Loan Charge 2019: Sir Amyas Morse Review

Chris Stephens Excerpts

Thursday 19th March 2020 Commons Chamber

[Chris Stephens (Glasgow South West) (SNP)]

Let me first congratulate the right hon. Member for Haltemprice and Howden (Mr Davis) on his brilliant introduction to this issue and on standing up for the victims of this scandal—and it is a scandal. I am a proud member of the all-party parliamentary loan charge group.

Two constituents, Fraser Kennedy and Jason Millington, have been in regular contact about this issue. Indeed, one Monday morning, as I was travelling down to Westminster, I got the fright of my life when I saw the number of Twitter notifications I had. It surprised me because it had been a quiet weekend, so I knew I had not said or done anything particularly controversial—at least not that particular weekend. It was a tweet from Jason Millington, who said that what had kept him going was that he had the support of me and so many other MPs in fighting this injustice.

[Patrick Grady (Glasgow North) (SNP)]

I congratulate my hon. Friend on avoiding controversy and recommend that for all Scottish National party MPs.

I have had two constituents get in touch and I have tried to make representations on their behalf, because they found themselves in a situation that they absolutely did not intend to be in because of the information that they were given. Does this not show the importance of constituents getting in touch with us? I understand from the people running the all-party parliamentary loan charge group that there may be more such constituents out there, and it is very important that they contact their MPs so that we can give them tailored advice and support.

[Chris Stephens]

My hon. Friend is right; that is very sound advice. Everyone who has spoken so far today has been a credit not just to the House, but to their constituents, because there are far too many people—such as my constituents, his constituents and others—who are in despair because of this issue.

[Richard Fuller]

On the importance of Members of Parliament speaking up, is the hon. Member concerned, as I am, that effectively, HMRC is smearing constituents as tax dodgers and adding to their mental anguish, rather than trying to assist them through this process?

[Chris Stephens]

I am not only very concerned, but angry about some of these actions and what I have heard today about what HMRC is up to. I will speak more about that.

When constituents such as Fraser Kennedy and Jason Millington come to us to discuss this issue, three immediate things leap out at us. This has come up in the debate, including in a fantastic example from my hon. Friend the Member for Ayr, Carrick and Cumnock (Allan Dorans). In this Parliament, we really need to deal with the relationship between an employer and a worker and their status in the workplace, because it really is time to end the bogus self-employment that we have heard about in this debate and in other examples. This needs to be addressed because what this issue has proven is that the wrong people are being targeted.

The hon. Member for Beckenham (Bob Stewart) said that when people first come across this issue, it looks like some sort of tax avoidance scheme, and I think it is perfectly natural for someone to think that when it is first explained to them. In the back of my head, when I first heard about it, I thought, “Well, maybe I will approach HMRC as an MP and try to get the same sweetheart deal that Google got only a couple of years ago,” when it paid the equivalent of 4% corporation tax. It seems that there is a disproportionate way that the people who have been caught up in the loan charge are being dealt with compared with other people who can get a sweetheart deal. That is how I thought I could try to deal with it, because if the answer is, “Yes, it is tax avoidance”, then the people HMRC should really be going after are those who contrived and promoted such schemes, because they are the ones who are directly responsible. They should be pursued and punished, and there should not be the blunt instrument that is being used for those caught up in the loan charge.

The third conclusion is, as the hon. Member for North East Bedfordshire (Richard Fuller) said, that there have been disproportionate actions from HMRC towards the individuals who have been caught up in this and how they feel. My constituent, Fraser Kennedy, sums it up well. His employer, Winchester, assured him and HMRC that it had paid all the tax and moneys, but he is still getting chased by HMRC. He feels bullied and harassed, and is suffering from stress and anxiety because of how it has handled the matter. He believed that it was settled a year ago, but he is still getting correspondence.

[Paul Holmes]

The hon. Member’s speech perfectly sums up the problem for many of my constituents in Eastleigh. So many times, they get a letter and desperately try to get through to HMRC, but there is no constructive dialogue with HMRC. Does he agree that we need a better bespoke team to work with the people affected by these measures?

[Chris Stephens]

I entirely agree. The hon. Member’s constituents in Eastleigh and my constituents in Glasgow South West will have the same feelings about this matter and how they are being treated.

Jason Millington emailed me his thoughts last night, because he knew that the debate was today. He said that he when he was advised of the changes in 2016, he stopped immediately and put his affairs in order, totally unaware that HMRC was looking for back taxes. The requests that are being made are entirely unreasonable. The stress of not knowing how he can ever repay what HMRC is looking for is having a serious impact personally, and indeed professionally. I do not remember the tax avoiders such as Google complaining publicly that they were feeling bullied and harassed, or that they were under stress or feeling anxiety. It seems appropriate to point out, as many hon. Members have, that if the law on tax was changed in 2017, that is when the law should apply from. Going back to 2010 is entirely unreasonable. I support the motion.

--- Later in debate ---

[Jesse Norman]

I thank my right hon. Friend for the question. All he needs to do is attend to the detail of the Morse report, in which Sir Amyas Morse goes through the efforts made at that time, before and after 2010, in some detail. That is the basis for the judgment that he reaches about the appropriate relief.

[Chris Stephens]

The Morse review also suggests that the main people responsible were the creators of such schemes, who do not seem to be getting chased up to the same extent as those who appear to be the victims of the schemes.

[Jesse Norman]

I take it that the hon Gentleman rightly refers to the enablers and promoters of such schemes. As he knows, I take that extremely seriously, and I have insisted on that point ever since I became Financial Secretary. I will say more about that shortly.

I return to the point that such schemes were contrived tax avoidance schemes that were typically run through an offshore vehicle. A person would receive a monthly amount of pay, often deliberately set at or around the level of the personal allowance to maximise the tax avoided, and above the national insurance lower earnings limit, so as to qualify the person concerned for the national insurance contributions required to receive a state pension. Of course, that did not reflect the person in question’s true earnings because, alongside that payment, they would receive a further top-up payment described as a loan. In many cases, the top-up payment far exceeded—often by a large multiple—the salary element declared for tax purposes.



Those facts are not genuinely in doubt, and all Members who have taken part in the debate have rightly condemned tax avoidance, but I put them on the record again because they highlight how contrived that form of tax avoidance typically was. They also go to the root of the problem.

My right hon. Friend the Member for Haltemprice and Howden raised the issue of thesauruses and dictionary definitions. Let me remind him of the difference between a dictionary definition and a thesaurus. A thesaurus gives an alternate word of supposedly the same meaning. A dictionary definition tries to explain exactly what it is that is being talked about.

The dictionary definition of a real loan is,

“an amount of money that is borrowed…and has to be paid back”.

That accords with our natural experience, as hon. Members will discover if they try to take out a business loan from a bank and not pay it back. If they try to take out a mortgage and not pay it back, they will find the same to be true.

Those loans, however, were not designed to be paid back. They were rather different from loans that might be made to employees that then get written off, on which tax is typically chargeable. They were not designed to be paid back. They were employment income in disguise, so they were subject to tax.