Alison Thewliss
Main Page: Alison Thewliss (Scottish National Party - Glasgow Central)Department Debates - View all Alison Thewliss's debates with the HM Treasury
Finance Bill (Eighth sitting)
Alison Thewliss ExcerptsTuesday 16th June 2020
(3 years, 10 months ago)
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Wes Streeting
The Minister asked us to watch this space. We will certainly do that and wait to see how discussions progress. We look forward to seeing the details of future arrangements in the not-too-distant future.
Question put and agreed to.
Clause 93 accordingly ordered to stand part of the Bill.
Clause 94
International trade disputes
Alison Thewliss (Glasgow Central) (SNP)
I beg to move amendment 14, in clause 94, page 76, line 33, at end insert—
“(2) The Government must lay before the House of Commons by 9 September 2020 a statement of the conditions under which it would consider it appropriate to vary rates of import duty under this Section.”
This amendment would require the Government to state the conditions under which it would consider it appropriate to vary rates of import duty in an international trade dispute.
The Chair
With this it will be convenient to discuss the following:
Amendment 15, in clause 94, page 76, line 33, at end insert—
“(2) No regulations under this section may be made unless a draft has been laid before and approved by a resolution of the House of Commons.”
This amendment would require the Government to seek the approval of the House before making regulations varying rates of import duty in an international trade dispute.
Amendment 16, in clause 94, page 76, line 33, at end insert—
“(2) The Chancellor of the Exchequer must, no later than a month before any exercise of the power in subsection (1), lay before the House of Commons a report containing the following—
(a) an assessment of the fiscal and economic effects of the exercise of the powers in subsection (1);
(b) a comparison of those fiscal and economic effects with the effects of the UK being within the EU Customs Union;
(c) an assessment any differences in the exercise of those powers in respect of—
(i) England,
(ii) Scotland,
(iii) Wales, and
(iv) Northern Ireland; and
(d) an assessment of any differential effects in relation to the matters specified in paragraphs (a) and (b) between—
(i) England,
(ii) Scotland,
(iii) Wales, and
(iv) Northern Ireland.”
This would require a review of the economic and fiscal impact of the use of the powers in section 94 including comparing those effects with EU Customs Union membership.
Clause stand part.
Alison Thewliss
This is a small clause in the Bill, but hidden within it is the Government’s intention to set the conditions under which they would consider it appropriate to vary the rates of import duty in an international trade dispute. With amendments 14 to 16, we seek to amend clause 94 because we are concerned that it gives the Government a huge amount of additional power, with which they will avoid scrutiny. The explanatory notes state that the clause
“replaces the requirement for ‘authorisation’ with a requirement to have regard to international obligations.”
The Government need to explain why they feel they need the additional power, what the safeguards to it will be and why they think it is appropriate at this time.
Trade wars are damaging and should be very much a last resort. If the Government intend to take such actions, they deserve the scrutiny of the House. It should not just be about what the Secretary of State deems to be appropriate. I remind Members of the dispute affecting the Scotch whisky industry in Scotland, which is facing a 25% tariff because of US actions regarding Airbus and Boeing. Disputes have spillover effects that affect other parts of the economy, so we need a good understanding of why the Government are seeking these powers.
Amendment 14 would force the Government, by 9 September 2020, to set out the conditions under which they would breach international law to engage in a trade war. If none exist, they can surely remove the clause from the Bill. If there are conditions under which they would jeopardise our economic prosperity, the House deserves to know. Amendment 15 would require Commons approval before Ministers could follow such an irresponsible course of action. Brexit campaigners said they wanted to restore parliamentary sovereignty. If that is the case, the Government should accept that Parliament must have a say in such important matters.
Amendment 16 would force UK Ministers, no later than a month before any exercise of power, to make an economic assessment of the implications of the power and compare it with the economic health that the UK would be enjoying within the EU customs union. Ensuring that the public are informed of the impact of such an act of economic vandalism should not be controversial. We were promised a veritable land of milk and honey during the EU referendum campaign, so we certainly deserve to see the truth about these kinds of actions. The Government must explain why they think it is important to remove that authorisation and allow the Secretary of State to do what they want without the check and balance of this House.
