Jim Fitzpatrick
Main Page: Jim Fitzpatrick (Labour - Poplar and Limehouse)Department Debates - View all Jim Fitzpatrick's debates with the HM Treasury
(5 years, 11 months ago)
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Jim Fitzpatrick (Poplar and Limehouse) (Lab)
It is a pleasure to see you in the Chair, Mr Walker. I am delighted to follow the hon. Member for Waveney (Peter Aldous). I offer my congratulations to the hon. Member for Wycombe (Mr Baker) on setting up this important debate. I, too, am grateful to the Loan Charge Action Group for its briefing and, in particular, to our former colleague in the House, Greg Mulholland, for his assistance in preparing for the debate.
A number of constituents have contacted me about this issue, and I will focus on the questions that they wish me to put to the Minister at the end of my remarks. I will make a few comments beforehand, though, first on the numbers of people affected, which seem to be in dispute. There has already been mention of several figures: 40,000, 50,000 and 100,000. If I read the Library briefing correctly, Mr David Richardson, director of customer strategy at HMRC, said to the Treasury Committee that there were 105,000 cases, 80,000 of which were unresolved. I would be grateful if the Minister could clarify exactly what the numbers are.
The second issue is the jobs that some of the victims have. The Loan Charge Action Group says:
“The Loan Charge affects many tens of thousands of professionals—contractors, freelancers, agency workers including social workers, supply teachers, locum nurses and doctors who were recommended to use umbrella companies by employers, professional advisers and employment agencies.
For many people the sums involved run into hundreds of thousands of pounds”.
The group goes on to say:
“Schemes were, and still are, legal and in most cases the motivation behind their use was not to reduce tax but simply to comply with the poorly drafted IR35 legislation, which”,
18 years on, “remains unclear.” It is misunderstood, and certainly the origin of this issue does seem to be the IR35 regulations. I have been dealing with cases for constituents about that for the past 18 years.
My hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) made reference, as did the hon. Member for Wycombe, to the Loan Charge Action Group’s analysis of the impact. She quoted the figures about those who are affected. Some 68% were affected by depression or mental impact, 71% by bankruptcy, 49% by loss of resident home, 30% by divorce and relationship breakdown, 30% by loss of career, and 39% by suicide or self-harm thoughts. The biggest issue for all my constituents and the action group is the retrospective nature of the legislation, which the hon. Member for Wycombe focused on. That has been raised many times already, and the key question remains about the transparent unfairness of this decision.
My constituents have requested that I put a number of questions to the Minister. I recognise that he is not directly responsible for this policy, but I am sure he has a briefing that will cover at least some of the questions that my constituents have asked me to raise, because they are quite predictable.
Why did it take HMRC 20 years to take official action? Why did HMRC not email or write to loan users over the past 20 years, to ask them to come out of these schemes and the associated risks, when it had the relevant information on the yearly individual self-assessment tax returns? Why ask for 20 years’ retrospective payment for something that was and is legal? Why has an appeal format been refused to loan scheme users, leaving costly judicial review as the only alternative, which single individuals cannot afford by themselves?
Why cannot HMRC just admit that it did not perform due diligence on the loan schemes? Why, when public sector contractors were asked to move into IR35 in 2018 so that they could pay the right amount of tax, did they not get retroactive tax to pay? Why did PricewaterhouseCoopers get away with 35% early discount on a £10 million fine in 2017 for a failed BHS audit? Apart from going bankrupt or committing suicide, how does HMRC expect most individuals to be able to repay such sums at short notice?
My hon. Friend the Member for Mitcham and Morden also mentioned a letter the action group received saying that HMRC contractors are now being pursued by HMRC due to the loan charge. The Loan Charge Action Group has now discovered that HMRC itself was using and paying contractors who are now subject to the loan charge. The LCAG has been contacted by people in that situation reporting that they are working on important IT projects for HMRC, were security-cleared by HMRC, and were working through arrangements that HMRC has now declared to be tax avoidance schemes. In effect, that means that HMRC was itself involved in arrangements that it now says “never worked.” The action group commented:
“This turns this from fiasco into farce.”
Perhaps the Minister could comment on that.
More than 100 colleagues have signed the early-day motion. This is clearly an issue that the Government have to address. There is a massive impact on the lives of those affected, including my constituents. They look to HMRC for fairness, and I trust that the Minister’s response will indicate that that is a possibility. If it is not, I look forward to a cross-party, Back-Bench new clause to the Finance Bill, which, based on the numbers here today, would stand a good chance of passing through the House.