During the passage of this year's Finance Bill through the House of Commons, LITRG asked MPs to support new legislation with the aim of enhancing disabled people's rights in relation to the tax system. Our proposals derived from our December 2003 Report, Disability in tax and related benefits: the case for a modern and coherent system (available on this website - see under 'Reports'). We drafted three 'new clauses' which were taken on the floor of the House by Richard Bacon MP on 6 July 2004, during the Report stage of the Bill.
Our first new clause provided for businesses which incur expenditure on complying with their obligations under the Disability Discrimination Act 1995 ('the 1995 Act') to qualify for capital allowances. This is an annual tax relief designed to recognise the cost of depreciation of capital assets used in a business. The obligations referred to are imposed by section 21 of the 1995 Act, and come into force on 1 October this year.
A similar clause was put forward jointly by the Disability Rights Commission and the CBI, although its scope was restricted to access ramps and accessible toilets for disabled people.
Secondly, we proposed a tax relief for all equipment provided by an employer if its main purpose was to enable a disabled employee to work, and a full tax deduction where disabled employees have to provide such equipment for themselves. In doing so we hoped to encourage the tax system to recognise the extra costs of being disabled, with the object that disabled employees should be in no worse a position than their non-disabled colleagues.
Finally, we asked for the broad definition of 'disabled person' in the 1995 Act to be imported into the tax legislation, to increase the numbers of disabled people entitled to the various tax reliefs and exemptions intended for them.
Whoever proposes amendments or new clauses to a Finance Bill has to realise that they are most unlikely to be adopted, particularly if they involve extra cost; but that raising them in debate may probe Government thinking in the area, and probably even elicit some assurances from Ministers.
The Economic Secretary to the Treasury, John Healey MP, began his reply with a generous tribute:
'place on record our appreciation of the thoughtful contributions that [the Low Incomes Tax Reform Group, the Disability Rights Commission and the CBI] are making to help us to assess the case for future policy changes.'
In reaffirming the Government's 'strong commitment'to 'establish comprehensive and enforceable civil rights for disabled people', he said that the Government had 'no quarrel with the motivation behind the new clauses'.
On the proposal to grant capital allowances for businesses complying with the 1995 Act, the Minister felt that to do so now would be unfair to those who have already incurred the necessary expenditure. A fair enough point - but well countered by the Liberal Democrat spokesman who said that most small and medium sized enterprises will not have made those adjustments yet, so that introducing a relief now would still help the majority of such businesses.
In response, the Minister cited research carried out in 2002 by the Disability Rights Commission and the DWP which:
'showed that 40 per cent of providers had made adjustments. Only 15 per cent of respondents said that had no plans to make further adjustments...'
Accordingly the Government concluded that the proposed change 'would not confer a significant benefit'. Nevertheless, they were thinking about bringing in capital allowances for a broader category of expenditure as part of their proposed reform of the tax system for companies. Those changes would not happen until well after 1 October 2004, and would not benefit small non-corporate businesses.
One is tempted to observe that we cannot have jam today because it would be unfair to those who did not get jam yesterday. However, some might get jam tomorrow, if they are fortunate.
To our proposals on behalf of disabled employees, the Minister replied that:
'the existing provisions together provide a comprehensive benefits exemption and expenses relief, along the lines of the provisions set out in the new clause.'
We found this reply mildly disappointing, as our aim was to replace the plethora of 'piecemeal' reliefs we have now with one blanket provision that would deal with any residual discrimination in the tax rules for disabled people in the workplace. Where we had identified gaps in the present legislation, the Minister did not demur, but suggested that they were 'unlikely to be significant'. They will be very significant to the unfortunate disabled employee who falls the wrong side of the narrowly drafted rules.
Definition of 'disabled person'
We were hoping for a more favourable response to our suggestion that the broad, up-to-date definition of 'disabled person' in the 1995 Act be brought into use in the tax legislation. The 1995 Act was itself, after all, an initiative of the previous government which has been supported and added to by the present administration. Our new clause would not have replaced the outdated definitions at present littering the Taxes Acts, but its presence there might at least have started the process of replacing them.
Nevertheless, the debate finished on a reasonably hopeful note, when the Minister confirmed that:
'these are matters that we are discussing in detail with groups that are interested in representing disabled people or representing employers of disabled employees.'
It was certainly constructive in tone, and a useful exposition of the Government's policy in the areas under discussion. The government and the Revenue still have some way to go before they can be comfortable that they are addressing the needs of those with disabilities in the tax arena. The Low Incomes Tax Reform Group will continue to seek opportunities to press forward with our proposals.
For the full debate, follow the link below.
Contact Name: Robin Williamson (Contact tel: 0844 579 6700, Fax: 0844 579 6701)
Relevant Link: Full text of debate