Economic Update
Mel Stride Excerpts(4 years, 8 months ago)
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Rishi Sunak
I thank the right hon. Gentleman for the constructive attitude with which he approaches some of these issues. I very much welcome his desire to work with me to try to solve some of the pressing issues that face our nation.
I will try to answer as many of the right hon. Gentleman’s specific questions as possible, starting with financial security for our most vulnerable people. I wholeheartedly agree that this is a priority and should be a priority, which is why, in the Budget, we made significant changes to the operation of statutory sick pay, universal credit, and employment and support allowance to ensure that people had quicker and more generous access to a support system for them and their families. We have already invested £1 billion to provide that extra security, but of course we keep all these things under review. As I said, the next step of our plan is to focus on providing support to people, their incomes and their jobs over the coming days.
The right hon. Gentleman asked about insurance for the leisure sector. I can confirm that, after extensive meetings today between my hon. Friend the Economic Secretary to the Treasury and the insurance industry, the insurance industry will honour insurance contracts that would have been triggered if the advice had been to ban certain things, rather than it being advisory not to do them. That has been agreed and negotiated by my hon. Friend. I thank him for those efforts, and I thank the insurance industry for doing the right thing.
The shadow Chancellor asked, rightly, about renters. Of course, I announced measures today on mortgages. He is absolutely right that the biggest fixed cost that many families face will be their rent payment, and it is right that we have regard to that. I can tell him that my right hon. Friend the Housing Secretary will, in the coming days, make a statement with further measures to protect renters through these difficult times.
The shadow Chancellor asked about other countries and their experience, and about global leadership. He mentioned some specific examples of schemes. I can assure him that I am in touch with my counterparts across the G7 and the G20 to understand how schemes in other countries work. He mentioned, for example, employment support schemes in both Germany and Denmark. I say to him and to the House that, whatever package or scheme we come up with that we believe will provide the appropriate support, it is important that we can operationalise that at speed. The difference between our system and that of many other countries is that they have these systems already in place, so it is far easier for them to step them up quickly. We need to make sure we come up with a solution that can be delivered so that it makes a difference to people quickly, which is why I am happy to work closely with unions and business groups to see what will make the most sense.
On international leadership, I say to the right hon. Gentleman that it was widely noticed by other countries that last week, in this country, we saw both monetary and fiscal policy—the Government and the Bank of England working independently but in a co-ordinated fashion to provide significant support and confidence to the economy. That was acknowledged by people, including the International Monetary Fund, which noticed what happened here and pointed at it as an example for others to follow.
On the scale of our response, I ask the right hon. Gentleman to look at the analysis comparing the scale of the fiscal support that various different countries are providing. Again, I think he will find that the package of measures announced both last week and today shows that we have one of the strongest responses of anybody in the G7 as a percentage of GDP to the significant challenge that we face.
The right hon. Gentleman asked about the delivery of the loan scheme and it is right to focus on how it will be delivered. We have been working at pace over the past week to make sure that the loans can be delivered not by the British Business Bank, but by individual retail banks on high streets up and down the country. Again, because of the work of the Economic Secretary, that will happen by early next week: businesses will be able to walk into their local branches and request a business interruption loan that has been backed by the Government on these attractive terms. Again, we have to work with the systems that we have. We cannot let the perfect be the enemy of the good because we want to be able to deliver these schemes as quickly as possible to businesses up and down the country.
The right hon. Gentleman asked about support for a variety of sectors. I can tell him that I have urgently asked my Cabinet colleagues to convene roundtables and engagement with their particular industries to understand if there are specific measures we should be looking at, on top of the measures for airlines and airports that we can look to address in the coming days. All the sectors he mentioned will be covered by that.
I agree with the right hon. Gentleman: when it comes to providing support to larger companies, if the taxpayer is going to be put at risk in supporting those companies, it is right that the taxpayer is rewarded on the other side. That is a principle with which we also wholeheartedly agree. He can rest assured that, as we negotiate those situations, we will always protect the interests of taxpayers.
The right hon. Gentleman rightly asked about public services. Our No. 1 priority is to ensure that the NHS has everything it needs to get through this period. I made that commitment last week. I re-echo that commitment today.
On the Barnett consequentials, the right hon. Gentleman will have seen this week that we released the full amount of the Barnett consequentials resulting from the Budget package in advance to all devolved authorities. Today, I announced the overall quantum. Again, we will quickly release those, in advance of those payments being released in England, to the devolved authorities, so they can plan appropriately.
