Loan Charge
Debate between Dominic Raab and Ruth Cadbury
Ruth Cadbury
I will if I have time.
Evidence to our inquiry shows that HMRC was aware of these promoters, yet none has been investigated and prosecuted. Why not, and why have they not been chased?
There is a 45% non-refundable charge on all loans advanced during the period unless the individual agrees to pay up front a figure calculated by HMRC—completely opaquely—and regardless of whether any such tax was legally due at the time. It is going to have to be paid and is effective from tomorrow. Anyone who has ever been employed through such a structure could face a retrospective charge in the 2018-19 tax year, which is about to close, payable by January 2020. All potential liability—it could be for many years—will be rolled up into this tax year, whether or not someone knows what their liability is, or indeed whether or not they are even aware that they have a liability. That cannot be within the spirit of natural justice.
How do the people who know about it know? Many of our inquiry respondents were notified of the loan charge in late 2018—some as late as this year. That is wholly inadequate given the life consequences of these demands. Standard letters are going out indiscriminately to any individual who might have been employed by a company that might have undertaken a disclosed tax avoidance arrangement. Letters refer to closed tax years, as the right hon. Member for Kingston and Surbiton (Sir Edward Davey) mentioned, even when the tax has been agreed and paid. Evidence shows that there is no standard format in letters and no evidence provided, even of the dates in the years being queried. By withholding this information, HMRC has failed in its duty of care to taxpayers who are unaware of their right to request disclosure. They face a greater retrospective penalty in a single year—this year—than might have otherwise been the case.
People’s belief that they were doing the right thing was partly based on a belief that the loan charge arrangements were not taxable. HMRC correspondence of 2006 stated that plans
“made by an…EBT…are not taxable under Sections 173 &174”
of the
“Income Tax (Earnings and Pensions) 2003”.
Furthermore, there is the Rangers Supreme Court case, which remains the position in law. Individuals are not liable—their employers are—yet HMRC is misinterpreting the outcome of that case. We understand that HMRC has used behaviour change specialists in pursuing the loan charge, which may explain the aggressive and opaque nature of its communications. The regular use by HMRC of a phrase asking people to “put their tax affairs right” is clearly part of this strategy of forcing people to feel, and accept, guilt for wrongdoing. That is despite the fact that the arrangements they used were entirely legal at the time. There have also been a disturbing number of reports of individual HMRC officers telling taxpayers that they should apply for mortgages or loans, but not telling the lender that the money will be used to pay a tax bill. Why? Because that is contrary to tax law, of course.
Many of the taxpayers who submitted evidence to our inquiry highlighted the stress and anxiety that they have experienced as the direct result of the language and tone of HMRC communication. Individuals who believed that they were acting within the law told us that they have been made to feel like criminals. The all-party parliamentary group on the loan charge agrees: it is wholly inappropriate for a Government department to intimidate individuals into settlements through threats and labelling.
The issue has had two consequences. One is the feeling of criminality. We heard about the family who read out the father’s suicide notes; he had kept the information from them as he was too embarrassed. He was too embarrassed even to see a tax consultant or his accountant; he could not admit that he might have done wrong. He thought he was going to prison. In that example, his liability was well within his means; he could have afforded to pay. But he was made to feel like a criminal—a man who had never done anything against the law in his life.
The other consequence is the threat to the homes and businesses of those who are likely to be made insolvent. This issue will affect their and their family’s lives now and in the future. We are talking about amounts that are often unjustified, unquantified and unexplained.
Dominic Raab (Esher and Walton) (Con)
I thank the hon. Lady, who is making an excellent speech. Does she agree that there are three fundamental elements of the injustice? There is the retrospectivity, which undermines basic principles of justice; the devastating impact on ordinary people’s lives, which she has described; and the contrast between the arbitrary approach taken to those people and the sweetheart deals for the likes of Goldman Sachs. Does she agree that the retrospectivity must be ended and that the scheme must be reviewed?
Ruth Cadbury
I absolutely agree. The scheme needs to be paused for at least six months and should be reviewed by a qualified tax judge completely independent of the Government. I am also concerned that HMRC may have been acting without direct steerage from the Treasury and Treasury Ministers. Ministers have said things to the loan charge APPG that contradict what we have been told by credible witnesses. This debate raises a number of questions for Treasury Front Benchers, and we look forward to their responses.
Oral Answers to Questions
Debate between Dominic Raab and Ruth Cadbury(5 years, 11 months ago)
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Dominic Raab
Local authorities can submit their business cases from September and we expect to make the funding decisions later in the autumn. The £4 billion forward funding stream is an essential mechanism to unlock the delivery of 400,000 extra homes and make sure we carry communities with us.
Ruth Cadbury (Brentford and Isleworth) (Lab)
I recently went out early one morning with the outreach workers of St Mungo’s, who help people newly sleeping rough to get into long-term support. Why is the Secretary of State pressing ahead with changes to funding for homeless hostels and other supported housing that charities such as St Mungo’s have said could threaten their hostels?
Oral Answers to Questions
Debate between Dominic Raab and Ruth Cadbury(6 years ago)
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Ruth Cadbury (Brentford and Isleworth) (Lab)
The Minister for Housing (Dominic Raab)
Over the past seven years, the Government have delivered 357,000 affordable homes, more than in the last seven years of the previous Government. Last year, the number of affordable homes delivered was up by 27%.
Ruth Cadbury
The new Secretary of State skirted the opportunity to address questions on social rented housing posed by my right hon. Friend the Member for Wentworth and Dearne (John Healey), so I will try again. In London in particular, for those on average incomes and below, affordable housing means only social rented housing—housing in which this Government are now investing virtually nothing for the first time since records began—so will the Secretary of State work with the Treasury to ensure that the Government go back to investing in social rented housing so that councils and housing associations provide truly affordable, good-quality homes and, by the way, cut the housing benefit bill that is currently going to rip-off private landlords?
Dominic Raab
I gently remind the hon. Lady that more than 10,000 local authority homes have been built since 2010, which is three times more than were built under the last Labour Government. We are investing a further £9 billion in affordable homes up to 2021; we have raised the borrowing caps on councils by £1 billion; and we are giving local authorities greater rental certainty from 2020.
Oral Answers to Questions
Debate between Dominic Raab and Ruth Cadbury(6 years, 3 months ago)
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Ruth Cadbury (Brentford and Isleworth) (Lab)
If the Treasury Committee can recognise the social and fiscal benefits of removing the council house building borrowing cap completely, why cannot the Government?
Dominic Raab
Of course, the borrowing cap has been raised by £1 billion, but it has to be done sustainably. We remain open-minded, however, and are keeping it under review.