ACCESS FOR DISABLED PERSONS

HC Deb 06 July 2004 vol 423 cc755-65

'(1) The following shall be inserted after section 29 of the Capital Allowances Act 2001—

"29A Access for disabled persons

This section applies to expenditure if a person carrying on a qualifying activity has incurred it in pursuance of a duty under section 21 of the Disability Discrimination Act 1995."

(2) This section shall have effect in relation to expenditure incurred in relation to chargeable periods ending on or after 1st October 2004.'.—[Mr. Bacon.]

Brought up, and read the First time.

Mr. Bacon

I beg to move, That the clause be read a Second time.

Madam Deputy Speaker (Sylvia Heal)

With this it will be convenient to discuss the following: New clause 3—Expenses of disabled employees—

'(1) The Income Tax (Earnings and Pensions) Act 2003 is amended as follows.

(2) After section 203 (cash equivalent of benefit treated as earnings), insert—

"203A Employment costs resulting from disability

There shall be exempted from section 203 any benefit which satisfies each of the following conditions—

1. (a) the benefit is provided to a disabled employee;
2. (b) the main purpose of providing the benefit is to enable the employee to perform the duties of his employment;
3. (c) the benefit consists in the provision of any equipment, service, or facilities;
4. (d) the benefit is made available to the employer's employees generally on similar terms."

(3) After section 336 (deductions for expenses, the general rule), insert—

"336A Expenses of disabled employees

Where an employee has a disability, a deduction from earnings is allowed for any amount incurred by him if its main purpose is to enable him to perform the duties of his employment."

(4) This section shall apply for the year 2004–05 and subsequent years of assessment and shall be deemed to apply for the year 2003–04.'.

New clause 4—Definition of disability—

'In section 832 of the Taxes Act 1988, subsection (1), there shall be inserted at the appropriate place: disability" and "disabled person" shall, where the context so admits, have the meanings given to them by section 1 of the Disability Discrimination Act 1995, and cognate expressions shall be construed accordingly…"' New clause 8—Expenditure incurred in improving accessibility for disabled persons—

1. '(1) The Capital Allowances Act 2001 is amended as follows.
2. (2) In section 23(2) after "section 29 (fire safety)", insert—"29A (disabled access)".
3. (3) After section 29 insert—

"29A Disabled access

1. (1) This section applies to expenditure if a person carrying on a qualifying activity has incurred it in making adjustments within subsection (2) below to premises which he uses for the purposes of the qualifying activity.
2. (2) The adjustments referred to in subsection (1) above are those specified in subsection (3) below which are or will be required to comply with section 21 of the Disability Discrimination Act 1995.
3. (3) The specified adjustments are—
1. (a) installation of ramps to facilitate either access to the premises or use of the premises by disabled persons, and
2. (b) alterations to the premises to provide accessible toilets for disabled persons…"'

Mr. Bacon

I thank the Economic Secretary for his earlier kind words. What he said was very generous, although I have absolutely no idea whether he is correct.

These new clauses address a number of issues in the tax system faced by disabled people. They are essentially probing clauses designed to elucidate the Government's thinking in this important area.

New clause 2 would grant capital allowances on expenditure incurred by businesses in complying with their obligations under the Disability Discrimination Act 1995 to ease access to premises for disabled people. There is no doubt that the level of awareness of the needs of disabled people in the worlds of architecture and building design has grown significantly in recent years. For new building projects, it is often the case that careful thought and planning has been undertaken at the earliest stages in order properly to meet the needs of disabled people. None the less, it is also true that complying with the 1995 Act can impose significant costs on businesses, particularly in relation to older premises.

New clause 2 amends the Capital Allowances Act 2001, and applies to expenditure by a person carrying on a qualifying activity who has incurred it in pursuance of a duty under section 21 of the Disability Discrimination Act 1995.

New clause 3 recognises the extra costs disabled people incur in going to work. It would ensure that the tax system does not discriminate against disabled workers vis-à-vis their non-disabled colleagues.

The test for a deduction of an expense incurred when carrying out one's employment has remained virtually unchanged since its introduction in 1853. The general rule is that a deduction from earnings is allowed for an amount if the employee is obliged to incur and pay it as holder of the employment, and the amount is incurred wholly, exclusively and necessarily in the performance of the duties of the employment. As a judge said 50 years ago, those words are stringent and exacting: compliance with each and every one of them is obligatory if the benefit of the rule is to be claimed successfully". One of the main purposes of the Disability Discrimination Act 1995 is to ensure that disabled people are not discriminated against in their employment. Long before that legislation was enacted, there were—and still are—a range of exemptions from tax relating to disabled people's earnings from employment, focusing on matters such as home-to-work travel, adaptation of motor vehicles for business use, early retirement on ill-health grounds, and so forth.