The right hon. Gentleman can rest assured that all the specific public service issues he mentioned, whether school meals, schools and social care, are under active and urgent consideration.
I will end on this point. Our public servants, in particular those working hardest in our NHS right now, deserve nothing but our support at this difficult time. I want them to know, and I want the country to know, that we will do whatever it takes to get through this.
Mel Stride (Central Devon) (Con)
These are truly shocking times and a great weight lies upon the shoulders of my right hon. Friend the Chancellor. I hope it is felt right across the House that we wish him every success in his endeavours to steer us through this crisis. He has come forward with a huge response to the current situation, which I know will, in many quarters and businesses up and down the country, provide some reassurance. There are, however, inevitably some areas on which there is still work to come, not least in terms of the employment support package. I note the fact that he will shortly be engaging closely with trade unions and businesses to flesh that out. May I urge him to do so as quickly and promptly as possible? Does he know at this stage when the conclusions of that exercise may be reached, so that we can provide vital reassurance to employers and employees who fear for their jobs up and down our country? This is a time in our history where not just days, but hours matter.
Rishi Sunak
I thank my right hon. Friend for his thoughtful support. I can tell him that we are working on those proposals urgently and plan to have answers for both him and the House in the coming days, ideally next week, with an early thought of what we can do. As I said, designing these schemes will take an appropriate amount of diligence and care. That is what we are focused on urgently as we speak. He is right: this is about hours, not days and weeks.
Oral Answers to Questions
Mel Stride Excerpts(4 years, 9 months ago)
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Rishi Sunak
Post-16 education and skills are a priority for the Chancellor and the Government. I am pleased to say that the recent spending round delivers a £400 million increase in funding for post-16 education, which makes it the fastest rise in a decade and means that the per pupil base rate that the hon. Lady mentions will go up faster than the schools total.
Mel Stride (Central Devon) (Con)
My right hon. Friend the Chancellor will know that I have written to him about the legal duty that the OBR has to produce two economic forecasts in each financial year, which of course has been complicated by the cancellation of the last Budget. Can I ask him to set out for the House the approach that he intends to take and how he will avoid the necessity of having two forecasts very close together saying essentially the same thing?
Sajid Javid
I congratulate my right hon. Friend on being elected as the Chair of the Treasury Committee. I look forward to working with him and to the scrutiny that he will provide, as he is doing right now. The issue about the forecasts the OBR needs to provide is a live one, and we will make sure that the OBR meets its statutory requirements. I am pleased that the head of the OBR, Robert Chote, has discussed it with my right hon. Friend, and I would be happy to discuss it with him too.
The Economy
Mel Stride Excerpts(5 years ago)
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Mel Stride (Central Devon) (Con)
May I start by saying what an honour it is to have been elected as the Chair of the Treasury Committee? I pay tribute to my predecessor, my right hon. Friend the Member for Loughborough (Nicky Morgan), who did such sterling work on the Committee, particularly with women in finance, the gender pay gap and other such important issues, all of which I intend to press forward with.
It is very early days. I was elected only yesterday and I have not even had a proper chance to sit down with the other members of the Committee to consider what we will be looking at in detail over the coming period. However, as this is an opportunity to bend the Chancellor’s ear, I thought that I would raise one or two extremely important points, which have been reflected in the debate so far this afternoon.
The first is Brexit. It seems to me that there is plenty of sound and fury around the issue, but what we need is some illumination and light. We will never all collectively agree in this House or indeed in the Treasury Committee on exactly where we want to end with Brexit, or indeed how we are going to get there. None the less, what we can all agree on is that information is important and that we need to know the data. I accept the Chancellor’s point that the political declaration is not the same thing as what is going through in the Bill at the moment; none the less, an assessment was made of the previous set of deals—on a broad range of circumstances, admittedly—and I think and fully expect that the Committee will be pressing at as early a stage as possible for some kind of assessment to be made of the likely outcomes of the deal that is under consideration.
The second point is about the Budget. A Budget will be coming very soon, which we will be scrutinising very closely. My message to the Chancellor is that after hearing from colleagues, we want to look at the regional distribution of the Budget. The Committee has already done some very good work on regional imbalances across the UK economy, and we will want to look at that closely. We will also want to look at how rural communities—
Alberto Costa (South Leicestershire) (Con)
May I add my congratulations to my right hon. Friend on his election to what is one of the most important Select Committees of this House? Does he agree that in addition to the comments he has just made, another very important area for the Treasury to consider is the way in which fairer funding for local councils—for example, for Leicestershire County Council—has to operate?
