Oral Answers to Questions

Mel Stride Excerpts

Tuesday 21st May 2019 Commons Chamber

[Mr Ivan Lewis (Bury South) (Ind)]

12. What steps he is taking to support people affected by the 2019 loan charge.

[The Financial Secretary to the Treasury (Mel Stride)]

Disguised remuneration is an aggressive and contrived form of tax avoidance that involves a loan, which there is never any intention of repaying, being routed via a low or no-tax jurisdiction and then back to the United Kingdom, to avoid income tax and national insurance. Her Majesty’s Revenue and Customs takes a measured, proportionate and sympathetic approach to the collection of this tax, which has always been due.

[Dr Williams]

My constituent contacted me about this issue and said that he had no choice in how he was contracted to work on a BP Norway project. Why is he being pursued rather than BP Norway and the other companies, such as NRL, AML and ICS (Salary) Ltd, which all work together to undermine workers’ rights and minimise their own tax liabilities? What action have the Government taken against those agencies?

[Mel Stride]

I refute the suggestion that anybody is forced into making a tax-avoidance arrangement. If something looks too good to be true, it generally means that it is just that. Of the settlements to date, which have been worth more than £1 billion, some 85% have been from employers, not employees, and we are actively pursuing the promoters of these schemes in exactly the way in which the hon. Gentleman would wish.

[Christine Jardine]

I understand that the all-party group on the loan charge has been sent evidence of the suicide of three people facing the loan charge. More than 100 people in Edinburgh West have been affected by the charge. Many of them have come to see me at constituency surgeries and are worried about their financial future. They did not understand that this tax was going to be put in place retrospectively. In the light of all the evidence, I am concerned about the wellbeing of those constituents who say that they may face financial ruin. Surely the only responsible thing to do is to pause and announce a delay and an independent review, given that we know that people have already lost their lives.

[Mel Stride]

The loan charge is not retrospective. There has never been a time in the history of our country when the arrangements that I described a moment ago were ever compliant with our tax code. Of course, the loans, which there is no intention of ever repaying—they are simply there to avoid national insurance and income tax—persist into the present. Generous “time to pay” arrangements are available with HMRC; I urge anybody who is involved in avoidance of this kind to talk to HMRC and come to sensible arrangements.

[Mr Lewis]

Is the Minister not aware that the people affected by this charge are strivers and people who are just about managing? They are the people who are suffering as a consequence of this decision. How many times are the Government going to hit ordinary working people, including groups like the Women Against State Pension Inequality, without Ministers fulfilling their responsibilities, intervening in such circumstances and ensuring that common sense prevails?

[Mel Stride]

If we include the loans, the average earnings of those who have been involved in this egregious tax avoidance is twice our country’s national average wage. There is no need for people to get involved in these schemes, the sole purpose of which is to avoid tax. Some Members have raised amounts of some £700,000 or £900,000 that HMRC is pursuing in this context; that would equate to a couple of million pounds going through these schemes. I remind the House that these are schemes that take loans from the UK out to an offshore trust in a low or no-tax jurisdiction and route it back into the UK as a loan that is never due to be repaid, simply for the purpose of avoiding tax. We do not believe that is right.

[Justine Greening (Putney) (Con)]

If the Minister is right when he says that the loan charge is not retrospective, how come we have examples like the situation faced by my constituent, who was pursued with an accelerated payment notice back in 2015, in relation to a loan charge scheme? He paid the amount that HMRC asked him for, but now suddenly, out of the blue, a request has been sent to a wrong email address that means he will probably have to pay more money. Does that not show that HMRC has shifted the goalposts and therefore that the loan charge is retrospective?

[Mel Stride]

I entirely stand by my earlier remarks about the measures not being in the least retrospective. Of course, I cannot comment on the tax affairs of the individual that my right hon. Friend has just referred to; it would not be right or proper of me to do so.

[Julia Lopez (Hornchurch and Upminster) (Con)]

I have received increasingly distressed representations from constituents affected by the loan charge. One of their concerns is that in making any settlement with HMRC, they risk giving up their right to review in the event of any subsequent change in Government policy. Will the Minister advise my constituents on what they might do? They currently feel trapped between that prospect and the risk of further financial penalty from HMRC if they do not come to an agreement quickly.