As a rule, people with disabilities need to spend more than those without in performing the same tasks. Where additional expense is incurred solely by reason of their disability, one would expect a tax-neutral effect. Whether such additional expense has to come out of their own pockets, or be paid or reimbursed by a sympathetic employer, the logical result should be that people with disabilities should either receive an expenses deduction for tax purposes, or should not be assessed on any employer subsidy as a benefit in kind.

Therefore, new clause 3 would do two things. First, subsection (2) would exempt from tax any benefit in kind provided by an employer that consisted of equipment, services or facilities, the purpose of which was to enable the disabled employee to work. Its wording is loosely based on an existing set of regulations, the Income Tax (Benefits in Kind) (Exemption for Employment Costs Resulting from Disability) Regulations 2002/1596, which attempt to do much the same thing but which unfortunately are restricted to benefits that are provided under statutory arrangements such as the access to work scheme. Secondly, subsection (3) would relax the restrictive rule governing tax deduction for employees' expenses where disabled employees spend their own money in order to be able to work.

New clause 4 would bring the definitions of "disabled person" and "disability" in the tax legislation up to date by aligning them with the broad definition in the Disability Discrimination Act 1995. Many of the definitions of disability that are attached to tax reliefs, allowances and other forms of favourable treatment contained in the tax legislation are restrictive and outdated. The new clause seeks to introduce the more up-to-date and inclusive definition of "disability" into the tax legislation, bringing it into line with the modern thinking on disability in the Disability Discrimination Act 1995.

Section 1 of that Act defines a "disabled person" as one with a physical or mental impairment which has a substantial and long-term adverse effect on his ability to carry out normal day-to-day activities". There is statutory guidance to enable courts and tribunals to assess whether a person meets the requirements of the definition. The draft Disability Discrimination Bill, introduced at the end of last year as a Government initiative for the European year of disabled people, will in due course widen the definition still further. By contrast, where disability issues are dealt with in the tax legislation, disabled persons and disability are defined in such a way as to restrict the scope of the relief or the exemption being conferred, or are not defined at all, so as to leave scope for official discretion. In the former case, not all the people who could usefully benefit from the tax relief or the exemption in question are able to do so, because of the restrictiveness of the definition. In the latter case, access to the benefit or the exemption can become a lottery, depending on the attitude of the official charged with applying the legislation, particularly—as is often the case—when there is little or no departmental guidance.

Both restrictive definitions and the absence of definitions are anachronistic and unnecessary in an era when we have the benefit of statutory definitions that recognise modern thinking on disability. Some definitions have survived intact for hundreds of years, such as the definition of "incapacitated person" in the Taxes Management Act 1970, which includes any infant, person of unsound mind, lunatic, idiot, or insane person". With respect, I think the Treasury can probably do a little better than that.

The Low Incomes Tax Reform Group, in its report on the issue, which was called "Disability in tax and related benefits: the case for a modern and coherent approach" and published in December 2003, recommends the adoption of the Disability Discrimination Act 1995 definition of "disability" and "disabled person" throughout the tax legislation.

New clause 4 would enable the benefit of the tax reliefs and exemptions to be extended to all disabled people, and would provide guidance for officials charged with using their discretion to determine who is disabled and who should benefit from particular forms of tax-favoured treatment. It is unfair that some disabled people should benefit and not others, simply because the statutory definitions are out of date, ineffective, or absent.

In conclusion, the new clauses would recognise the special costs that can face both employers and employees in ensuring that disabled people can play a full part in the workplace and would also update the definitions of "disabled person" and "disability" for the purposes of tax legislation in a way that is almost certainly overdue.

4.15 pm

Mr. Laws

I want to speak to new clause 8, which is, I must confess, somewhat similar to the new clause 13 that we debated in the Standing Committee. On that occasion, the Financial Secretary responded on behalf of the Treasury and I indicated that some of her points were fair and reasonable. On reflection, however, I may have been too generous in acknowledging some of the hon. Lady's points so I want to take this additional opportunity and respond to them in relation to new clause 8.