Mel Stride
I agree with my hon. Friend entirely. In fact, one of the prisms through which we should view this Budget is also how well-funded rural communities are compared to urban communities. That is a very important point. Moreover, we need to look at the tax impacts of the measures that come forward in the Budget, not least on those who are the least well-off. Those on the Opposition Front Bench will have heard me tirelessly repeat the mantra that 28% of all income tax is paid by the wealthiest 1%. However, although that is true, it is not the same thing as saying that we should not keep an eagle eye on the bottom quintile and make sure that they are fairly treated.
I also want to consider the issues that my hon. Friend the Member for Congleton (Fiona Bruce) has often raised with me about the interaction of the universal credit taper and the income tax regime, and the fact that, for some lower-income families with children, that leads to marginal tax rates of 70% or more. That is unjust and something on which the Committee may wish to focus.
My final point on the Budget is that, as a global economy, we are facing a slowdown. Most projections now have gone from growth of 4% to about 3%. There are corporate debt issues in China, which are weighing down investment globally, and we have a trade war between the United States and China. With regard to our own fiscal numbers, we have had a reclassification of the student loan debt such that some £12 billion has been taken out of the so-called headroom between what we can spend and the meeting of our fiscal mandate in 2020-21. Given all the expenditure commitments that are being made at the moment, the Committee will be looking very carefully at the issue of fiscal prudence and making sure that the new fiscal targets that the Chancellor may come forward with are, first, appropriate and, secondly, actually achievable.
There are some other important issues that I wish to raise. The Chancellor used the expression, I think, that he wants to come forward on the people’s priorities. I call that the “Dog and Duck” test. What is it that people, when they are down the local pub—if they still have a local pub—talk about and care about? I wish to raise two priorities. One is access to local finance. That was raised very eloquently by the hon. Member for Aberdeen North (Kirsty Blackman) and also by way of intervention by the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone). I call on Barclays to reconsider its decision in relation to the availability of cash over the counter at post offices. I know that my hon. Friend the Economic Secretary had a meeting with the chief executive of Barclays just yesterday and that he is working very hard on this issue. None the less, in many communities, including those in my constituency, where the last bank has gone, it is the Post Office to which we turn. I pay tribute briefly to Stuart Rogers, the postmaster at Ashburton post office and a leading member of the National Federation of SubPostmasters, who has done such brilliant work in this area. I know, in fact, that he is known to many Members in the Chamber for his work up here in Westminster.
In my final 20 seconds, let me say that we need to get fairer taxation internationally for those online businesses, which create value through internet platforms such as search engines in social media and marketplaces. People expect them to be taxed fairly. It is a matter not of avoidance, but of having a tax regime that is fit for the 21st century.
Oral Answers to Questions
Mel Stride Excerpts(5 years, 6 months ago)
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Mr Ivan Lewis (Bury South) (Ind)
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)
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)
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)
Christian Matheson (City of Chester) (Lab)
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.
Anna Turley (Redcar) (Lab/Co-op)
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?
VAT (Place of Supply of Services) (Supplies of Electronic, Telecommunications and Broadcasting Services) (Amendment and Revocation) (EU Exit) Order 2019
Finance Act 2011, Schedule 23 (Data-Gathering Powers) (Amendment) (EU Exit) Regulations 2019
Customs (Records) (EU Exit) Regulations 2019
Mel Stride Excerpts(5 years, 6 months ago)
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The Financial Secretary to the Treasury (Mel Stride)
I beg to move,
That the Committee has considered the Value Added Tax (Place of Supply of Services) (Supplies of Electronic, Telecommunication and Broadcasting Services) (Amendment and Revocation) (EU Exit) Order 2019 (S.I. 2019, No. 404).
The Chair
With this it will be convenient to consider the Finance Act 2011, Schedule 23 (Data-gathering Powers) (Amendment) (EU Exit) Regulations 2019 (S.I. 2019, No. 397) and the Customs (Records) (EU Exit) Regulations 2019 (S.I. 2019, No. 113).