[Mel Stride]

I have made it very clear, as have the Government, over a long period of time—at least since 2016 when these measures were first brought into effect, which is before I arrived in my current position—that our policy is our policy and that we will not change that policy. For those who have been involved in this form of aggressive and contrived tax avoidance, the recommendation is very clear: the best thing to do is to speak to Her Majesty’s Revenue and Customs and come to a sensible and reasonable arrangement for repayment.

[Joseph Johnson (Orpington) (Con)]

I understand the Minister’s sincere desire to tackle disguised remuneration and thank him for always being available to discuss my constituents’ concerns. However, something has clearly gone very wrong with the operation of the loan charge and now, too, I fear with the roll-out of IR35 to the private sector. Will the Minister commit please to pause both the loan charge and the roll-out of IR35 to the private sector until my constituents’ concerns have been fully addressed?

[Mel Stride]

IR35 is often raised in the context of the loan charge, but it is a completely unrelated matter. IR35 is about making sure that those who are effectively employed by other businesses are treated as employees for tax purposes, and that is only right and proper. The loan charge is about putting right the situation of this aggressive tax avoidance.

[Mr Jim Cunningham (Coventry South) (Lab)]

21. Given that nurses and cleaners—the lower-paid—can be adversely affected by this and distinguished from those who are deliberately tax avoiding, will the Minister not agree at least to extend the payback period rather than people having to go through the rigmarole with the tax man?

[Mel Stride]

The hon. Gentleman makes a very important point, which is that, when it comes to paying the money that is due, HMRC has a duty to be proportionate and to make sure that appropriate arrangements are in place. There is no maximum limit for the time over which repayments can occur—there are often arrangements that come into place that are well in excess of 10 years. HMRC will continue to approach these matters on that basis.

[Mr Laurence Robertson (Tewkesbury) (Con)]

May I also thank the Minister for the way that he is engaging on this issue? Although I certainly do agree that anybody who has tried to avoid tax in this way needs to be held accountable, I do ask whether it is right that HMRC can go back 20 years to reopen accounts that were accepted. If this tax was due then, why did HMRC not obtain that tax then? Why did it not charge it then? Why has it taken it 20 years to get to this point?

[Mel Stride]

I have already dealt with the issue of retrospection. As to why tax may not have been paid at the time that it was due, there are a multitude of reasons for that not least of which is the fact that many taxpayers simply do not volunteer the correct information or they claim that their scheme works when clearly it does not. HMRC has, over many, many years, pursued these various schemes through the courts, including the Supreme Court, and on each occasion, these schemes have been found not to work.

[Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)]

22. The Treasury has claimed that the off-payroll tax should not affect the genuine self-employed, yet HMRC’s Check Employment Status for Tax tool assessed 3,909 contractors across five key public sector bodies and the results were that 94% of the contractors were deemed to be employers. That clearly demonstrates that the CEST tool is leading to the wrong decisions. Will the Minister now agree to cease the use of the CEST tool and to put on hold those plans to roll it out to the private sector?

[Mel Stride]

The statement that the hon. Gentleman has made does not suggest that the CEST tool is inappropriate. The CEST tool is there to determine an individual’s employment status. In 85% of cases, it does give a determination. HMRC will stand by that determination provided the right data was put into the CEST process.

[Ross Thomson (Aberdeen South) (Con)]

Following a recent case, an individual convicted of benefit fraud was given 900 years to pay off the £88,000 that they had defrauded from the state, but those facing the loan charge have not committed any criminal offence or broken the law, yet they are being hounded by HMRC for unaffordable sums. Can my right hon. Friend please advise me on why HMRC is persecuting innocent people to the point that it is affecting their mental and emotional wellbeing while allowing convicted fraudsters such leeway?

[Mel Stride]

HMRC is not persecuting people, as my hon. Friend suggests. It is collecting the tax that is due. It is also not pursuing people for criminal activities, as he says. However, when it comes to criminality, I can tell the House that very recently, on 16 May, HMRC announced that six promoters of these schemes had been arrested on suspicion of loan charge tax fraud.