I remind Members who were not present during our previous debate on the issue that the new clause was drafted by the CBI and the Disability Rights Commission and enjoys the support of both bodies. It relates to the duties imposed by the Disability Discrimination Act 1995, which will begin on 1 October 2004, whereby providers of services to the public will need to take reasonable steps to facilitate disabled persons wishing to make use of those services.

New clause 8 proposes that expenditure on ramps and accessible toilets for use by disabled persons be classified for tax purposes as expenditure on plant and machinery qualifying for relief as capital allowances. That would follow the established precedent of capital allowances being given for fire safety expenditure, as is currently the case.

In Committee on 24 June, the Financial Secretary put several counter-arguments to the new clause that we were debating, to indicate that the Treasury was not willing to support that proposal. I shall briefly run through her arguments. Her first argument was that the new obligations relating to disability access will apply to all service providers whether in the public, private or voluntary sectors, so it could be seen as unfair to give special financial support only to private sector businesses. That argument is partly countered by the fact that there is an existing precedent in relation to fire safety expenditure: it is possible to use capital allowances even though fire safety expenditure obviously relates to entities that are not merely business entities, which would have to fund such provision differently.

The DRC sent me a note raising several issues relating to what it described as the "spurious"—I hope it will not mind my quoting that word—arguments put by the Financial Secretary to counter our proposals. The DRC said: while we'd like to see more/better funding support across the board we would point out that there are sources of funding available to the public sector/voluntary sector to support physical alterations to premises which businesses cannot access". The commission helpfully sets out a series of areas where specific grants are made available—often through the Government—to help with disabled access. Many Members will already know about the large capital investment programme in new school buildings through the schools access initiative, designed to make school buildings disabled-accessible at very large cost. Those grants have been directly provided by the Government.

In addition, local authorities often provide small grants for community groups and other local groups, to make their facilities disabled-accessible. Central Government provide grants to local authorities to facilitate physical access to polling stations, and other grants are available for both private and public bodies through the national lottery distribution fund, millennium funds and the Heritage Lottery Fund, which can be fruitful avenues for voluntary organisations and other groups.

In other words, quite a number of alternative mechanisms are already available for the bodies that the Financial Secretary felt might be disadvantaged by the proposal. New clause 8 would provide a relief for businesses that do not benefit from that other Government support.

The second point that the Financial Secretary made in arguing against such a new clause was that it is clear that many of the adjustments needed to meet the requirements of the Disability Discrimination Act, including some of the most expensive adjustments, already qualify for tax relief as either a revenue expense, of through capital allowances."—[Official Report, Standing Committee A, 24 June 2004; c. 773.] Although that is a fair point, it is of limited relevance to new clause 8, because even the Financial Secretary was not trying to maintain that the existing reliefs relate to ramps and toilets in particular. Those are major items, which many organisations will need to purchase to make their premises disabled-accessible. Indeed, many Members of Parliament may discover that they need to make precisely those types of adjustment in the organisation of their own constituency offices. Many businesses will certainly want to make those adjustments.

At the time, I thought that the third reason that the Financial Secretary gave for not pursuing these proposals was a hopeful sign, but on further investigation, I am not sure whether it is quite so promising as the nod and wink that she gave me reason to believe that she was giving. The third reason that she gave was that we are considering the possibility of introducing such an allowance to cover structural alterations for most commercial buildings in the wider context of our ongoing review of the corporate tax regime."—[official Report, Standing Committee A, 24 June 2004; c. 773.]

The Disability Rights Commission's response to that point is that the timing of any such changes to the corporate tax regime will be past the symbolically important point when the new duties come into force. That is obviously in a few months' time. It points out: The incentive is needed now to maximise compliance by the Government's 2004 deadline … Moreover, it is likely that any such general allowance for expenditure on buildings would be at a rate similar to Industrial Buildings Allowance—currently 4 per cent. per annum. That would be too small to make any difference to small and medium-sized enterprises, which are likely not to have made the necessary adjustments to disabled access already. It is likely that larger entities have already allocated expenditure for those purposes. They may even have completed that expenditure.

The final point that the Financial Secretary made on the issue was that the Department for Work and Pensions had discovered that cost was not a factor for many entities in making provision for disabled access. That may well be the case for the larger entities that have already undertaken a lot of those works and made the relevant expenditure, but it is not likely to be the case for many SMEs. The Financial Secretary indicated in Committee that it might be unfair to introduce a new tax allowance, which other entities could not have taken advantage of earlier, to facilitate conversion for disabled accessibility, but we must appreciate the fact that such an allowance could largely benefit the smaller businesses that are struggling to pay the cost of making their premises disabled-accessible. In other words, the allowance might turn out to be well targeted as a consequence of its late introduction, as it would probably affect particularly those businesses that are struggling to make such provision and that will find it most difficult financially to make those conversions.

