing a ship exceeds £80 million, the lessor is not entitled to capital allowance in respect of the excess.

The draft Bill is an impressive achievement by the Tax Law Re-write Team and we congratulate everyone involved. The Capital Allowances Act 2001 will demonstrate clearly the value of the Tax Law re-write process in improving the intelligibility of the tax legislation.

What stood out, however, was the professionalism of the job the re-write team had done and the light it shone on the notoriously opaque areas of the Tax Law.

Although the project has taken a good deal longer than the original estimate of five years--

the quality of the draft reflects the enormous amount of work undertaken by the revenue in consultation with organisations such as ours. It is a high quality product. It is simpler and therefore easier to understand.

We shall propose that the Revenue tax code is rewritten in plain English--a major task. The House has a duty to set out clear legislation, which in that area we have not done. We in the House will need to look at our procedures to see how that tax rewrite can be sensibly handled.--[ Official Report , 28 November 1995; Vol. 267, c. 1066.]

The language of existing tax law can be simplified, that the benefit 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.

The report was welcomed by my right hon. Friend the Member for Fylde (Mr. Jack), then Financial Secretary to the Treasury. He pointed out that it supported the Government's deregulation initiative--a point made by my hon. Friend the Member for Christchurch (Mr. Chope)--and confirmed that the Chancellor had asked the Inland Revenue to proceed with the preparatory work. Those early stages were driven by my right hon. Friend the Member for Fylde and I take this opportunity to pay tribute to his work on this major project and to his current work on the rewrite steering committee.

I was too busy doing other important things. I was struggling to manage public expenditure, Civil Service pay, the nationalised industries, the International Monetary Fund, the European Community budget--not to mention the Prime Minister.

Inertia can develop its own momentum.

The nature of property in this country, and its very complicated forms, render it almost impossible to deal with for the purpose of Income Tax in a very simple manner.

Consumption is so pernicious with respect to spirits that no man could wish there should be any limit to the duty so far as is consistent with the means of safely collecting it . . .

It is like trying to repaint Brighton Pier at a time when its owners are trying to extend it to the French Coast . . .

The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the smallest amount of hissing . . .

To restate, with minor changes, certain enactments relating to capital allowances.

This Part has effect in relation to the person to whom the relevant interest is sold as if . . .

The endless elaboration of existing rules to deal with changes in the outside world has fed upon itself. Even a simple change may interact with a mass of existing provisions. So getting that change to fit in properly will extend the jungle, and make it even more impenetrable.

Many people would like the project to go further towards simplification of the underlying tax policy. The process of rewriting the legislation is highlighting many archaic or cumbersome aspects of the tax code which they believe could be improved.

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 rules in section 198 in different ways.

What works well in one respect does not work well in another. But the current arrangement is seen as the best compromise.

A claim . . . for a first-year allowance in respect of expenditure to which 22(4)(c) applies . . . shall be accompanied by a certificate . . .

A person is entitled to a first-year allowance in respect of first-year qualifying expenditure . . .

The main significance of the extended definition in the present context is that it includes structures that can be moved only by being put on trailers.

No allowance is to be made under this Act unless a claim for it is made.

It was argued by the Inland Revenue that, because trading expenses are automatically deductible in computing trading profits, the effect of making a capital allowance a trading expense was to obviate the need for the allowance to be claimed and to make it automatically deductible.

Motion made, and Question put forthwith, pursuant to Standing Order No. 15 (Exempted business),

That, at this day's sitting, the Motions in the name of Margaret Beckett relating to Tax Simplification (Joint Committee), Tax Simplification, Human Rights (Joint Committee) and Human Rights and proceedings on the Capital Allowances Bill may be proceeded with, though opposed, until any hour.-- [Mr. Robert Ainsworth.]

The House divided: Ayes 291, Noes 8.

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