Loan Charge

Ashley Dalton Excerpts

Thursday 18th January 2024 Commons Chamber

[Sammy Wilson]

I am glad the hon. Gentleman agrees with everything I have said today. I think he has even dressed to show that agreement, with his red, white and blue outfit, and I appreciate that very much. Maybe he has become a Unionist as well—even for a day, that would be something of a miracle.

Let us look at the role of HMRC and the approach it has taken. It has been rightly pointed out that there should have been much more supervision within HMRC of what was going on. HMRC is now saying that it believes that many of the people who used payroll loan schemes should have been paying pay-as-you-earn, but at the time HMRC was not challenging the schemes, and the promoters were able to say they were legitimate. For years, people were acting in the belief that they were legitimate and were no risk. And here is the ultimate irony: HMRC employed people on contracts to do work for it, knowing that those people were being paid in that way, and never challenged it. That being the case, we have to ask what the level of supervision was, or whether HMRC changed its mind and then, having done so, decided to go after the individuals who had undertaken those schemes.

Some people will argue, “Well, it’s their own fault. After all, they knew that when they went into one of these schemes their tax liability may have been reduced. If people did that, they took that risk.” The fact is that many people did not volunteer to go into those schemes. Many people were forced into them. Some people were put into those schemes and did not even know they were in them. As far as they were concerned, they were employed by a contractor and their tax was being deducted, and they only found out later on that that was not the case.

By the way, this was not rich people employing fancy accountants to tell them how to avoid their tax. Many of the people caught up in the schemes were ordinary workers—nurses, teachers, cleaners—and some were people who wanted to set up a company and, because of the flaws in IR35, this was the only way of dealing with their tax affairs. People did not always volunteer to go into the schemes. One of the ways we discovered that HMRC was involved in this was that one lady came to us and said, “I was employed by an IT consultancy, the contractor was working for HMRC and the only way I could get the job was to be paid through one of these schemes. I did not particularly want to, but I wanted the work, so I had to enter into the scheme.”

HMRC, apparently, was quite happy for that contractor to pay its workers in that manner. In many cases, if people wanted to work, they were forced into these kinds of schemes. For years, although it was quite clear that there was an employer-employee relationship and they were under the direction and supervision of a company, they were treated as if they were separate stand-alone employees or individual self-employed people who could pay tax in that way.

The result was, of course, that when it was decided that the schemes were not tax compliant and there were years and years of back tax, Ministers were persuaded to introduce the loan charge in the Finance Act 2017. It was very convenient for HMRC to have that arrangement in place, because using the loan charge enabled it to decide what tax an individual was liable for and people could not challenge it in the normal way tax disputes can be dealt with, through either tribunals or courts. That was ruled out for them. In many instances, HMRC did not even have to explain how the tax bill was reached. If people do not have any redress to a court or tribunal, they really have no chance of negotiating whether or not the tax they have been deemed liable for is a liability and a correct liability.

Added to that was the fact that many employers saw the schemes as an advantage, because they could employ people without paying employment taxes or having to deal with pensions or holiday pay. That is why many employers forced individuals to be paid in that way. Those who argue, “Look, these people tried to avoid paying tax, so slap it up them now, they have reaped the consequences and they should just grin and bear it.”. should bear in mind that thousands of people are affected by this because they were impotent to stop that method of payment being used and were told by the promoters that it was all compliant and that there was no risk. In fact, 93% of those in the schemes were assured there was no risk and that they were compliant.

Indeed, they probably were compliant until, in later years, HMRC decided they were not compliant. People were left with tax investigations going back to 2010, which have resulted in many of them finding it impossible to pay. I want to mention a couple of case studies, because the confusion in HMRC made it very difficult for people to settle. HMRC did not seem to have the capacity to tell people. In one particular case, an individual was told after six years, “You owe £91,000.” He wanted to settle rather than be put in the loan charge. He was told, despite the fact that that was not in the criteria, “We don’t believe you can afford to pay £91,000 on the terms you have given.” So no settlement was granted and he was put in the loan charge, and the man who could not afford to pay £91,000 was then hit with a bill of £124,000. He could not afford to pay £91,000 in a settlement, but he was pushed into a loan charge where he had to pay £124,000.

We have the back charges, tax years that people thought were closed have been reopened, the confusion and some people now have to pay more in tax than they actually earned. HMRC does estimates; I think one person was told, when an explanation was sought of why they owed so much, that it was because everybody else paid that amount—and of course there is no redress.