Bridget Phillipson (Houghton and Sunderland South) (Lab)
The Opposition have considerable sympathy with the hon. Lady’s arguments and the amendments tabled by the SNP. We have many concerns about clause 94, which seems buried, given that it is of such considerable importance for the years ahead.
The change to the language in section 15 of the Taxation (Cross-border Trade) Act 2018 has worrying implications for the Government’s adherence to the World Trade Organisation’s dispute settlement system. Replacing the requirement for authorisation under international law with the more nebulous consideration of appropriateness is extremely concerning, and implies that the Government may seek to sidestep international law regarding trade disputes. The matters set out in section 28 of the 2018 Act already give the Government considerable flexibility over what they consider to be appropriate action in the light of international law. It is effectively up to the Secretary of State to decide which international agreements are relevant to the exercise of the function. Loosening up the language even further in this clause is thus highly questionable.
The proposed changes seemingly downgrade the Secretary of State’s responsibilities when it comes to their international obligations. Having regard is nowhere near as onerous as having authorisation. That would allow the Secretary of State to operate at a much lower standard of requirement, and move away from recognised EU standards. We therefore seek to understand the reasoning behind the change. What is wrong with the current provisions regarding the variation of import duties in trade disputes?
There are further questions to which we seek answers from the Government. What will they use the clause for? It does not detail what kind of dispute is in question. How might the Trade Remedies Authority be involved in the decision-making process? Could this be an upshot of the digital services tax? The US has already found similar measures by France to be trade-restrictive, leaving the office of the United States trade representative to authorise retaliatory tariffs, as we discussed last week in Committee with reference to the digital services tax. While both parties are in the process of reaching a deal over the matter, it is possible that the Government wish to introduce this clause in preparation for a similar confrontation with the US. I hope the Minister can assure us that that is not the case, but why do the Government wish to reduce their responsibilities in adhering to international law?
The amendments tabled by the hon. Member for Glasgow Central and her colleagues go some way towards responding to that. The production of a report by the Chancellor no later than a month before any exercise of the power regarding the economic impact of such an action might enable Parliament to better scrutinise the actions taken through the clause. As it stands, other than through the scrutiny of primary legislation, Parliament has little say over international trade. I welcome the amendment to seek approval of any regulations deriving from the clause by resolution of the House of Commons, in the spirit of parliamentary scrutiny. However, the Government hold a considerable majority, and therefore I question how far the amendment would go in practice towards ensuring that the Government act in accordance with international law.
I welcome the amendment regarding the requirement for the Government to detail the conditions under which they would consider it appropriate to vary the rates of import duty under the clause. However, I believe that the implications of the wider clause are of significance and that the Government ought to provide these details during debate, rather than by September, although we are sympathetic to the intention behind the amendment. I stress that I would like the Minister, when he responds to the hon. Lady’s concerns, to explain the reasoning behind this change, what kinds of disputes the clause would cover, and whether the Trade Remedies Authority will be involved.
If the changes in the clause are in anticipation of a dispute with the US over the digital services tax, does this not involve giving the Government permission to ignore international trade rules when disputes arise, undermining the authority of the WTO in the process? I hope that the Minister will provide assurances on the issue of appropriateness and respond to the concerns that the hon. Lady and I have, because this is a significant change. We have reservations about the measure that the Government are putting forward, and we would like to understand much more about their intentions.
Alison Thewliss
Although the Minister spoke for a long time, he did not get to the nub of why the clause is necessary, what safeguards are in place, and why the requirement for authorisation is replaced with a requirement to have regard to international obligations. I will press my amendment to a vote.
Question put, That the amendment be made.
Alison Thewliss
I beg to move amendment 17, in clause 95, page 77, line 5, after “tax” insert
“which is due at the relevant date from the debtor and which became due in the 12 months immediately preceding that date, and/”.
This amendment seeks to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy from being applied retrospectively and by limiting that preference to only those taxes which became due in the 12 months before the relevant date as given in the Bill (1st December 2020).
