Clause 158 - Reporting limits and annual exempt amount

Finance Bill – in a Public Bill Committee at 9:45 am on 17th June 2003.

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Question proposed, That the clause stand part of the Bill.

Photo of Stephen O'Brien Stephen O'Brien Conservative, Eddisbury

Clause 158 has attached to it schedule 28, which you will call separately, Sir Nicholas. The Chartered Institute of Taxation has welcomed the Revenue's continuing attempts to simplify the tax system, which were begun by the previous Conservative Government and have been maintained by this Government. We are at one on the importance of that progressing.

However, in the institute's opinion, the changes introduced by proposed new section 3A are disappointingly small. Taxpayers will still have to calculate their capital gains in order to know whether they fall within the exemption from detailed disclosure. The Law Society of Scotland also notes that in many cases there will still be a burden on the taxpayer to complete the necessary calculations to determine whether he falls within the reporting

exemption, even if the forms do not require to be submitted. Therefore, the only effort that taxpayers will be saved is that of transferring the results of their calculations to their self-assessment forms.

The Chartered Institute of Taxation seeks confirmation that the calculation to determine whether the aggregate consideration exceeds four times the annual exempt amount is to be performed in the same way for trustees as for individuals. That is quite an important point and would easily be dealt with by a note from the Revenue. I hope that the Paymaster General will confirm that that is likely to be forthcoming.

Certain representations from the Institute of Chartered Accountants in England and Wales reflected slightly stronger concerns. However, it might be better if those matters were dealt with in a Revenue note. I know that the points are with the Revenue and the Treasury, and I hope that we will get a commitment that they will be considered and that any clarification needed will be forthcoming.

Photo of John Baron John Baron Conservative, Billericay

I rise in support of my hon. Friend's point about simplification. The attempts to simplify the issue only go so far. I put it to the Paymaster General that simplification should be to the benefit of both the Inland Revenue and the taxpayer. There seems to be hardly any real benefit to taxpayers. As far as I can see, they will still have to incur the cost or the personal burden of performing the necessary computations to see whether they fall within the new rules. The only beneficiary from the so-called simplification appears to be the Inland Revenue, which will be relieved of a fair number of capital gains tax pages in the self-assessment returns. Will the Paymaster General address that point? It will be of interest to a good number of taxpayers.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

The clause cuts red tape. Few of those liable to pay capital gains tax will need to fill in the capital gains tax pages of the tax return. The clause will lead to a 15 per cent. cut in the number of those with no tax liability who need to fill in the capital gains tax pages. The main beneficiaries are likely to be taxpayers who do not employ professional advisers to complete their tax forms.

The hon. Members for Eddisbury and for Billericay (Mr. Baron) made a couple of brief points. The hon. Member for Eddisbury said that people still need to make the calculation. People will still need to work out whether they have a tax liability, but often it will be obvious from a rough sum that there is no tax to pay. As a result of the clause, there will be fewer cases in which precise calculation is needed to fill out the form. It will save people time and trouble.

The second point made by the hon. Gentleman, and echoed by his hon. Friend, was that the clause still leaves too many people filling in the capital gains tax forms. Obviously, the Government need to strike a balance. We need to protect the tax base, both from evasion and from honest mistakes, so the Inland Revenue needs to see forms from some people who think that they may have no tax liability. However,

under the clause those with simple affairs and modest disposal proceeds and gains will no longer have to fill in the capital gains tax pages of their tax return. As I said, that will benefit taxpayers who do not use agents to deal with their tax affairs. Such individuals are more highly represented among those with modest disposals.

On the point made by the hon. Member for Eddisbury about guidance for trustees, I confirm that the Revenue will provide clear guidance for trustees in the notes on tax returns.

The hon. Member for Billericay referred to simplification. The guidance notes will give simple explanations for taxpayers, although it would have been simple just to raise the level of disposable proceeds that trigger the need to fill in a form. The legislation is longer because we wanted to cut the number of forms further by taking account of the taper relief. We also wanted to ensure that the situation is clear for trustees as well as individuals—the hon. Member for Eddisbury referred to that. In balancing those priorities—the Committee will agree that they are correct—it is not always as straightforward as going just for the simplest option. We have struck a balance between the need to complete the capital gains tax sections of the self-assessment form and the need to reduce that requirement as much as possible, making the guidance as simple as possible. I hope that the Committee will welcome the clause on that basis.

Photo of Stephen O'Brien Stephen O'Brien Conservative, Eddisbury

I am grateful to the Paymaster General for her helpful explanation, and particularly the information that the notes will cover trustees as well as dealing with the points raised by my hon. Friend the Member for Billericay about simplification. That was a helpful exchange and we shall support the clause.

Question put and agreed to.

Clause 158 ordered to stand part of the Bill.

Schedule 28 agreed to.