On reflection, I might have been a little generous by accepting some of the points that the Financial Secretary raised on 24 June. However, I understand that the Economic Secretary will respond to today's debate, so there is hope for us. Perhaps he will accept that his colleague's arguments were not entirely convincing and respond positively to some of the arguments that have been put forward by the Disability Rights Commission and the CBI—a powerful alliance of two bodies with special interest and expertise in the matter. In the light of comments on the Financial Secretary's arguments, I hope that the Economic Secretary will indicate that the Government will undertake a more constructive and positive approach.

John Healey

I am not sure whether I will disappoint the hon. Member for Yeovil (Mr. Laws) or not—he will have to wait and see—but as he would expect, I am entirely as one with my hon. Friend the Financial Secretary. We take seriously the arguments and evidence put to us by the Disability Rights Commission. I hope that I can give him an indication of the consideration that we are giving to the cases that it and others put to us.

The four Opposition new clauses relate to disability issues across the tax system. Labour's manifesto included a pledge to establish comprehensive and enforceable civil rights for disabled people, so I welcome the opportunity to reaffirm our strong commitment to those rights. I can also confirm that the Low Incomes Tax Reform Group, to which the hon. Member for South Norfolk (Mr. Bacon) referred, the Disability Rights Commission and the CBI are in detailed, continuing discussions with our officials on the range of issues covered by the new clauses and the points raised by the hon. Members for Yeovil and for South Norfolk. I place on record our appreciation for the thoughtful contributions that those organisations are making to help us to assess the case for future policy changes.

Given our strong commitment to the rights of disabled people and our support for them, we have no quarrel with the motivation behind the new clauses. However, we are not yet convinced that the specific changes to the tax system that they suggest would represent the best way of improving the rights of, and support for, disabled people.

New clauses 2 and 8 would provide capital allowances for the costs that businesses might incur when making their premises reasonably accessible to disabled people. As the hon. Member for South Norfolk made clear, the requirement on service providers to make their premises reasonably accessible derives from the Disability Discrimination Act 1995, which was passed by the previous Government. At the time, that Act was an important step forward for disabled people's rights, and we have been able to build on it. The requirement comes into effect in October this year.

New clauses 2 and 8 are similar in purpose to the new clauses 5 and 13 that were debated in Committee and subsequently withdrawn. However, new clause 2, which was moved by the hon. Member for South Norfolk, has a wider scope than those new clauses because its provisions are not limited to specific items of expenditure such as access ramps or accessible toilets. Our reasons for resisting it at this stage are compounded by our worry that such broad provisions could be manipulated and carry a high Exchequer cost. Additionally, as the provisions are broadly drawn, they could impose a significant compliance burden on taxpayers and the Inland Revenue, which would administer the scheme.

Like the previous Government, we have consistently encouraged all businesses to make adjustments as early as possible, rather than waiting for the provisions in the 1995 Act to come into force in October 2004. Common sense would suggest that many would think it unfair to introduce allowances at such a late stage. That would be especially unfair to businesses that had already acted promptly in the interests of disabled people by promoting the access that they may need. Research commissioned jointly by the Disability Rights Commission and the Department for Work and Pensions in 2002 showed that 40 per cent. of providers had made adjustments. Only 15 per cent. of respondents said that they had plans to make further adjustments to comply with the Disability Discrimination Act 1995. The research found that the cost of making adjustments to comply with the Act tended to influence the manner and timing of the adjustments rather than whether they were made at all. We have therefore concluded, as my hon. Friend the Financial Secretary has made clear, that the changes to the capital allowances system proposed both today and on an earlier occasion would not confer a significant benefit.

4.30 pm

The research confirmed that many adjustments needed to meet the requirements of the Act, including some of the most expensive, already qualify for tax relief, either as a revenue expense or through existing capital allowances. The cost of structural alterations to most commercial buildings is not covered by the capital allowances regime, but we are considering the introduction of allowances for commercial buildings in the wider context of our ongoing project to reform corporation tax.

Mr. Laws

Will the Economic Secretary give way?

