|A better tax deal for
This speech was given in the chamber of the House of Commons as part of the debate on the Finance Bill, on 6 July 2004
Mr. Bacon: I begin by thanking 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.
|© Richard Bacon 2010|