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Tax Law Rewrite : The Way Forward: Chapter 1: Introduction


Chapter 1: Introduction

1. This consultative document sets out how we believe the tax law rewrite project should be taken forward and asks for your comments and views by 1 November 1996.


2. In his Budget Statement last November, the Chancellor of the Exchequer announced the project to rewrite tax legislation in clearer, more user-friendly language. He said:

"Tax law has become too long and too complicated. Some experts have described it as incomprehensible. The Inland Revenue will shortly be publishing a report on tax simplification. We will propose that the Revenue tax code is rewritten in plain English a major task."

3. Our report was published on 12 December ("The Path to Tax Simplification" and "The Path to Tax Simplification a Background Paper"). It set out in detail the reasons why a rewrite was needed and what it would involve. The report included examples of rewritten legislation.

4. Commenting on the report, the Financial Secretary to the Treasury said:

"Preparatory work will now go ahead in full consultation with the private sector on the main proposal. This is to rewrite over about five years most of the primary legislation on the Inland Revenue taxes in simpler, more user-friendly language, which will be easier for everyone to understand. It will of course be some time before we begin to see the full benefits of this major project ... I am convinced that the rewrite programme, when complete, will reduce the compliance costs which the tax system imposes, in one way and another, on every business and taxpayer in the country."

5. In both its "Interim Report on Tax Legislation" (November 1995) and its "Final Report on Tax Legislation" (June 1996) the Tax Law Review Committee (TLRC) also concluded that a rewrite was needed. We have taken account of their reports in preparing this consultative document, and of our informal contacts with a wide range of tax professionals and others since the rewrite project was announced.

The rewrite project

6. The scope of the rewrite project was described in "The Path to Tax Simplification" and its Background Paper. The main points are as follows.

7. The project is to rewrite most of the existing primary legislation on Inland Revenue taxes that is, Income Tax, Corporation Tax, Capital Gains Tax, Inheritance Tax, Petroleum Revenue Tax and Stamp Duties.

8. The rewrite will use several techniques to make the legislation easier to understand, including plain language, rationalisation of definitions, reordering and renumbering, omitting outdated or unnecessary material, and better signposting and layout. The examples in last December's Background Paper show the substantial improvement which can result.

9. The project will be led by the Inland Revenue, but will proceed on the basis of full consultation with the representative bodies and taxpayers generally. In addition there will be direct private sector involvement in the project, to ensure that taxpayers' concerns and the concerns of the tax professions are taken into account throughout.

10. We estimate that completing the rewrite will take around five years. It will entail costs to both the public and private sectors which the Government believes will be substantially outweighed by the long term benefits, to business and self-employed taxpayers in particular. However, when the first tranche of the rewrite is completed, there will be a 'stocktaking' to assess whether or not the aims of the project are being met and to give the opportunity to modify the project as necessary to achieve the best results.

11. In the course of rewriting existing legislation, we expect that there will be cases where a real improvement can only be achieved by simplifying minor rules, subject to the approval of Ministers and Parliament. These minor policy changes apart, the project is not about simplifying the policy underlying the Inland Revenue taxes. Treasury Ministers will continue to consider tax policy changes, including proposals for policy simplification, in the normal way. However, the rewrite should make it easier to identify where there is a case to be made for policy reform.

12. Nor is the project directly about improving Finance Bills in the short term. As the rewrite proceeds it will produce clearer legislation which will make it easier to produce clear amendments. But other proposals for improving Finance Bills will be pursued separately. In particular, we will shortly be consulting about improved explanatory material for Finance Bills.

This consultative document

13. A successful rewrite needs careful planning and the close involvement of those who use the law. The rest of this consultative document sets out our proposals, all of which are open to change and modification in the light of reactions to them.

14. The next four chapters are about what the finished product might look like:

Chapter 2 covers the general drafting approach for the rewrite

Chapter 3 discusses design and layout issues

Chapter 4 discusses the way tax legislation is ordered overall and how that could be improved

Chapter 5 discusses the case for a new numbering system for tax legislation.

15. The following four chapters discuss how we could go about creating the finished product:

Chapter 6 discusses how the ordering and numbering systems chosen can best be implemented, and introduces the idea of a 'ghost code'

Chapter 7 seeks views on whether the rewritten law should be brought into effect in stages or all at once in a 'Big Bang', and how this issue interacts with some of the other issues discussed in this document

Chapter 8 discusses the order of rewriting, in particular which area or areas should be tackled first

Chapter 9 discusses a key issue: how best to involve users and the tax professionals fully in the rewrite, through consultation and by taking part directly in the work. It sets out Ministers' decisions on a steering group for the project. It also covers the arrangements for stocktaking at the end of the project's first phase.

16. Finally,

Chapter 10 summarises the other chapters and lists the points on which we seek comments and views.

Our general approach

17. The purpose of the project is to make our primary tax legislation clearer and easier to use. The following chapters say how we propose to achieve that. But first we need to be clear about who the users are.

18. Most obviously they are taxpayers themselves. Many taxpayers doubtless rely on explanatory material rather than the legislation itself. But we believe that they would use the legislation rather more if it were made more accessible to them. And by making our legislation clearer, the rewrite will lead to clearer explanatory material, more easily produced, for taxpayers who do not consult the law directly. In many cases, the rewritten legislation should be clear enough to be used unaltered in guidance leaflets and other explanatory material.

19. Second, there is a significant body of people and institutions employers being the prime example on whom the law imposes specific obligations in addition to those they have as taxpayers.

20. The third category of users is those acting for the taxpayers in a professional capacity, be they accountants, lawyers or other professionals. They probably constitute one of the main direct users of tax legislation at present.

21. Fourth, there are those who apply, enforce and interpret tax law, a category ranging from Revenue staff to judges in the higher Courts.

22. Finally, there is a small but important category, with Ministers and Parliament at the core, concerned primarily with changes to tax law.

23. This is a very disparate collection of users with differing needs and differing levels of expertise. So our aim is not to make all tax law accessible to everyone. Rather we will try to tailor the particular area of law being rewritten to those who will actually use that law.

24. When preparing this consultative document, it is these groups of users, and how they use the law, which we had in mind.

Response invited

25. You are invited to comment on the questions raised in this document and summarised in Chapter 10. (If you wish, your comments will be treated in confidence.) We would be grateful for comments by 1 November 1996 to:

Ajit Philipose,
Simplification Project,
Inland Revenue,
Room 643,
South West Wing,
Bush House,

26. Comments can be sent by e-mail to

27. After the comments have been received, the Government will publish its reactions to them and its conclusions on the issues raised in this document, and how it will proceed with the next stage of the project.