The Chair
With this it will be convenient to discuss the following:
Amendment 18, in clause 95, page 77, line 6, after “deduction”, insert
“from a payment made by the debtor in the period of 12 months immediately preceding the relevant date.”
This amendment seeks to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy from being applied retrospectively and by limiting that preference to only those taxes which became due in the 12 months before the relevant date as given in the Bill (1st December 2020).
Amendment 19, in clause 95, page 77, line 29, after “tax”, insert
“which is due at the relevant date from the debtor and which became due in the 12 months immediately preceding that date, and/”.
This amendment seeks to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy from being applied retrospectively and by limiting that preference to only those taxes which became due in the 12 months before the relevant date as given in the Bill (1st December 2020).
Amendment 20, in clause 95, page 77, line 30, after “deduction”, insert
“from a payment made by the debtor in the period of 12 months immediately preceding the relevant date.”
This amendment seeks to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy from being applied retrospectively and by limiting that preference to only those taxes which became due in the 12 months before the relevant date as given in the Bill (1st December 2020).
Amendment 21, in clause 95, page 78, line 9, after “tax”, insert
“which is due at the relevant date from the debtor and which became due in the 12 months immediately preceding that date, and/”.
This amendment seeks to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy from being applied retrospectively and by limiting that preference to only those taxes which became due in the 12 months before the relevant date as given in the Bill (1st December 2020).
Amendment 22, in clause 95, page 78, line 10, after “deduction”, insert
“from a payment made by the debtor in the period of 12 months immediately preceding the relevant date.”
This amendment seeks to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy from being applied retrospectively and by limiting that preference to only those taxes which became due in the 12 months before the relevant date as given in the Bill (1st December 2020).
Amendment 23, in clause 95, page 78, line 26, at end insert—
“(8) The amendments made by this section do not apply to any debt secured by a floating charge in respect of monies were advanced to the debtor before 1 December 2020.”
These amendments seek to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy from being applied retrospectively and by limiting that preference to only those taxes which became due in the 12 months before the relevant date as given in the Bill (1st December 2020).
Clause stand part.
Clause 96 stand part.
Alison Thewliss
The amendments seek to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy being applied retrospectively, and by limiting that preference only to taxes that became due in the 12 months before the relevant date as given in the Bill, which is 1 December 2020. In the current context, that is particularly important. With firms increasingly running the risk of insolvency, it really is unfair to give HMRC a queue jump to recoup lost funds, when other businesses and individuals in the real economy may be well out of pocket.
The plan is to grant HMRC preferential status in insolvency proceedings from December 2020, and measures will make directors personally liable for a company’s tax liabilities where HMRC considers that avoidance or evasion is taking place or where there is evidence of phoenixes in the tax abuse using company insolvencies. I understand that the insolvency and restructuring trade body R3 is very concerned about the prospect of the policy. It feels very strongly that introducing such a policy would damage business lending and impede business rescue. UK Finance has suggested that the measure could hit lending to small firms by over £1 billion.
When I made representations in the Chamber on Second Reading, I explained that the policy is incredibly problematic. On the issue of phoenixism, R3 has suggested that the policy could lead to blameless shareholders, lenders, businesses and rescue professionals being made liable for the tax avoidance activities of rogue directors. What do Ministers intend to do to protect those who are innocent in the system from becoming liable under the proposals?
As well as having a detrimental impact on business and economic growth, restricted lending will make it harder to rescue businesses, increasing the knock-on effect of one business’s insolvency on other businesses and individuals further down the line. Business investment, returns to creditors and confidence in the UK’s corporate framework all stand to be damaged as a result. Ministers really need to give us a bit more detail about why they feel the policy is necessary.
Although the measure on tax abuse using company insolvencies can be mitigated through accurate legislative drafting and detailed guidance from HMRC, the SNP feels strongly that the policy to grant HMRC preferential creditor status should be withdrawn in its entirety. It is an introduction that could well prove a hammer blow to business rescue money across the UK, at exactly the same time as the Government are seeking to level up the economy and support businesses as they try to make their way through these difficult days. We all know of businesses in our constituencies that are really struggling and might not make it further than a couple of months ahead. Knowing that the policy is being introduced could have a detrimental effect on those who are supporting such businesses and on lenders.