John Healey

May I just make an observation about the points made by the hon. Gentleman? If he still wants to intervene, I shall give way. He is sharp in wanting to intervene, but perhaps he will be patient while I explain that the fire safety example that he gave does not give the lie to my general argument.

Mr. Laws

The Economic Secretary suggested that there might be a change to the corporation tax regime that would provide relief for some of the expenditure that we have discussed. Surely, however, that would take effect too far into the future?

John Healey

I cannot give the hon. Gentleman a time scale for the completion of the work or the decisions that will flow from it, but it is unlikely that we will have conclusions from the review or legislation in place by the October start date of the provisions of the Disability Discrimination Act.

The new obligations under the Disability Discrimination Act will, as my hon. Friend the Financial Secretary has argued before, apply to all service providers, whether public, voluntary or private, so giving special financial support only to private businesses could be seen by other sectors as unfair. As I have just said, the example of fire safety cited by the hon. Member for Yeovil does not give the lie to the general argument. The list of grants, many of them modest—he used the phrase "quite a number"—available to some organisations does not undermine the argument against providing special treatment for the private sector in preference to other organisations that must meet the requirements of the Act.

New clause 3 proposes further tax relief for disabled people for employment benefits and expenses. Under existing law, wherever equipment, facilities or services are used wholly, exclusively and necessarily in carrying out the duties of employment, there is no benefits charge where the employer provides the items in question. Where employees themselves pay the cost, there is a full deduction against earnings, so problems do not arise in those cases, as the hon. Member for South Norfolk acknowledged. Where equipment, services or facilities such as specially adapted wheelchairs or hearing aids are provided for disabled people for work purposes, but for which there is some private use at home, there is a general exemption. Beyond that, in June 2002 we introduced regulations—the hon. Gentleman referred to them—which ensure tax exemption for any benefits provided to disabled employees under any statutory arrangements, provided that the main purpose of the benefit is to enable the employee to perform the duties of an employment.

The hon. Gentleman made a parallel point when he said that the benefits exemption was too narrow because it was confined to provision under statutory arrangements. In our experience that is unlikely to be significant. As regards cases where benefits are not provided by employers under statutory arrangements, I should be glad to see any specific examples that he may have.

Furthermore, as the hon. Gentleman mentioned, an employer can provide transport for disabled employees, and pay for or reimburse their transport costs to enable them to commute to and from work, without any tax charge. Where additional costs are a necessary part of a disabled employee's employment, he or she can already claim a deduction for those costs.

To go beyond that would make it difficult to target the relief effectively and to devise an affordable scheme. The expenses rule proposed in the new clause could entail considerable costs and is likely not to be properly targeted at helping disabled employees with the additional employment expenses that they incur as a result of their disabilities. In summary, the existing provisions together provide a comprehensive benefits exemption and expenses relief, along the lines of the provisions set out in the new clause.

Finally, new clause 4 proposes the use of the Disability Discrimination Act 1995 definition of disability across the tax Acts. At this stage I am not convinced that that is necessary or desirable. The insertion suggested into section 832 of the Income and Corporation Taxes Act 1988 would not override the existing definitions in use. It would apply only to the few provisions in which disability is not defined. I shall return to that in a moment.

The hon. Member for South Norfolk mentioned the work of the Low Incomes Tax Reform Group and the report that it produced. That report gave examples of areas where there is a lack of explicit definition of disability, but many of the areas cited as examples, such as council tax or power of attorney, lie outside the Taxes Act and therefore would not be affected by the new clause.

I am uneasy about the new clause. The DDA definition is not settled or certain at present. It allows exclusions, and as the hon. Gentleman acknowledged, the draft disability discrimination Bill proposes further changes to that definition. The main area of the Taxes Acts where the word "disability" is not currently defined is in relation to the taxation of certain payments from insurance policies. In some cases it is possible that a policyholder might receive less favourable treatment if the DDA definition were used.

I hope that Opposition Members will accept that these are matters that we are discussing in detail with groups that are interested in representing disabled people or representing employers of disabled employees. I hope that hon. Members will feel that the debate has been a useful contribution to that process and that they will not press the new clauses to a vote.

Mr. Bacon

I thank the Economic Secretary for that useful and detailed reply. I agree that the debate has been constructive, and I hope he will feel that our having raised these matters has enabled him to set out the Government's policy more fully. I join him in paying tribute to the Low Incomes Tax Reform Group and to the Disability Rights Commission and the CBI for the important work that they are doing. I indicated that the new clauses were probing measures, and I hope that they have served their purpose. On that basis, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.