[Ashley Dalton (West Lancashire) (Lab)]

I congratulate the right hon. Gentleman on bringing such an important debate to the Chamber. I have been contacted by several constituents who have described themselves as victims of this situation. Does he agree that those people who are being asked to pay what my constituents describe as incomprehensible amounts of money, while their employers and the people who provided those schemes are not being pursued for one penny, are victims, but are assumed to be criminals? Does he agree that they must be treated as victims and that this must be covered by a truly independent inquiry?

[Sammy Wilson]

That brings me to the very last point— I promise it is my last, Madam Deputy Speaker. I will simply list the points and other people can take them up and expand them later on. There are a number of issues the Minister must consider. First, while I have no evidence of this, we have been told that HMRC officials, just as Post Office officials were, are on commission for the money that they bring in through the loan charge. The Minister must confirm whether that is the case, because if so, it would act as a huge incentive for them to pursue individuals relentlessly.

Secondly, I trust that the Minister, in his new position, will challenge the Department’s lines on this matter. We need a greater challenge than we have had so far. Thirdly, I believe that the loan charge needs to be repealed because it is not fit for purpose and is having a detrimental effect. Fourthly, the employers and promoters must be pursued. Under the law, they were responsible for collecting tax from the employees. That is the basis on which tax demands are now being made of people—that they were employees, not self-employed.

Fifthly, of course we recognise that the Government have to collect tax when it is due, but the current method of pursuing this will not bring in tax revenue because people are going bankrupt. A group of professionals has proposed that the Government could claim back an affordable proportion of the tax that is owed. They would get at least some tax revenue out of it while stopping this relentless pursuit of individuals. In the longer run, I think we need a Bill of rights for taxpayers, and for tax fairness to be built into legislation, but that is a matter for a longer debate.

There are people who are suffering today because they are being battered by the cosh that HMRC officials are using on them to extract money that they do not have and which many of them do not believe they owe. I ask the Minister to grasp this nettle and ensure that we do not have another Horizon scandal.

Finance (No. 2) Bill (First sitting)

Ashley Dalton Excerpts

Committee stage
Tuesday 16th May 2023 Public Bill Committees

[Victoria Atkins]

The shadow Minister asked that question. We respect the work of the OBR, and of course we understand that it is an independent forecaster. However, as I said, we have never shied away from the fact that this a difficult set of circumstances. I know it is not for the hon. Lady to set tax policy on behalf of her Front-Bench team, but my hon. Friend the Member for Aylesbury posed an interesting question: what is Labour’s alternative? Outside observers may wish to take that into account.

We believe in sound money, and the rate of debt interest that we are paying each year—some £120 billion—is money that we would much rather spend on our NHS, police and defence. However, precisely because of our extraordinary efforts to protect our constituents throughout the pandemic, to help Ukraine and to provide support through the cost of living crisis that has emerged from that, we are having to take these difficult decisions in a fiscally responsible way.

[Ashley Dalton (West Lancashire) (Lab)]

It is a pleasure to serve under your chairmanship, Ms McVey. This is my first Public Bill Committee, so I am definitely the baby in the room. There is just one thing I would like the Minister to clarify. When she was responding to the point raised by my hon. Friend the Member for Wallasey about the OBR projections, she said very clearly that she respected and understood them. However, does she agree with them?

[Victoria Atkins]

The hon. Lady will know that I have just answered her shadow Minister’s question on that. I will quote the Chancellor:

“I respect the OBR’s figures. The OBR is an independent forecaster”—

the hon. Lady must use the correct terminology—

“it is their job to make a forecast.”

However, I do observe that forecasts can change, which is why these variables are so important.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clauses 2 to 4 ordered to stand part of the Bill.

Clause 16

CSOP schemes: share value limit and share class

Question proposed, That the clause stand part of the Bill.

Oral Answers to Questions

Ashley Dalton Excerpts

Tuesday 9th May 2023 Commons Chamber

[Mr Speaker]

I call Carla Lockhart. She is not here.

[Ashley Dalton (West Lancashire) (Lab)]

T2. If he will make a statement on his departmental responsibilities.

[The Chief Secretary to the Treasury (John Glen)]

Three of the Prime Minister’s five priorities are economic priorities: to halve inflation this year, to grow the economy and to reduce debt. We are on track to halve inflation this year to ease the cost of living. We have taken the difficult, but responsible decision needed to get net debt falling and secure the future of public services, and we have a clear plan to grow the economy to create better paid jobs and opportunity right across the country.