In addition to scrapping the clause, the SNP believes that the UK Government must urgently introduce a comprehensive financial package to ensure a strong economic recovery, protect jobs and prevent new businesses from going under. With dire warnings emerging that up to half the loans issued under the bounce-back loan scheme are at risk of not being paid back, and with businesses defaulting on payments due to financial difficulties, it is vital that the Government introduce strengthened and tailored financial support urgently. The Treasury must heed the calls and turn its bounce-back loan scheme into grants for those who require them. It should write off debts for businesses that are facing increased hardship to ensure that they can survive in the long term and that jobs are protected wherever possible.
Many businesses are struggling to stay afloat during these challenging times, and despite the extensive financial support that has been provided by the Government, which we do not dispute, loans will not be the answer for every business. For many businesses, it is not income deferred, but income lost completely. For example, hospitality and tourism businesses will not be able to recoup that money, and loans will just put them further into debt.
It is important that the Government look at this matter very carefully and take on board the very substantial concerns that R3 has raised about the proposed policy, hence why we have tabled so many amendments. I would be grateful if the ministerial team could tell us exactly why this change is required and why it has been brought about.
Wes Streeting
I must confess that I come to this clause with a slightly different set of questions for Ministers to respond to. There is no doubt that in the current climate, the risk of insolvency to businesses is much greater, and it is right that the Government do all they can to stop preventable collapses, to safeguard jobs and to ensure that the UK is well positioned for the economic recovery that we hope will follow in short order, with the aim of making this recession as short and shallow as possible.
That is why my right hon. Friend the shadow Secretary of State for Business, Energy and Industrial Strategy and the shadow Minister for business and consumers, my hon. Friend the Member for Manchester Central (Lucy Powell), were prepared to work closely with their opposite numbers in the Department for Business, Energy and Industrial Strategy to expedite through the House of Commons the recent Corporate Insolvency and Governance Bill.
Turning to clause 95, the question I wish to pose to Ministers is why HMRC is only a secondary preferential creditor. HMRC will remain an unsecured creditor for the taxes that the bankrupt businesses owed, and we have had strong representations for HMRC to be a preferred creditor across the board, to ensure certainty and to recognise the fact that HMRC contributes, through tax collection and maintenance of general rules, to the general operating environment from which all businesses benefit.
Although we have heard that the risk exists that businesses may lose out as a result of HMRC having greater preferential status in the process of recovering money, it does not necessarily follow that the businesses that would lose out are those that most of us would have in mind as being of greatest concern, such as small to medium-sized enterprises. When a business becomes insolvent, bank loans need to be paid off first; unpaid bills to SMEs would have a much lower priority and be less likely to be paid off anyway.
I recognise the concerns expressed by UK Finance. They are concerns I heard in my previous life on the Treasury Committee, and I am always open to talking to colleagues at UK Finance and across the across the banking industry. However, they have to go somewhat further to make a more convincing case than they have outlined. It would be interesting to hear from the Minister why HMRC is only a secondary preferential creditor and why, on this occasion, the Treasury has not gone further.
To respond to the lobbying from the financial services industry, I would say that it was ever thus—when measures like are brought forward, it says that the sky will fall in and business lending will stop. There are challenges with business lending in this country, but it is stretching the imagination somewhat to say that such challenges will be presented by this modest clause.
Alison Thewliss
From what the Opposition Front-Bench team said, I do not think that I have support for the amendment, so I am content to withdraw it, but I may return to the subject later. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 95 ordered to stand part of the Bill.
Clause 96 ordered to stand part of the Bill.
Clause 97
Joint and several liability of company directors etc
Question proposed, That the clause stand part of the Bill.
