Finance Bill

Debate between David Davis and Alison Thewliss

Report stage & Report stage: House of Commons & Report: 1st sitting & Report: 1st sitting: House of Commons
Wednesday 1st July 2020 Commons Chamber

[Mr Davis]

Thank you, Mr Deputy Speaker. I shall move on to the other issue that I want to discuss today.

Amendment 20 would delay the imposition of the IR35 rules from 2021 until April 2023. It is very unlikely that the economic crisis we are facing will be over by April 2021, and attempting to implement IR35 will cost jobs and do serious economic damage. A few months ago, the powerful Cross-Bench House of Lords Economic Affairs Committee wrote a report on IR35, and much of what I am going to say involves quotations from that report. I will start with this:

“It is right that everyone should pay their fair share of tax. But the evidence that we heard over the course of our inquiry suggests that the IR35 rules—the government’s framework to tackle tax avoidance by those in ‘disguised employment’—have never worked satisfactorily, throughout the whole of their 20-year history. We therefore conclude that this framework is flawed.”

It is right not to impose unnecessary burdens on business at a time like this. I agree with a great deal of what the right hon. Member for Wolverhampton South East had to say about the importance of preserving—and, indeed, not destroying—employment in the current circumstances. This goes right to the issue of IR 35. The report states that

“the government made this decision after considering the issue too narrowly, in terms of its tax take. It has severely underestimated the costs to business of implementing the changes…And it did not analyse sufficiently the unintended behavioural consequences of the proposed reforms or their wider potential impact on the labour market, and on the gig economy in particular.”

Many contractors in the coming years will be left in an “undesirable halfway house”. They do not enjoy the rights that come with employment, yet they are considered employees for tax purposes. In short, IR35 will create “zero-rights employees”. I am saying this directly to Labour Members, because the idea that a Government action can create a class of employee with zero rights is an issue close to their hearts. Such employees have no rights under employment law but under tax law they are employees.

The Lords Committee called on the Government to commission an independent review to devise a better implementation of the scheme. I think that is exactly right, which is why I want to see another two years before we implement whatever the decision is. We need that time to understand precisely what the effect of our new policy will be.

It would be a disaster if, in the context of the economic crisis and the growing gig economy, the Government accidentally created that class of zero-rights employees with no holidays, no sick pay, no pension, no redundancy —no employment rights whatsoever. We must stop that happening either accidentally or deliberately, and on that basis I ask the House to support amendment 20.

[Alison Thewliss]

I am glad to follow the right hon. Member for Haltemprice and Howden (Mr Davis), who set out well the impact that the loan charge has had on many people’s mental health and wellbeing. Many of them will be watching the House tonight.

The implementation of the loan charge has been a disgrace. Our new clause 1 would force the Treasury to come clean on its unfairness and would require a review of the impact of the scheme. That reflects the limitations of Finance Bill amendments, but given the freedom of information revelations released yesterday by the all-party parliamentary group on the loan charge, suggesting that there was too cosy a relationship between Government officials and the staff working on the independent Morse review, looking again at this whole shambles seems appropriate.

It remains a scandal that tax professionals advise their clients to use such loopholes. It is important that people pay their fair share for the public services we all use, and the UK Government must pursue the organisations and individuals who facilitated these loans. An independent review should be carried out of the advice given. As I said in Committee, those who trade in the business of loopholes are surely looking for the next thing to come along, so coming down on those scheme promoters now would prevent future loss to the Treasury.

There is widespread concern that HMRC has failed to work constructively with those seeking a loan charge repayment plan, with concerns that some may face bankruptcy and homelessness. I thought the right hon. Member for Haltemprice and Howden laid that out quite well. He mentioned the seven people who sadly took their own lives.

We continue to call on the UK Government to review the implementation of this policy, and our new clause 1 would force them to publish one within six months, including on the fairness with which HMRC has implemented the policy and whether it has provided reasonable flexibility on repayment plans, with the aim of avoiding business failures and individual bankruptcies.

My hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) tabled early-day motion 296 to welcome the publication of Sir Amyas Morse’s loan charge review and the fact that, through this Bill, the UK Government would amend relevant legislation such that loans made before 2010 would no longer be subject to the loan charge. The motion also welcomes the fact that the self-assessment deadline has been delayed until 30 September 2020.

Initial analysis suggests that more than 30,000 individuals will benefit from those and related measures, but a pause in the policy is still necessary to assure MPs that HMRC is working constructively with those who are seeking a reasonable repayment plan—one that recoups the unpaid tax while avoiding the unacceptable risks that people face. If HMRC cannot deliver on that, an independent arbitration scheme should be used.

We on the SNP Benches support the cross-party amendment 55 and new clause 31, which, as the right hon. Member for Kingston and Surbiton (Sir Edward Davey) pointed out, has 54 names to it and would provide that a prior settlement with HMRC could be unwound unless the worker failed to account for a pre-2016-17 tax liability in his or her return deliberately, despite knowing that the loan should have been included as income.

It is disappointing to hear that there may be no vote on new clause 31, given how many signatories there are to it and the lobbying we have all had. People watching this debate at home will not understand why. Since we are trading FDR quotes, we should note that he said: “In politics, nothing happens by accident. If it happens, you can bet it was planned that way.”

The Tories have failed to address our concerns about IR35, which is why we tabled amendment 16 to scrap it. Instead of pressing ahead with the discredited IR35 in the Bill, the Government should take the advice of the House of Lords—that is not something I often say, but they should; they should pause this policy and go back to the drawing board. It seems evident that the UK Government have not learned from their previous experience in the public sector and are ploughing on regardless.

On a process issue, we maintain that it was not acceptable that the Government introduced all this through a deeply contentious 45-minute money resolution debate instead of going through the full scrutiny of the Budget process. We have been against IR35 since the start, and these proposals would introduce a new group of zero-hours employees, paying full taxes without the associated employment rights—something that should give us all pause for thought. People working in our constituencies in a huge range of jobs should be entitled to those employment rights.

Under the present economic circumstances, it is wrong to place new and unfair taxes on firms. Contractors are particularly liable to be struggling at this point—not least those who are part of the 3 million people excluded from the UK Government’s support schemes. I pay tribute to ExcludedUK and all those who have sought to highlight this issue.