Loan Charge 2019: Sir Amyas Morse Review

Christian Matheson Excerpts

Thursday 19th March 2020 Commons Chamber

[Christian Matheson (City of Chester) (Lab)]

I intend to speak for only a couple of minutes. That is partly because of the outstanding introduction from the right hon. Member for Haltemprice and Howden (Mr Davis), which was clear, logical and unimpeachable—I congratulate him on securing the debate—but partly also because the situation is simple.

I am clear about two facts. First, disguised remuneration loan schemes—DR schemes—were clearly a tax dodge and were used for people to pay less tax. It is absolutely right, as the right hon. Member for Kingston and Surbiton (Sir Edward Davey) hinted, that we should close down those loopholes. However, it is also clear that the loan charge was put in place unfairly and unjustly as a retrospective measure. What is the proof of that particular pudding? Well, the right hon. Member for New Forest West (Sir Desmond Swayne) beat us all to it, and he is absolutely right. Why on earth did we need to introduce the 2017 legislation to introduce the 2019 loan charge if, as the Government and HMRC claim, these schemes were already illegal? They were not. That is why the loan charge was brought in. It is utterly wrong to bring in retrospective legislation and retrospective taxation as a result.

HMRC is entirely within its rights to look at up to five years of someone’s tax records, but only if the information that the individual has given to HMRC can be proved to be incorrect. We are talking about individuals who had their correct tax returns signed off by HMRC, which agreed that they were perfectly legitimate and lawful under current tax law but then reopened them, not because there was a suggestion that the individuals had provided incorrect information, but because the law had changed or was not quite as HMRC thought it was at the time it signed off those tax regulations. That is HMRC’s problem, not the problem of my constituents.

Fortunately, I do not know of any constituents who have taken their own life, but I do know of constituents who have lost their business and their house. One constituent’s marriage broke up. One young lad doing his first contracting job was told on the first day, “This is the way that we get paid in this place.” He did not know any better; he was 21 years old and just out of university. That was how he was encouraged by the employer and, incidentally, his colleagues to undertake the scheme. He does not yet know what his liability will be. Will it be £16,000? Will it be £60,000? The uncertainty is dragging him down. At the moment, he does not even feel able to work.

I congratulate the right hon. Member for Haltemprice and Howden (Mr Davis) and echo the right hon. Member for Kingston and Surbiton, who says that it is not a party issue. Members will agree that it is a question of natural justice and fairness, and of not reopening tax returns that had previously been signed off by HMRC. By all means let us close the loophole, but let us not drag people into this dreadful sense of natural injustice.

[Several hon. Members rose—]

--- Later in debate ---

[Jesse Norman]

I am not in a position to take the right hon. Gentleman through the legal arguments, and I do not need to, because, as I have said, they have been described in detail by Sir Amyas Morse in his review which, of course, is based, as my remarks would not be, on a detailed interrogation with tax experts on all the specific issues behind it. I do not think we have any sensible reason—no one has in fact offered one—for disagreeing at length or in any detail with his conclusion.

[Christian Matheson]

The Minister knows that I have all the time in the world for him, but nobody in this House disputes the fact that it was tax avoidance and that loopholes needed to be closed. He is spending his time explaining why they were avoidance schemes, but hon. Members understand that. It is the question of retrospection and unfairness that is exercising us in this debate.

[Jesse Norman]

I am very grateful to the hon. Gentleman, but if I may say so, I do not think that has been true. I think the conclusion colleagues have been pushing in this debate is that they disapprove thoroughly of tax avoidance, and their view is that this is not tax avoidance in many cases. If they accept that this is tax avoidance and that the issue is merely as to the remedy, that is of course a slightly different position, and one that I am happy to respond to.

I just want to make it clear that this is a form of tax avoidance. It goes to the wider issue as to whether people should have known what it was. The point is that it is tax avoidance, and it costs the Exchequer hundreds of millions of pounds a year. That has two effects: it deprives public services of the money they need to operate; and it forces other taxpayers to pay more to make up the shortfall.

The purpose of the loan charge was to combat this form of abusive tax avoidance. The loan charge was introduced as a new measure in 2017. Following a public campaign last year, we asked Sir Amyas Morse, as has been noted, to conduct a review of whether it was an appropriate policy response to the use of the disguised remuneration scheme. He had full control of the review’s management and recommendations. He took evidence from a very wide range of individuals affected, and he spoke to interest groups, MPs, tax specialists and many other stakeholders.

Again, the facts are not in doubt. Sir Amyas Morse, as has been recognised by colleagues today, is an individual of huge experience and great independence of mind, and he is widely respected across the House. He was independent in his review, and he was given wide scope in expert support. He produced a thorough and exacting piece of work—a 76-page, 30,000-word report—that drew on over 700 individual testimonies and impact statements, and which painstakingly worked through the issues before recommending notable changes to the policy, including substantial carve-outs as to who was affected. Sir Amyas was clinical and at times unsparing in his criticisms, including of Her Majesty’s Revenue and Customs and, be it said, of the Loan Charge Action Group. All but one of these recommendations were accepted by the Government.

Among those recommendations were two to which I want to draw the House’s particular attention. The first is Sir Amyas’s insistence, as we have heard across the House today, on the need for the Government to go further in going after and bringing to justice people who enable or promote tax avoidance schemes. I am therefore delighted that, as part of the Budget documentation we have produced today, we have published a policy document on “Tackling promoters of mass-marketed tax avoidance schemes”, and I draw the attention of all colleagues to it. It is a sober and thorough piece of work that looks at lots of different approaches as part of an integrated strategy.

The other thing that Sir Amyas pointed to—again, I think rightly, but also picking up on a widely anticipated and understood gap—is the importance of raising standards in the tax advice market. Again, I am pleased to say that, as part of the Budget documentation, we have published a call for evidence on this very topic, “Raising standards in the tax advice market”. I encourage all colleagues and their constituents to contribute to that approach.