Wes Streeting
It is always the case that when a new measure is introduced, criticism can be made of it simply because it had not existed previously. In this case, it really is a reflection of the Treasury’s failure to clamp down effectively on the abuse of the system and the people trying to avoid and evade their taxes. Despite the Government’s previous efforts to impose greater accountability for tax avoidance and evasion, there are still too many holes in the system, but I welcome the fact that clause 97 and the schedule will go some way to addressing that.
What is the threshold of responsibility for the conduct? When will HMRC consider the serious possibility that the tax liability might not be paid? At what stage will HMRC conclude that there is likely to be a tax liability arising from the avoidance? Might the Treasury go further, for example, by asking HMRC to report on how much money is lost by companies participating in or promoting tax avoidance schemes and then becoming insolvent before HMRC can counter the schemes and collect the money owed? Following on from that, how much money would be collected if those companies’ directors, participators and associated persons were made jointly and severally liable?
Alison Thewliss
I want to comment briefly on the huge gap that exists within Companies House as part of this process. If we go after companies and directors that are involved in phoenixing, why can that not be stopped at source when those companies are registered at Companies House? Why is there no link to the Government’s Verify scheme for those who wish to register companies there? Companies House is obliged only to register the information, not to check whether any of the information is accurate, correct or related to any other kind of activity. It is not involved in anti-money laundering obligations, but it really should be. Will the Minister look carefully at the question of Companies House? That could be a key part of preventing phoenixing in the first place. For example, I have a friend who employed a builder to do work on his house for his disabled son. The builder went bust and phoenixed, as he has done on several occasions. My friend is out of pocket, and that company continues to trade. It is employing sub-contractors who lost out last time because there is nobody else to hire them in that small community. There needs to be a stop on those types of people and behaviours, and I urge the Minister to consider ensuring that Companies House is a big part of that.
Jesse Norman
I thank both hon. Members for their comments. I draw from them strong support for the clause, although it was caveated in the way they described. Let me address the issues that they raised.
The hon. Member for Ilford North asked, “Why not do this earlier?” There is a long-standing principle in company law that the corporate veil should not be pierced, and limited liability should exist in place. As he will recall, there was a moment not so long ago when HMRC had Crown preference and was always the first, or close to the first, creditor to get paid out. It then got moved to the back of the queue.
As we think about the current insolvency and abuse regime, there has been a process of further reflection on all the different aspects of it, and that inevitably includes the phenomenon that we have seen. My impression—I do not know whether it is true—is that phoenixism is a better recognised phenomenon and a more widely understood problem than it has been. This is part of a much wider effort that has been made—particularly since I have been Financial Secretary to the Treasury, but before that, too—to really push on the issue of avoidance and evasion, and that is what we are doing.
The hon. Gentleman also asked about process. It is a perfectly good, important question, and I have been through it myself with HMRC officials. I will not read out the conditions in each case, but there are central cases for the issuance of avoidance and evasion notices, avoidance and evasion facilitation notices, and repeated insolvency notices. Each has some quite specific criteria sitting underneath it. For avoidance and evasion facilitation notices, a company must have begun an insolvency procedure or given assurance that it will; it must have incurred a penalty for facilitating tax avoidance or evasion; there must be a serious risk that some or all of that liability will not be paid; and the person must have a relevant connection to the company at the time that the behaviour leading to the penalty occurs. There are important threshold tests that must be met, and there are appeals processes against notices that have been filed, which are designed to provide safeguards, for all the reasons that one might imagine.
I have a degree of sympathy for the point that the hon. Member for Glasgow Central makes about Companies House. In the promoter strategy, which we published at the time of the Budget, we looked to create a more integrated approach to trying to crack down on abusive avoidance and evasion, and the promotion of avoidance and evasion. It has been in part about pulling together different entities, one of which might be Companies House and another of which might be the Advertising Standards Authority, if the two had been outside the purview of a more traditional approach. I take the hon. Lady’s point, and I thank both hon. Members for their support for this important clause and schedule.
Question put and agreed to.
Clause 97 accordingly ordered to stand part of the Bill
Schedule 12 agreed to.