Mel Stride
It is a pleasure to serve under your chairmanship, Mr Sharma. The Value Added Tax (Place of Supply of Services) (Supplies of Electronic, Telecommunication and Broadcasting Services) (Amendment and Revocation) (EU Exit) Order 2019 amends the Value Added Tax Act 1994 to reverse changes made on 1 January in consequence of an EU-wide change to the place of supply of electronic, telecommunication and broadcasting services, or “digital services”. The place of supply rules govern where VAT has to be paid.
Since 1 January 2015, the place of supply of digital services made to a private consumer in the EU has been the consumer’s member state. Businesses that make supplies of digital services are therefore required to account for VAT in each member state where their consumers are located. To facilitate payment of VAT, the mini one-stop shop, or MOSS, was established. MOSS is an EU-wide simplified registration and accounting scheme, which allows businesses that supply digital services to consumers to register for VAT in one member state, rather than in each member state where they make supplies. Since VAT MOSS is an EU scheme, on exit from the EU, the UK will no longer be eligible to take part in it.
On 1 January 2019, the EU made further changes to the place of supply rules for digital services, which were implemented by amendments to the VAT Act. Those changes removed the requirement for EU businesses with very low cross-border trade to register in respect of supplies to consumers in other member states. If an EU business’s total cross-border supplies are valued at less than €10,000, or £8,818, the place of supply is now the supplier’s member state and not the consumer’s. In those circumstances, VAT is due in the supplier’s member state, subject to any domestic registration threshold. That treatment could no longer apply to UK businesses in the event that the UK left without a deal, because the UK would no longer be a member state. The changes to the VAT Act would therefore become redundant.
The changes made by the order are consistent with the changes to the VAT Act made by the Taxation (Cross-border Trade) Act 2018, which included removal of the VAT MOSS. However, the 2018 Act predated the changes to the place of supply rules, which is why a separate instrument is required. If we did not proceed with this instrument there would be no immediate impact, since the legislation is otiose and should no longer have practical effect. However, manipulation of the place of supply rules has been used in the past for tax avoidance, so, although no risk has been identified, it makes sense to remove the superfluous legislation now. That approach will also provide certainty and consistency with other amendments made to VAT primary legislation. I commend the order to the Committee.
The Finance Act 2011, Schedule 23 (Data-gathering Powers) (Amendment) (EU Exit) Regulations 2019 enable Her Majesty’s Revenue and Customs to request data from postal operators in support of the compliance strategy for parcels. In the unlikely event of the UK leaving the EU without a deal, the Value Added Tax (Postal Packets and Amendment) (EU Exit) Regulations 2018 would introduce a new policy in respect of imports of parcels, transferring the liability for payment of import VAT on consignments of goods with a value of £135 or less from the UK consumer to the overseas supplier. To enable HMRC to ensure compliance with the new regime, it will be necessary for it to obtain information on those imports from businesses involved in the transaction chain.
Clearly, postal operators are well placed to provide useful information on the parcels they deliver in order to allow HMRC to ensure that overseas suppliers pay the import VAT due. The regulations are the first step in ensuring that HMRC can obtain that information. Schedule 23 to the Finance Act 2011 enables HMRC to collect relevant data from certain third parties. The regulations simply extend those powers to include postal operators in the unlikely event of the UK leaving the EU without a deal.
The next step will be to set out in detail the type of information that HMRC can require postal operators to provide. That will be done by way of a separate statutory instrument. However, HMRC can require data holders only to provide information that they acquire as part of their normal business activities. It cannot require them to collect additional information and provide it to HMRC. The rules as a whole will therefore balance the need to ensure that tax is collected, where due, with the need to prevent additional costs or administrative burdens from falling on business.
Failing to agree to proceed with this instrument will not in itself change the introduction of the new parcels policy in the unlikely event of the UK leaving the EU without a deal, but it will mean that HMRC may not be able to collect the necessary data to ensure compliance with that policy. HMRC may be unable to satisfactorily assure itself that the new policy is working correctly and therefore spot and deal with any difficulties. That in turn could lead to losses in VAT revenue.
The third instrument is the Customs (Records) (EU Exit) Regulations 2019, which are needed to incorporate existing record-keeping requirements relating to customs obligations, currently contained in EU law, in UK law after the UK’s departure from the EU. They cover all types of customs transaction and are designed to provide customs officials with an effective audit trail for the movement of goods, including the intended use of the goods, the point at which they became liable for import duty, the level of that duty, and details of the payment. The regulations require HMRC to publish a notice containing the requirements for the types of record that importers and exporters and those connected to imports and exports will be expected to keep, the format of those records and the length of time for which they will need to be retained.
