Finance Bill

Mary Glindon Excerpts

Wednesday 2nd July 2014 Commons Chamber

[Mrs Mary Glindon (North Tyneside) (Lab)]

Will the hon. Gentleman give way?

[Mark Field]

If the hon. Lady will excuse me, I will make some progress, as there are other Members who want to speak.

We are now looking at drawing tax avoidance measures so widely. It has been common practice for investors to err on the side of caution and sign up, as the Minister knows, to the HMRC’s own disclosure of tax avoidance schemes—DOTAS—register. Currently, if the UK tax authorities wish to challenge the legitimacy of a DOTAS-registered scheme in court, the taxpayer is permitted to hold on to the disputed tax while the case is being resolved. The Government believe that that incentivises scheme promoters to sit back and delay resolution, so they propose extending the accelerated payments measure to existing DOTAS-registered schemes. That will mean that disputed tax is paid up front to the HMRC, and will be returned if a scheme is subsequently found to be legitimate.

I quite understand why the Minister has felt tempted to explore that route. There is, I understand, a desperate need for money to shore up the public finances, which are still far less rosy than any of us would wish, with a recovery that remains somewhat fragile. There is also, understandably and justifiably, a consciousness of the need to deal more quickly with the tens of thousands of outstanding mass-marketed avoidance cases that are currently clogging up the courts.

However, there is also a vital issue of principle at stake. The Government have been celebrating and espousing their reverence for the eight-centuries-old principles set out in Magna Carta. It was that charter that established the supremacy of the law by dictating that no Englishman could be punished without first going through the proper legal process. That set in train a constitutional revolution that has seen billions across the globe having their rights expanded and protected against an all-powerful state.

Yet at the same time, our Government are now overseeing the creation of a law that will permit HMRC to confiscate a citizen’s property before the courts have established who is legitimately entitled to it. The DOTAS register was a good idea. It was designed to promote openness and transparency in investors’ relations with the HMRC. It is now, in effect, introducing retrospective legislation, with DOTAS declaration being used as a stick with which to beat legitimate investors—those who had never planned on having the liquid assets to meet disputed liabilities.

No doubt the Government—any Government—feel they can railroad those proposals through on a wave of popular demand for new measures to tackle tax avoidance, but although I agree that we have to clamp down on illegitimate tax avoidance, I worry about the potentially very wide-ranging consequences, including the fundamental undermining of the Government’s overarching aim to make Britain a place that is open for business. I support many of the underlying measures in the Bill that are focused on that aim, but this measure expands a profoundly anti-Conservative notion of retrospective legislation. The Minister and I have both been shadow Ministers; we know the number of Finance Bills proposed by the erstwhile Labour Administration in the latter half of the last decade that we expressed concern about because they contained precisely this type of anti-avoidance legislation with retrospective elements. We have to recognise that considerable hardship is imposed on many of those who are affected by such provisions.

I addressed these issues in an article in The Daily Telegraph several months ago. I was and continue to be inundated with letters and e-mails from ordinary people across the country who are utterly dismayed that a Conservative-led Government would initiate such a change in law. Let me highlight some of their comments, so that the Minister is fully aware of the impact of the proposal. One correspondent advised me:

“If this goes through, HMRC will be able to demand immediate and upfront payment of the money it says I owe as a result of their changing the law retrospectively—but without me even being able to present any arguments to the tax courts in my defence. If this were to happen I would need to lose my home in order to pay the bill. It is a monstrous injustice.”

Another correspondent wrote:

“If one was to listen to the Government, it could easily be believed that users of the structures declared under the DOTAS are malicious, super rich individuals, out to escape payment of their ‘fair share’, in contrast to ‘honest taxpayers’. I have been an employee of a company that provided a remuneration structure duly registered under the DOTAS.

In the aftermath of the most severe economic crisis in generations, the IT industry, in which I work, got hit very hard. I have been subjected to rate cut after rate cut since 2009, and for me, nominal income is only going in one direction: down. Yet, if I listen to”

the Government,

“it sounds like complying with an ‘accelerated payment’ will be but a well-deserved inconvenience, forcing me maybe to sell one of my numerous yachts or…homes. I am shocked and appalled at the cynical discourse that consists of creating this false image. I personally feel deeply insulted…. I am not a rich person by any stretch of the imagination; my partner and I rent a one bedroom apartment, and we live modestly.”

What is slightly depressing is that this sort of scrutiny has not really happened. I well understand why the Labour Opposition feel they do not want to stand up for those individuals affected by the accelerated payments regime. I ask the Minister once again in the implementation of the Bill to consider an exception in the case of existing DOTAS-registered schemes whose promoters have taken all reasonable measures to enable a dispute to be brought before the statutory appeals tribunal. I think there should also be a right to appeal against an accelerated payment on the ground that the money is not due, or that a follower notice or accelerated payment notice is not applicable.

Although the Government say the legislation is not retrospective, as it does not change an underlying tax liability, it will in fact apply with retrospective effect over the past 10 years to anyone who currently has an open appeal or inquiry. In my view, if the provision is to come into effect, it should be applied only in cases involving tax planning carried out after Royal Assent to this Finance Bill.

I am sorry if I sound a little churlish. The Minister is well aware, because we have discussed this privately as well as on the Floor of the House, that I think there is much that is good in the Bill, but it is right that these things are properly scrutinised and that scrutiny is ongoing. We are putting into place certain measures that I think set a potentially dangerous precedent and run counter to a principle that should be close to all our hearts: that the British tax system and the British economy should be open for business and open to the opportunities that we all want our constituents to benefit from as we move into a strong economic recovery in the years ahead.