[Ashley Dalton]

The consumer voice organisation Which? has recently found that 2 million UK households missed a key payment for their mortgage, rent, loan or credit card. Last month alone, 700,000 of these related to housing, so when will the Tory Government wake up to the fact that the cost of living crisis is far from over and what do they intend to do about it?

[John Glen]

In previous answers, I have set out a number of the interventions the Government have taken to help the most vulnerable. I have mentioned the household support fund, the benefits that accrue to all those who are on means-tested benefits, particularly pensioner households, and those who are eligible for disability benefit. As I have also said, the money that the Government have made available is designed to focus on those who are most in need, and we will continue to look out for the most vulnerable through this difficult time.

Finance (No. 2) Bill

Ashley Dalton Excerpts

2nd reading
Wednesday 29th March 2023 Commons Chamber

[Ashley Dalton (West Lancashire) (Lab)]

Over the past few weeks, Government Members have described the Opposition’s objections to this Bill, and to the Budget that came before it, as “the politics of envy.” Nothing could be further from the truth. It is not envy to understand that pension tax breaks for the very richest in society do nothing to provide the economic growth we all so desperately need. It is not envy to demand an economic strategy that prioritises growth and public services, and it is not envy to want good jobs and productivity across all of our communities. This is about tapping into the potential of our country to build the better Britain that we on the Labour Benches know is not only possible, but essential. It is about priorities.

This Government had an opportunity to unlock the massive potential of our country and target measures in a way that could drive growth, invest in public services, and facilitate jobs and employment in our key sectors. However, what they have again chosen to do is paper over the cracks of 13 years of economic failure. They have chosen to dress up a massive tax cut for the richest as some kind of economic freedom, when in fact it is one of the most regressive decisions they could have taken. They have chosen to vaguely manage ongoing decline, rather than take the bold and progressive steps required to unleash the potential of our economy and build a better Britain.

I am sure that Government Members will tell us that the plan is for inflation to come down and for financial growth, but all the evidence is to the contrary. Inflation was meant to come down this month, but it went up again. Rather than improving, growth forecasts have been downgraded, and the Office for Budget Responsibility tells us that wages will fall again this year in real terms. As for the Government’s plan to abolish the pensions lifetime allowance, apparently to keep doctors in the NHS, it is a blanket measure that benefits only the very richest, and one that the former Pensions Minister Sir Steve Webb believes will actually lead to people retiring earlier.

Let us have a look at this abolition of the pensions lifetime allowance. The Government are keen to dress it up as a “keep more of what you earn” idea, as though it is going to help struggling people to save for their futures, but that is absolute nonsense. It is a common misconception that the lifetime allowance stops people from saving more than the limit—it does not. As it stands, people can save more than the lifetime allowance in their pension pots, but over that allowance they will have to pay tax on it. At first glance, anyone might think that it is a great idea that they can now save more without being taxed, but who does the policy actually benefit? In 2019-20 there were over 41 million people of working age in the UK. How many of those were fortunate enough to be able to save enough money that they went over the allowance in that year? It was 8,510. If we filled The O2 arena, four of the people in there would go over the limit. This policy will benefit at most 1% of people. How do the Government justify a policy that helps so few and costs everyone else so much? Even if it did encourage people to stay in employment longer, the IFS says it will cost the taxpayer £100,000 for every job retained. There is no guarantee at all that those people will be retained in the key sectors where we desperately them, such as doctors.

Moreover, this policy allows somebody to hoard huge unlimited wealth in pension pots tax-free. On their death, they can pass those on without having to consider inheritance tax. When Government Members claim this policy is about letting working people keep more of what they earn, we know it is a sham. When they claim it is about retaining doctors, we know it is a sham. When they claim it is about growth, we know it is a sham, because despite this so-called tax cut, the tax burden on ordinary working people is up. Not only is it up; it is at its highest in more than 70 years, and that comes on top of stagnating wages, rising inflation and rocketing interest rates.

There was a chance to put in place an affordable, targeted scheme to keep doctors, but the Government did not. There was a chance to give control back to communities through devolution deals, but 90% of us have missed out on that. There was a chance to end non-dom status and spend the money on the NHS, but it was missed. That is because the Government are out of ideas, out of steam and out of touch. It is time for them to get out of the way so that Labour can get on with building the better Britain that we not only need, but that Opposition Members know we can be.