2019 Loan Charge

Gareth Snell Excerpts

Tuesday 20th November 2018 Westminster Hall

[Justin Madders (Ellesmere Port and Neston) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Walker. I congratulate the hon. Member for Wycombe (Mr Baker) on securing the debate. It is clear from what we have heard that the issue has caused much consternation and anguish for many people, so it is right that those concerns have been aired here.

As much as the next person, I believe that if tax is due, it should be collected. Without the ability to raise funds, our public services would grind to a halt. I am sure there is unanimous agreement about that. My concern, and that of many hon. Members, lies in the way the recovery of the 2019 loan charge has been handled. It raises questions about whether HMRC can say, hand on heart, that all those who are subject to it have had what I would call a fair hearing. I want to make it absolutely clear that if, following due process, the money is owed, it should be paid, but what I have heard from a constituent does not give me confidence that that will be the case.

My constituent, Mr Crook, was working as a geologist in the oil industry when the agreements that are being scrutinised were set up. His work has dried up and he is now unemployed. He tells me that he is not in a position to repay everything he owes—not that he has been told how much that is—and that because of the uncertainty and the failure of HMRC to engage with him, he is concerned about the risk of bankruptcy.

I have corresponded with Ministers and officials to ask someone to look into Mr Crook’s case but I have had nothing back but the standard response. With Mr Crook understandably anxious to resolve matters, he has contacted HMRC at the email address provided on 9 April, 8 May, 30 August, 31 August and 28 September, and by post on 2 July. His emails have had an automated response and he has had no response to his letter at all.

[Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)]

My hon. Friend is making a powerful argument on his constituent’s behalf. I have a constituent much like his who has been told that he may have to pay back more than £100,000 over the five years, which could cost him as much as £2,500 a month. Does my hon. Friend accept that even when people are still in work, if they are trying to provide for their families, those sorts of sums are simply unobtainable for most of our constituents and will lead to bankruptcy, whether that is what the Government intend or not?

[Justin Madders]

There is a lack of reality and a lack of genuine engagement with the individuals affected. As I said, my constituent has not had a discussion of the sort that my hon. Friend refers to, and until he does, he is in no position to know whether he will be able to repay anything at all. Will there be genuine discussions before the loan charges become due? Is the Minister confident that the Department has sufficient staff and resources to deal with all the inquiries that we have heard about?

My constituent tells me that although he submitted his tax returns each year when he was working they were never queried, and because of that HMRC has at the very least implicitly, if not explicitly, accepted that the moneys he received as a loan were indeed just that. He is concerned by the retrospective nature and long reach of the loan charge, and states:

“We really are normal people, who operated within the law at the time, itemising everything on our tax returns, paying benefits in kind tax on the loans and operating under a registered scheme with a reference number lodged with HMRC at the time.”

I contrast those words with what my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) said earlier about the string of multinational companies that are clearly paying less tax than they ought. When individuals are being driven to despair by the sort of hectoring we have heard about, it is perhaps right if they conclude that there seems to be one rule for the big corporations and another rule for the man on the street. If individuals are made bankrupt we will all lose, but it looks as if we could end up in that situation by default because of a lack of resources and engagement by HMRC. Will the Minister look carefully at how the recovery operation is working, so that we avoid that? Finally, I ask that HMRC acts with competence and compassion.

--- Later in debate ---

[John Glen]

In the course of my speech, I will address that point. I am happy for the hon. Gentleman to come back to me later if he feels that I have not done so.

To be clear, I am the Economic Secretary; the Financial Secretary wanted to be here but he is in the main Chamber for the Finance Bill, so I am here in his place.

I acknowledge the early-day motion tabled by Members. It has attracted 103 signatures, and I also acknowledge the concern throughout the House on this matter. The concerns expressed are for people who have used a disguised remuneration scheme, who expect to have outstanding loans in April 2019, and who will be subject to the charge. I recognise that the Government need to be clear about why we legislated for this charge, which received Royal Assent following a full debate during the Finance Bill process in 2016-17. I will outline the steps that the Government have taken to help those individuals who may be affected.

The Government believe that it is not fair to ordinary taxpayers, who pay their tax on time and in full, to allow people who have used tax avoidance schemes to get away with it. Disguised remuneration tax avoidance schemes are contrived arrangements that use loans, often paid through offshore trusts, to avoid paying income tax and national insurance contributions. The schemes may have involved provision of a loan with no intention whatever to repay it. I spoke to the Financial Secretary this morning, while preparing for the debate, and he said, “Earnings are earnings, and a loan is a loan,” and that is what the issue boils down to.

[Gareth Snell]

I understand the Minister’s point, but before he progresses with his speech, will he clarify whether he accepts what many Members have asked this afternoon-that those who undertook the scheme did so in good faith, and therefore that the people ultimately in trouble for this system are those who perpetrated it, not those who signed up to it?

[John Glen]

I am happy to concede that for the 50,000 indivi-duals affected, there are obviously responsibilities for those who promoted this. It is absolutely the case that HMRC is pursuing those individuals. They often promoted the scheme to large numbers of individuals. Five cases are before the courts—that seems a small number, but each one covers a large number of individuals—and there has been a judgment in one, with the other four cases still moving through the courts. It is not right to say that HMRC is not engaged with those who promoted the scheme.

[Gareth Snell]

Others set it up.

[John Glen]

Others did, I appreciate that—that is fair. I take on board the sentiment of the Chamber with respect to ensuring that HMRC is engaged with those who promoted the scheme, as well as the other individuals.