§ 3.16 p.m.
§ The Lord Chancellor (Lord Mackay of Clashfern)
My Lords, I beg to move that this Bill be now read a second time.
The Bill consolidates the enactment relating to taxation and chargeable gains presently found in the Income and Corporation Taxes Act 1970, the Capital Gains Tax Act 1979 and in annual Finance Acts from 1970 onwards. This consolidation Bill, which re-enacts legislation providing for the taxation of the chargeable gains accruing both to individuals and to companies, will therefore serve the useful purpose of restating the current law but in a readily accessible form.
The Bill has been drafted by a former parliamentary counsel engaged by the Law Commission and is another example of the outstanding efforts of the Commission in keeping the statute book in good order.
If your Lordships are content to give the Bill a Second Reading, it will be referred in the usual way to the Joint Committee on Consolidation Bills.
Moved, That the Bill be now read a second time.—(The Lord Chancellor.)
§ Lord Stoddart of Swindon
My Lords, perhaps I may ask the Lord Chancellor one question. He says that the Bill will restate the law in a more accessible form. May we also be assured that it will also be in a more understandable form?
§ The Lord Chancellor
My Lords, the principle of consolidation is to restate the existing law. That is what the Bill does. The form in which it is stated, and the structure of the Bill, help understanding. Therefore I believe that I can fairly claim that it is a move towards a more understandable form of legislation also.
§ Lord Mishcon
My Lords, perhaps I may at once from these Benches re-echo the compliment that the noble and learned Lord most properly paid to the Law Commission. However, I believe that a Bill which has six parts, 12 schedules and 291 clauses and consists of 320 pages ought at least to be debated for a few minutes in your Lordships' House. I confess at once 118 that I have not read every single clause, although I am absolutely sure that the noble and learned Lord who sits on the Woolsack has.
It is interesting to note that we have a good custom, especially in complicated legislation, which provides that derivation clauses are set out in a table. The Bill has a derivation table. The Bill deals with matters of taxation. Those who are engaged professionally in regard to taxation matters—I refer in particular to lawyers and accountants—are a little worried, to say the least, that while there is a derivation table there is no destination table. Those who practise in taxation law have become accustomed over the years to quoting sections as covering principles in our legislation in regard to taxation. If one has no destination table, and having become accustomed over the years to talk about a Section x case, one has to undertake a tremendous amount of work to find out what has happened to that section to which one has become accustomed over the years.
The joint committee which deals with this matter with great patience and ability consists of Members of both Houses. I wish to make a plea to the joint committee for consideration to be given to providing a destination table in addition to the derivation table. That is no new concept; there are Bills dealing with similar matters which have destination tables.
I have already mentioned the Law Commission, as did the noble and learned Lord. From these Benches I wish to pay tribute to the noble and learned Lord the Lord Chancellor, who has seen under his reign a great deal of consolidation. That has helped a great deal in ensuring that understanding of the statute law is simplified by the need to look at only one statute. However, the noble and learned Lord's good work is not recognised sufficiently only because not enough advanced publicity is given to the fact of these consolidation statutes coming before Parliament. That is true in particular of this consolidation Bill. I have talked to many accountants and representatives of the institute. Until I told them about the Bill they did not even realise that it was about to come before your Lordships' House. I urge that in future more advanced publicity should be given to consolidation Bills, especially when they affect the whole of the profession dealing with the subject.
I make my next point with some temerity. It relates to the title of the Bill, which the Committee may consider. Technically it is correct but I suggest that it is slightly cumbersome. To my simple mind and to the much less simple minds of others, the title "Capital Gains Tax Act 1992" might be more readily acceptable.
Finally, I plead for a little more consolidation. The House may know that the law relating to stamp duty dates back to a statute of 1891. Since then so much has happened in relation to stamp duty that it cries out for consolidation—I hope not in the wilderness but in the ears of the noble and learned Lord the Lord Chancellor for ready acceptance.
I make those comments in regard to a Bill which will be tremendously useful. One hopes that various other fields of taxation, if not a whole comprehensive 119 consolidation Bill dealing with taxation, will be readily acceptable before your Lordships' House as this Bill undoubtedly is.
§ Lord Wilberforce
My Lords, I broadly agree with what was said by the noble Lord, Lord Mishcon, but wish to add one or two comments. First, I heartily congratulate the noble and learned Lord and the Law Commission on the work done in this consolidation. It was a mammoth task. Unlike other noble Lords, I believe, I have here the two volumes of 319 pages which have resulted from the work. This admirable production is a remarkable job and uses many modern techniques. However, there is a price to be paid.
