Comments of the CIOT on Tax Law Rewrite
Paper CC/SC(03)06, sent to the Inland Revenue on 14 August 2003. The Chartered Institute of Taxation has the following comments on this paper:
General
As a purely general comment we feel it must be said that there is a great deal wrong with the UK tax code in relation to income from estates in administration. This paper cannot address any of these issues, but merely adds further verbiage to the statute. We find this disappointing and somewhat depressing for the future of this project. As our specific comments below also note, we are not sure how much is actually being achieved by this restatement of existing law in an area where the existing legislation is in one discrete part of the Taxes Act. This is an area of law for which there are specialist practitioners, who are well aware of the statutory provisions and are not aided by these provisions being restated. A member of the public is unlikely to glean any greater insight from reading the re-written provisions than from inspecting TA 1988 Part XVI, as amended.
We do, however, welcome the amendments made to this legislation as we commented in response to Exposure Drafts 8 and 13. In particular we welcome the decision not to rewrite section 695(6) ICTA 1988. We suggested that this subsection served no useful purpose.
Specific comments
Clause 555(1)
The changes that have been made to accommodate self-assessment mean that a beneficiary is charged on income he actually receives when he receives it. The project should, therefore, seize the opportunity to abolish the distinction between the taxation of income arising from an absolute interest and an income arising from a limited interest. Including reference to a discretionary interest is a mere diversion. No individual receives income from a discretionary interest until such time as those entitled to exercise their discretion do so in favour of that individual. Once that discretion has been exercised, the beneficiary has a beneficial entitlement, not a discretionary interest. (This is the ratio decidendi in Sansom v Peay [1976] STC 494, which led to the Court applying principal private residence relief on a disposal by trustees when a right of occupation had been given to a beneficiary by the trustees exercising their discretion).
Clause 556(5)
We note that this is a new sub-clause added since ED8. We find it less than clear.
Clause 557
Again we query whether this is an improvement on the present statute.
Clause 557(2)
Is this supposed to include, for instance, a foreign estate that has received interest on UK Government stock where an election is not in force to receive the interest gross?
Clause 562(5)
Again, we find the wording here less than clear.
Clause 567
Whilst we appreciate that “Steps” have become a useful Rewrite tool, an expert in estate and trust administration has commented that in this particular case the “Steps” are more confusing than the traditional formulation.
Clause 571
By contrast we find this clause a significant improvement on the current s699 ICTA 1988.
Clause 578(3)(a) and (4)(b)
We suggested in our response to ED8 that “exists” would be a better word than “is subsisting”. Is there any special reason why this word should not be used? We note that there was no comment on this matter in your ED8 response document.
Clause 581(1)(c)
We welcome the revised wording, part of which is as we suggested in our response to ED13. However we note that you have inserted the word “whole”. Does this not contradict clause 557(2)?
The Chartered Institute of Taxation
14 August 2003
Technical Department
020 7235 9381