Wes Streeting
As the Financial Secretary outlined, this clause is designed to tweak the system. Therein lies my criticism and my concern. The challenges we face when it comes to tax avoidance and abuse have been well documented during this Committee in relation to the loan charge. Even where Government have sought to clamp down on avoidance and HMRC has put in place controversial but rigorous arrangements, there continue to be, to this day, companies and promoters that tout schemes that are patently against the spirit and letter of the law. HMRC has made it clear that such schemes do not work, but those companies and promoters are still at it.
The most recent examples I have seen are of umbrella companies targeting public sector workers in the NHS. Rather than just tweaking, Ministers should be trying to give the general anti-abuse rule more bite. For example, they could extend the general anti-abuse penalty rules to apply a 100% penalty for any tax avoidance scheme that fails the GAAR or, more likely, fails for some other reason, but would have failed the GAAR as well. They could prevent operators of avoidance schemes simply running away from their liabilities and victims, making directors, shareholders and other associated persons jointly liable for the new GAAR penalty, as I alluded to in the previous discussion.
Umbrella companies create a unique opportunity to flog tax avoidance schemes to low-paid workers. We see that exploitation taking place. We could counter that by making umbrella company directors and associated persons jointly liable for unpaid PAYE, national insurance and VAT. We should make the promoters, scheme designers and independent financial advisers jointly liable for unpaid tax and penalties from a failed scheme, with a safe harbour designed to protect people acting in good faith. For example that could be where a promoter followed specific tax advice from a regulated adviser, where factual assumptions in advice were reasonable or where advice was shared with scheme participants; the list goes on. There are reasonable exemptions, or reasonable assessments could be made, where people are acting in good faith, but we still see far too many examples of people designing or promoting schemes in the full knowledge that they will make a quick buck but will not pay the consequences.
As we have seen, the Government and HMRC are trying to clamp down. When they catch up with people who have followed advice, often in ignorance of tax rules and in the belief that they were following good, independent financial advice, the bite really hurts. Why are we not going after the scheme promoters much more aggressively? Despite all the controversy—the headlines generated off the back of the loan charge, the debates in Parliament, inquiries and grillings before the Treasury Committee—we still have not got to the heart of the issue.
In my opinion, and that of many people following our proceedings, the people who design, contrive and promote such schemes are still not paying the price for giving bad advice to their customers, who believe they are following good advice and the law. We are not going to quibble about clause 98 and the tidy up it is doing, but I am disappointed by the lack of aambition. The Treasury has to be much more aggressive with the promoters than it is currently.
Alison Thewliss
In new clause 12, we mention the issue of Scottish limited partnerships. I make no apology for doing so, as they are still a problem. We only need to look at the ongoing campaign journalism by Richard Smith and David Leask on this issue to know that Scottish limited partnerships are being used in nefarious ways to move money and goods around the world. They have been involved in war crimes and all kinds of things. The loopholes existing in Scottish limited partnerships and Companies House must be closed by the Government. They are harming not only individuals who suffer the effects of these crimes, but Scotland’s reputation. They are called Scottish limited partnerships, but Scotland really has no part in it; they are an historic arrangement, but they are governed here.
There are still people not doing the simplest things such as registering persons of significant control. The answer to my recent parliamentary question suggested that 948 companies have still not registered a person of significant control. That is dramatically down from where it was, but it tells me that people are using other means to hide their money, rather than going through Scottish limited partnerships, and that no Government fines have been levied on the 948 companies that have not registered a person of significant control. That is money that the Government could have in their pocket. They are deciding that they do not want to pursue that for their own reasons. It really does stick in my craw that this is a continual issue: I have to raise it on the Finance Bill and the Scottish National party has to raise it in this House.
We are also concerned about the tax gap. The tweaks being made here are not really going to change that significant gap. In June 2019, HMRC published revised estimates, which put the tax gap at £35 billion for 2017-18, representing 5.6% of total tax liabilities. The Minister, no doubt, will say that the tax gap has fallen—it has—but that does not disguise the fact that it still exists, and that tax is money that could be coming into the revenues. It could be supporting businesses and individuals across the country and we could be abolishing policies such as the two-child limit, because the money would be there in the Government’s bank account. The Government could use that money rather than not collecting it. I could go into great detail, which I have here, about all the anti-avoidance mechanisms that have happened. I am sure other hon. Members are as warm as I am and would like to get some fresh air, so I will skip that in the interest of the patience of all colleagues.