I follow to some extent what was said by the noble Lord, Lord Mishcon, in pointing out the effect on practitioners. They must use textbooks and digests. All those relating to the law on capital gains must be rewritten, revised and republished at considerable expense to the practitioners. One must bear in mind that that is the price one pays for simplification. The repeals of existing legislation occupy only some three pages of the Bill, so in that respect one is not gaining a great deal. On the other hand, practitioners must buy new books of considerable length which will contain the new legislation. No doubt in the end we shall be glad that the job has been done, but that is the price that must be paid.
Again I follow to some extent what was said by the noble Lord, Lord Mishcon, in pointing out that the other consequence of the consolidation is beneficial. It enables your Lordships and Members of the other place to see for the first time what the capital gains legislation amounts to. There are two volumes consisting of 319 pages. It is legislation of unimaginable complexity. It is absolutely impossible for the ordinary citizen to understand. It is impossible for many accountants to understand. Indeed, as I know from personal experience, it is also impossible for the officials of the Inland Revenue to understand. I know that that is not the fault of the noble and learned Lord the Lord Chancellor; it is not his responsibility. However, perhaps I may enter a plea that he should use his great influence on his colleagues to ascertain whether the legislation can be simplified.
When one imposes a draconian tax—and this is the most draconian tax of its kind in the Western world—one becomes involved in complications. Sections are piled upon sections and schedules are piled upon schedules in order to deal with supposed cases of evasion. No doubt that is to some extent unavoidable. However, we now have a monster tax which in 25 years of its 26-year existence has outgrown the possibility of being handled. The noble and learned Lord would render a great service by persuading his colleagues in the Inland Revenue and in the Treasury to produce a simpler, more comprehensible and more compact tax.
I welcome the production of these volumes. At the same time one must recognise that one must pay a price and that the unfortunate taxpayer and his advisers are landed with a Frankenstein's monster that they must use.
§ The Lord Chancellor
My Lords, perhaps I may first deal with the last point raised by my noble and learned friend Lord Wilberforce. I agree that it is a desirable aim to simplify the tax system. Early in the 1970s I had the honour of being appointed to a committee set up under the then Chancellor of the Exchequer, the late Iain Macleod. Its task was to simplify the tax system. It laboured for a while, subsequently without my membership, and the current tax system is the result. Simplification is not easy but I understand the plea that is made. In so far as I have influence in such matters I have always sought to aim for simplification in the taxation field. The decisions of the courts can sometimes help in that direction and can also indicate other areas of possible complexity.
I acknowledge that any consolidation will have an effect on the textbooks. That is unavoidable, but it is a question of balance. Obviously one wishes to opt for consolidation when the result is likely to be sufficiently beneficial to justify that price.
I shall keep in mind the suggestion of the noble Lord, Lord Mishcon, about a table of destination. It is always a sign that a practitioner is ageing a little when he has to refer to an old section that has been replaced. However, I well understand the need for a table. I am also grateful for the point that the noble Lord made about advanced publicity. I shall consider whether we should do more in that connection. In the preparation of consolidations the professional bodies are consulted. When consulting with the various committees of the membership not all professional bodies are equally good at telling their members what is going on.
As regards the title of the Act, I suspect that that has to do with a distinction between the capital gains of companies and individuals but I shall certainly look at that point as, no doubt, will the Committee.
Finally, I should welcome a consolidation and, possibly, a simplification of stamp duty legislation as part of the process. I am grateful for the general reception which the Bill has received and I commend it to the House.
§ Lord Houghton of Sowerby
My Lords, if a layman may have a consolidated point of view, it is that it is about time that we scrapped the tax on capital gains and replaced it with relief on capital losses.
§ The Lord Chancellor
My Lords, I am delighted to hear the noble Lord, with all his experience of the taxation system, make that point. I am glad to think that such a point of view may be feasible.
§ Lord Simon of Glaisdale
My Lords, it is the practice of both Houses of Parliament on the Second Reading of a consolidation Bill to discuss nothing except the desirability of consolidation and, at later stages, nothing except whether the consolidation represents the pre-existing law subject to any modifications permissible under the statute setting up the Law Commission.
I agree with most of what has been said today but a good deal has strayed rather beyond the line which has been laid down in the past. The reason that it has been laid down is that experience has shown that when 121 the merits and substance of what is consolidated are under discussion, the whole process of consolidation comes to an end. I venture to suggest that we should all be very careful not to stray beyond the line set by our predecessors.
On Question, Bill read a second time, and committed to the Joint Committee on Consolidation Bills.