Tax Law (Hansard, 1 March 1996)

§ Mr. Heathcoat-Amory

Inland Revenue produced a report on tax simplification in December 1995 under Section 160 of the Finance Act 1995 entitled "The Path to Tax Simplification". HM Customs and Excise (Customs) shares with the Inland Revenue the objective of seeking to simplify legislation and reduce burdens on business.

The two departments have already started working closely together wherever possible to reduce burdens, particularly on small and new businesses. Early benefits include, for new businesses, a joint leaflet, "Starting Your Own Business" to help them assimilate information on VAT, income tax and national insurance; the provision of a joint notification form for business start-up and the availability of joint seminars. Other developments include 757W the provision of each other's leaflets at inquiry points and the extension last year of the Inland Revenue independent adjudicator's role to cover complaints against Customs. A trial is also taking place in Scotland to assess the value to business of a single low-cost telephone number for inquiries about taxation issues.

However, because of significant differences in their role, Customs is following a different approach to simplification. Like the Revenue, Customs collects taxes for the UK Government: VAT and excise duties—oils, tobacco and alcohol; insurance premium tax; and, in due course, landfill tax. Unlike the Revenue, however, Customs also has other obligations. Customs collects customs duties for the EC; operates a range of duty relief and suspension regimes; protects society and UK trade by operating import and export prohibitions and restrictions; and collects trade statistics.

The separate legislation—either UK or EC or both—for each of the taxes operated by Customs creates complexity for business through the different requirements for similar activities, such as registration. Many of Customs' legal requirements also apply to non-fiscal regimes such as the collection of trade statistics or licensing. Altogether, Customs legislation encompasses over 40 Acts of Parliament and more than 500 statutory instruments, together with over 200 Community instruments.

Customs recognises that these different legal requirements impose costs on business, and the importance of removing or reducing them, wherever possible, across nearly 50 duty and suspension regimes it operates. In some cases, complexities are created by exemptions and special rules introduced to meet the needs of businesses. Where appropriate, existing reliefs will need to be retained, but keeping tax legislation simple may well mean resisting the introduction of new reliefs.

Customs is working through a rigorous deregulation programme, which has already included repealing a number of unnecessary or redundant provisions. Clause 20 of the Finance Bill is an example of a current proposal here. Likewise, legal consolidation contributes to deregulation, for example The Value Added Tax Regulations 1995, where 62 sets of existing regulations were brought together into a single document.

As a Government we have encouraged the EC to deregulate. Some EC law, such as the Community customs code, is directly applicable and wherever opportunities are identified, Customs presses the Commission to simplify regulations. In co-operation with UK trade representatives, Customs has contributed significantly to a review of inward processing relief which, subject to agreement by a majority of member states, should result in simplification.

Similarly, we have to have regard to existing Community obligations in relation to a number of fiscal regimes. Nevertheless, there have also been a number of recent simplification initiatives. The measure to simplify the EC VAT system is one which the UK has actively encouraged. Another is the relaxation in the financial security requirements for excise warehousekeepers achieved following UK representations.

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As I announced in June 1995, Customs has started a project, known as LEGIS, with two goals. The first is to converge and simplify common procedures and rationalise individual enactments. The second is to simplify the structure of the law by consolidating the revised legal provisions. This will reduce burdens for businesses which have dealings with Customs on more than one tax or relief regime and result in a more coherent body of law for the benefit of taxpayers, practitioners and revenue officers alike.

Customs has identified the main processes which it needs to review in order to assess the scope for rationalising policies, procedures and legislation across all the tax and other regimes. These are: registration and authorisation, declaration, payment and repayment, reviews and appeals, compliance assurance, debt management, civil penalties, and offence procedures.

The reviews are under way. I expect most of them to be completed by the end of the year and the remainder to be completed early in 1997. Customs will consult business on emerging findings later in the year and I expect to introduce simplification and deregulatory measures flowing from the project as soon as is practicable thereafter.