We do need workable general anti-avoidance rules. They must tackle tax avoidance in all its forms. They must not exempt existing established abuse from action being taken. They must include international tax abuse within their scope. They must give the right to the tax authority to take action against tax avoidance, defined in an objective fashion capable of being numerically assessed, without the consent of the unelected authority. They must increase the burden of proof on this issue on to the taxpayer.
In 2014, the coalition Government announced the introduction of a system of follower notices and accelerated payment notices. In cases where someone is in dispute over their assessment, HMRC may issue a follower notice if this arises from the use of an avoidance scheme that is the same or similar to arrangements that HMRC has successfully challenged in court. In July 2017, HMRC reported that it issued over 75,000 such notices worth in excess of £7 billion and managed to collect nearly £4 billion. That is still a significant gap of £3 billion. HMRC must be able to collect the taxes it is due in real time instead of waiting for those judicial decisions.
With Scottish limited partnerships, the extent of the abuse of the current system is laid bare in the Global Witness report “Getting the UK’s house in order”, which highlights the deficiencies at Companies House that have been going on for many years. This needs to be dealt with soon. Reviews have been carried out, things have been talked about, but there has not really been any action. It makes no sense to me that we have such a system but do not allow it to catch the people it should be catching.
I sat on the pre-legislative Joint Committee for the Registration of Overseas Entities Bill in the last Parliament. That Bill seems to have disappeared completely. It would help to tackle some of the money laundering that goes on with property registered in the UK. People across the country, particularly in many London boroughs, see blocks of flats with nobody living in them. People could live in those flats. They are being used for money laundering and moving money about. We need to bring that Bill back and ensure those people are held to account. We should close these loopholes in the system and ensure that the tax that is due is collected for the benefit of all of us.
Jesse Norman
I am grateful to colleagues for their contributions. I want to take up some of the points made by the hon. Member for Ilford North. The delicacy and agility in his ability to pivot from detailed scrutiny to a swingeing extension of tax powers, and new taxes galore, is interesting to watch, but the fertility of his invention is great, and I will read his suggestions with some care, in the record. I am grateful to him for that.
The ugly truth of the matter is that tax avoidance and, in particular, the promotion of it, is an amoebic activity that tends to flow into empty spaces and to be parasitic, if amoebas can be parasitic—I am not sure whether they can—on good activity. So, right next to where we see good or lawful and legal activity, we can see some unpleasant, nasty and abusive tax avoidance.
The hon. Gentleman is right to focus on how we see new forms emerging. It means that the battle against tax avoidance and evasion is never fully won. I hope that he will take some comfort from all the work we are doing on the promoter strategy. It is designed not merely for potential new powers, but for a different way of thinking about disrupting the economics of the supply chain. To pick up on a point that he raised about effectiveness, the GAAR can lead to a fine of 60% of the counteracted advantage. It can be pretty substantial, and it has genuine teeth.
I hope what I say in responding to the point made by the hon. Member for Glasgow Central on Scottish limited partnerships falls within the framework of the Bill. The issue is well understood, and there is public concern about it, which is shared across the House. She will be aware that BEIS introduced some new reporting requirements for Scottish limited partnerships in June 2017. Since then, new registrations have declined sharply. Of course, there is a sump of existing partnerships and, as she will be aware, BEIS is consulting on wider reforms to prevent the criminal misuse of those partnerships but retain their core and, in many ways, effective and important other purpose. It announced reforms in that area as of December 2018, and the Government have made clear that they will legislate when parliamentary time admits. So although the matter does not, in its preponderance, fall directly within the clause, she is right to raise it and the Government are fully sighted in that regard, and fully seized of it.
Question put and agreed to.
Clause 98 accordingly ordered to stand part of the Bill.
Schedule 13 agreed to.
Ordered, That further consideration be now adjourned. —(David Rutley.)