The requirements contained in the notice, in conjunction with provisions in the Customs Traders (Accounts and Records) Regulations 1995, will maintain existing record-keeping requirements, which means that those involved will be required to continue to retain relevant documentation for a customs transaction, on both imports and exports, for a suitable period, usually not less than three years. That is in line with the Government commitment to provide maximum certainty for businesses after EU exit. The record-keeping requirement is of course essential to enable a customs authority to assure customs processes by checking and confirming transactions and declarations, particularly where potential discrepancies are identified after the relevant transactions have taken place.
I commend the instruments to the Committee.
Mel Stride
I thank the hon. Members for Stalybridge and Hyde and for Glasgow Central for their contributions. I will endeavour to go through their points.
The hon. Member for Stalybridge and Hyde made a general overarching point about the uncertainty of Brexit. I agree with him about that, which is why the Government are working so hard, including through conversations with his Front Bench, to secure a negotiated arrangement with the European Union whereby we have an orderly exit. The measures are being brought in only on the basis that, in the unlikely event of day one no deal, we will be able to switch them on by way of an appointed day order.
An important point for the Committee is that we are not rushing these measures in immediately; we have time to see how the negotiations conclude and to bring the measures into effect at the appropriate moment. That also gives us some time to address the specific point about how we propose to make sure that those affected by the measures are aware of them. Of course, we have consulted extensively on these matters with businesses across the country that are involved in imports and exports, and there is an extensive amount of information on that area on gov.uk. There was also an impact assessment that covered, among others, the two instruments that relate specifically to VAT measures, which concluded that the impact would be relatively modest.
The hon. Gentleman is also concerned about the fact that we are using secondary legislation for the measures, but we published the statutory instruments some time ago. I think I am right in saying that the instrument relating to VAT MOSS was published in January, and the other two have also been available for hon. Members to consider for a reasonable amount of time. Of course, they are also affirmative instruments, rather than negative instruments, given that they make amendments to primary legislation.
I was asked specifically why the instruments were being moved today, rather than at any other point. It is a case of making sure that we put them in place so we can switch them on through an appointed day order in the event that we come out without a deal. Of course, in theory at least, we have until the end of October to conclude our arrangements with the European Union.
The hon. Gentleman spoke about the importance, as he saw it, of regulatory alignment with the EU in the context of VAT, on which I agree with him. We have always made it clear that it is our intention and desire for VAT and other tax issues, and indeed customs measures more generally, between us and the European Union to be as closely aligned as possible, so we have a period of stability as we go forward in whatever new arrangement we end up in.
The hon. Gentleman also asked about what would happen to the UK businesses that have benefited from what I accept are considerable easements and simplifications related to the operation of VAT MOSS if we leave without a deal. We have always been clear that either they would have to register with the individual member states with whom they were transacting VAT-applicable business and digital services, or they could afford themselves of the benefits of the non-Union VAT MOSS arrangements available to those outside the European Union.
The hon. Members for Stalybridge and Hyde and for Glasgow Central both made points about the data that will need to be collected under the parcels regulations. I assure the Committee that, as I set out in my opening remarks, there will be no additional burden on business. The focus is strictly on obtaining data that is relevant to parcel collections.
Alison Thewliss
The Minister says that there is no additional burden to business, but is he not asking businesses to do something that they were not doing before?
Mel Stride
The additional burden, such as it might be, would be registering and being prepared to provide information that is already being collected. In their day-to-day transactions, those businesses already collect a large amount of information, for example on the flow of parcels, where they come from and their value. As the hon. Lady will know, for parcels with a value below £135 the responsibility for accounting for the VAT will transfer from the UK to the sender in one of the EU27 states. To rephrase my point, the additional administrative burden will be proportionate and relatively slight—that is probably a better way to describe it.
The hon. Lady asked about the penalty regime with respect to the responsibilities and obligations that will materialise under the regulations on customs transactions. The answer is that there will be no change to the regime for the businesses concerned. She spoke about consultation, which I think I have dealt with. She also observed that the changes under the VAT MOSS order relate to changes that happened as recently as January 2019. We could not have foreseen those changes, and there are no changes to primary UK legislation. As I set out in my opening speech, it makes sense to rid ourselves of that superfluous legislation, for the reasons that I gave about the potential risk that it could be used for tax avoidance purposes.