[Peter Dowd (Bootle) (Lab)]

Those of us on the Labour Benches have repeatedly asked the Government what they are doing to clamp down on the enablers of the loan charge and we have repeatedly received feeble answers showing inertia and inaction, and we have had more of that today. More broadly, why are the Government not doing more to crack down on lawyers, accountants and others aiding and abetting tax avoidance under the guise of legitimate tax planning?

[Mel Stride]

I think the hon. Gentleman probably composed his question before he heard my last answer, in which I made it clear that we have just recently had six arrests relating to the suspected fraudulent activity around the loan charge. We are also actively pursuing 100 promoters of tax avoidance schemes, including those relating to the loan charge, and have brought in up to £1 million fines for promoters engaged in this activity.

[Peter Dowd]

Six? There are thousands of these wheezes going on out there. Let me give the Minister another example. Under existing tax compliance and procurement rules, and public contracts regulations, there is provision for public contracts to be denied to individuals and organisations that do not comply with tax law, possibly including these promoters of loan schemes. Can the Financial Secretary admit that there is evidence of tax avoidance and enabling by organisations winning public contracts while not one single individual or organisation has been banned from securing those public contracts?

[Mel Stride]

Is not the difference between the Government and the Opposition on tax avoidance quite simply that this Government are serious about it, having brought in and protected £200 billion since 2010? The tax gap is at a near historic low. If it was as high as it was under the last Labour Government, we would be deprived of sufficient funds to employ every policeman and woman in England and Wales. This Government are serious about avoidance and evasion, and we have a record of which to be proud.

[Andy Slaughter (Hammersmith) (Lab)]

3. What discussions he has had with Cabinet colleagues on the fiscal effect of the no recourse to public funds condition on local authority budgets.

--- Later in debate ---

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

11. What assessment he has made of the potential merits of extending business rates relief to more music venues.

[The Financial Secretary to the Treasury (Mel Stride)]

We announced in the Budget that we were reducing business rates for small retailers and others by one third. Music venues are not specifically included, although local authorities may make some judgments around that. We, of course, keep all tax reliefs and taxes under review.

[Christian Matheson]

The music sector contributes billions to the economy and so much more in terms of life enrichment, but the opportunity pipeline is being constricted as music venues close under pressure. Will the Minister agree to just a small tweak to the retail discount scheme guidance to make it clear that music venues are eligible?

[Mel Stride]

Music venues are eligible for many of the reliefs, worth £13 billion over the coming years, we have introduced since 2016, as well as the switch from uprating the multiplier from RPI to CPI. Many benefit from small business rates relief as well. I will of course, as with all representations, take the hon. Gentleman’s comments on board and consider them going forward.

[Martin Vickers (Cleethorpes) (Con)]

Not all of the small private hotels and guest houses in Cleethorpes are noted as music venues, but they would benefit from additional relief to their business rates. They are finding trading particularly difficult at the moment. Would the Minister look sympathetically on representations from them?

[Mel Stride]

In short, yes. I always look sympathetically on any representations to reduce taxation.

--- Later in debate ---

[Anna Turley (Redcar) (Lab/Co-op)]

T7. I have listened in astonishment to the answers from the Financial Secretary and the Chancellor about the loan charges. Given that the Financial Secretary admitted that the Government were pursuing six companies on a legal basis over this—they are admitting they are the companies responsible—why do they pursue constituents like mine, many of whom were obliged to undertake these tax changes in order to get work?

[The Financial Secretary to the Treasury (Mel Stride)]

We are simply making sure that the tax that was always due is paid, and that is right and proper. As I have set out, we are taking a front-footed approach to clamping down on promoters, and that has included six recent arrests for potential criminal activities.

[Sir Patrick McLoughlin (Derbyshire Dales) (Con)]

Will the Chancellor of the Exchequer acknowledge the important role that the national lottery has played in this country? When he looks at the national lottery, will he ensure that any future lottery that is run on a national basis is taxed at the same rate?