The hon. Lady mentioned the three-year period for which customs data will have to be held. Under the current European Union arrangements, however, the data is retained for four years, so the new system will be no more onerous.
Question put and agreed to.
Resolved,
That the Committee has considered the Value Added Tax (Place of Supply of Services) (Supplies of Electronic, Telecommunication a Broadcasting Services) (Amendment and Revocation) (EU Exit) Order 2019 (S.I. 2019, No. 404).
Finance Act 2011, Schedule 23 (Data-gathering Powers) (Amendment) (EU Exit) Regulations 2019
Resolved,
That the Committee has considered the Finance Act 2011, Schedule 23 (Data-gathering Powers) (Amendment) (EU Exit) Regulations 2019 (S.I. 2019, No. 397).—(Mel Stride.)
Customs (Records) (EU Exit) Regulations 2019
Resolved,
That the Committee has considered the Customs (Records) (EU Exit) Regulations 2019 (S.I. 2019, No. 113).—(Mel Stride.)
Value Added Tax (Tour Operators) (amendment) (EU exit) Regulations 2019
Mel Stride Excerpts(5 years, 6 months ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Mel Stride)
I beg to move,
That the Committee has considered the Value Added Tax (Tour Operators) (Amendment) (EU Exit) Regulations 2019 (S.I., 2019, No. 73).
It is nice to see that we are all here present and correct, Sir Henry, and under your chairmanship. The instrument allows changes to the VAT treatment of the suppliers of designated travel services made by UK tour operators that are enjoyed in an EU member state. By “designated travel services” we mean holidays in which, for example, hotel accommodation, car hire, flights and so forth are included.
The instrument will come into effect only after the laying of an appointed day order, which will occur only in the unlikely event that the UK leaves the EU without a deal. As the Committee will know, the Government remain focused on ensuring our smooth and orderly withdrawal from the EU with a deal as soon as possible. However, the current agreement with the EU is that the UK will leave no later than 31 October, and as a responsible Government we have been preparing for all potential outcomes, including the unlikely scenario in which no mutually satisfactory agreement can be reached.
The tour operators’ margin scheme, also known as TOMS, is an EU simplification scheme that treats a series of designated travel services—let us call them holidays—as a single supply, and determines that the place of supply is where the tour operator is established, not where the holidays are enjoyed. A benefit of TOMS is that tour operators need only account for VAT on the difference between the value of the sales and the costs for the services, which is commonly known as the margin. An additional benefit of the current system is that tour operators need to register an account for VAT only in the member state where they are established, regardless of where in the European Union the holidays take place.
In common with other areas of VAT, in the unlikely event of a no-deal exit from the EU, the Government are seeking to retain the VAT treatment of goods and services as close to the existing rules as possible. For UK tour operators, that means implementing a UK version of TOMS that retains some of the VAT benefits while treating holidays in the EU in the same way as those enjoyed in the rest of the world. That means that the VAT rate on EU holidays will be zero, rather than 20% as now. That requires an amendment to group 8 of schedule 8 of the Value Added Tax Act 1994, to extend the VAT rate of 0% to designated travel services enjoyed in EU member states, as well as to those in the rest of the world. There would be no change to the VAT treatment of designated travel services currently enjoyed in the United Kingdom.
It is worth noting that UK tour operators may be required to register in each member state where they supply designated travel services that are to be enjoyed in the member state in question. However, Her Majesty’s Revenue and Customs is not aware of any member state that requires non-EU tour operators to register for VAT. While there is no reason to believe that this will change, in the event that the UK leaves without a deal, it cannot be guaranteed. The instrument therefore removes the risk of UK tour operators being subject to double taxation.
This instrument also makes changes to the Value Added Tax (Tour Operators) Order 1987, replacing references to “the EU” with “the UK”. That ensures that the place of supply of those services remains the United Kingdom, and that the place of establishment of the tour operator is in the UK.
In summary, in the unlikely event that the UK leaves the EU without a deal, these changes will keep the VAT processes as close as possible to the present regime, and ensure that UK tour operators will not be subject to double taxation. Those changes treat suppliers of designated travel services enjoyed in the EU in the same way as those enjoyed in the rest of the world, and maintains the present VAT treatment of designated travel services enjoyed in the UK. I commend the instrument to the Committee.
Mel Stride
I am grateful to the hon. Member for Oxford East for her usual thorough interrogation of the issues at hand.
Mel Stride
The hon. Lady’s colleague says she is very good, and I concur entirely with that sentiment.
I am pleased that the hon. Lady agrees with the premise of what we are attempting to achieve here. She recognised the importance of avoiding potential changes in the unlikely event of a no-deal Brexit, in terms of double taxation. She specifically raised the issue of what would happen, and she set out in great detail what might happen, in the event that we were to leave the European Union and the EU were to then change its relationship in respect of this particular element of the VAT regime and what the impact of that might be on the UK business sector. I would like to make a few brief points on that.
The first point to make is that there is no suggestion at this stage from HMRC or ourselves that that is a likely outcome, in terms of the discussions that we have had with the European Union on our exit. It would introduce a great additional complication on both sides were the EU27 to decide to move in that direction.
The second point I would raise is one that the hon. Lady raised. Under the EU’s current regime, no third countries are treated as having to register for VAT within any of the EU28 member states with which they may be conducting business.
Thirdly, when we look at VAT, where holidays or trips are sold from the UK into the EU27, VAT is generated as a consequence of those trips and the hotel bookings and so on, so the EU and member states are collecting VAT in that way. As the hon. Lady will recognise, the context of this debate is the margin on which the VAT is being accrued.
Finally, if we were to end up in a no-deal situation, which I think unlikely, and the EU were to decide that our businesses had to register separately within the EU27, it would have to think long and hard about the consequences and what we might do in response to that. I do not think it would be in either party’s interest to change from the current status quo.
The hon. Lady also pointed out that the impact assessment foresees limited or effectively no impact on businesses. Of course, that excludes the scenario on which she dwelt at great length in her speech, and rightly so, as I have set out why we think that is highly unlikely. She asked what support we would provide to business in the event that there was a changed response from the EU27. Were we to get into that kind of territory, we would know some time in advance, and would take decisions at that moment in time.
She also asked whether we had encouraged the EU to look at alternative arrangements. I am fairly confident in saying that we have not engaged in those specific discussions with the EU on the basis that we think that it is extremely unlikely, but were it to appear to become more likely, then of course we would look at all those particular avenues. She asked a specific question about what the loss of VAT revenue might be as a consequence of complying with WTO rules and applying the zero VAT rate to those transactions between ourselves and the EU27, in the unlikely event of a no-deal Brexit. I am very happy to write to her to give as accurate an answer as I can.
I thank the hon. Member for Linlithgow and East Falkirk (Martyn Day) for his comments. I think he said it was disgraceful that we are still planning for a no-deal Brexit, but that is something that we passionately do not want, which is why we are working so hard to try to deliver a deal. However, we must recognise the fact that ultimately a no-deal might be outside of our control. It is to some degree within the gift of the European Union. As a responsible Government, we must make sure we cover that remote possibility. On that basis, I hope the Committee will support the instrument.
Question put and agreed to.
National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill
Mel Stride ExcerptsTuesday 30th April 2019
(5 years, 6 months ago)
Commons ChamberRead Full debate National Insurance Contributions (Termination Awards and Sporting Testimonials) Act 2019 View all National Insurance Contributions (Termination Awards and Sporting Testimonials) Act 2019 Debates Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Mel Stride)
I thank all right hon. and hon. Members for their contributions to this important debate, which is narrow in scope, as the Exchequer Secretary to the Treasury pointed out, but none the less important. There were a limited number of contributions, made up for, however, by their quality.
Let me bring us back to the essential element of what this Bill is all about, which is aligning the employer national insurance treatment in respect of termination awards and sporting testimonials with that of income tax. As a number of hon. Members pointed out, the rationale behind these measures is to bring in alignment and, with it, some elements of simplification. We should remind ourselves that, as we have heard, the genesis of this journey was back in 2013-14, with the report by the Office of Tax Simplification. Another rationale for these measures is to disincentivise any tendency towards the manipulation of payments as between earnings and termination payments on the tax side of things. There is, of course, additional revenue to the Exchequer of some £200 million per year as a consequence of these measures.
I turn now to some of the specific points that have been raised—first and foremost, by the hon. Member for Bootle (Peter Dowd). He told us some jokes about cricket that were not bad—well, by his standards, at least, they were passable. He managed to remember two of the three great football teams up in the Liverpool part of the country, proving conclusively, I have to say, that he knows far more about football than he does about economics and taxation. [Interruption.] Yes, cruel but fair. That was exemplified by his lamenting the fact that we did not abolish class 2 NICs. I was surprised to hear him say that, because he was at great pains, as he always is, to be the champion of the lower paid—as indeed are Conservative Members. The rationale for stepping back from that abolition, as he will know, is that it would have imposed a very significant burden on the very people he seeks to protect—the lower paid—by putting up the cost of the contributions that they would have to make in order to qualify for their state pension.
Curiously, the hon. Gentleman accused us, contrary to the assertions of the hon. Member for Oxford East (Anneliese Dodds), of having rushed the timetable for this legislation, despite the fact that its genesis was about five years ago. That is probably indicative of the speed at which a future Labour Government would get things done—five years is rushing it, in those terms. He also accused us of not taking the legislation seriously, but as he spoke there were precisely none of his hon. or right hon. Friends sitting on the Benches behind him.
My hon. Friend the Member for South Suffolk (James Cartlidge) gave a masterful performance in which he not only showed great in-depth knowledge of the issues at hand but understood the mentality and the challenges that we have as Ministers in the Treasury. It is indeed a restrictive environment where we do not want to put people’s taxes up, we make commitments not to do so, and we fight day in, day out to ensure that we stick to those pledges. But at the same time, we do of course have to raise revenue, as he described. He also cantered around the tax terrain, touching on IR35, auto-enrolment and various other aspects of tax. It was a very thoughtful contribution to the debate.
The hon. Member for Aberdeen North (Kirsty Blackman) specifically referenced the amount of consultation—or the lack of it, as she saw it—around the Bill. I should remind her that we have consulted on it twice. It was issued in draft in December 2016, and it was prefigured when we handled the income tax aspects of these issues in the 2016 and 2017 Finance Acts. Of course, the measures themselves were first mooted back in 2015, so we have been round the block with them.
Kirsty Blackman
The point I was making was not that there was necessarily a lack of consultation, but that we did not know how much consultation there had been, because the details are not in the explanatory notes, where they would often be. Normally, the explanatory notes will say a bit about the amount of consultation there has been, but they do not say anything at all. If that had been written down for us, and we had known how many consultation responses there had been, I would not have asked the question.
Mel Stride
The Exchequer Secretary to the Treasury has just reminded me that there has been a lot of information out there—we have, not least, written to Members to explain the background to these measures.
As to the hon. Lady’s specific point, she has raised the quality of information memorandums with me before in a different context. I said on that occasion, and I will restate now, that I am happy to look at the point she has raised. While we may have disagreements over policy across the House, I think we all accept that it is important that the relevant information is clearly provided and in the right place, and I will certainly be happy to look at that issue.
The hon. Lady raised the issue of tax treatment where there is an expectation that a testimonial payment will be made. She understandably asked how we know whether such a payment should be seen as having an expectation attached to it. The answer is if that payment is customary. If someone is involved in a sports club of some sort, and there is a testimonial every year for a particular player or group of players, and that had been going on for some time, that would be a customary testimonial situation. In those circumstances, the tax treatment would follow accordingly.
The hon. Lady also raised a point about employer NICS at 13.8% being applied above the £30,000 threshold. She raised the prospect that some of that may be borne by the employee, because the employer would have a certain amount that they were looking at. She raised the question of what the balance was between who bears that cost and the £200 million per year received by the Exchequer. I very much doubt that that information is available, but if it is, I will certainly make sure that we provide it to her. That may be an issue she wishes to come back to in Committee.
My hon. Friend the Member for South Thanet (Craig Mackinlay) specifically majored on the threshold—the £30,000—and pointed out that it first came into effect in 1988. What I would say to him is that, in the case of Germany and the United States—certainly in the case of income tax—the threshold is effectively zero, so in terms of international comparisons, the figure of £30,000, while it is true that it has not increased by inflation since 1988, is none the less set at a reasonable and proportionate level. As a number of speakers have also pointed out, 80% of termination payments are below the £30,000 threshold in any event and would therefore not fall under this employers’ national insurance.
The hon. Member for Oxford East, as well as helpfully pointing out that Labour’s mission is to increase corporation tax, came on to the issue of avoidance and evasion, particularly in the area of football. She thought I would mention the Rangers case, and it is important to do that, because it does indicate that we will take cases right the way to the Supreme Court when we believe that issues such as disguised remuneration are in play. Whether it is in football or other areas of commerce and economic life, we will make sure that the right amount of tax is paid. I will not rehearse the arguments that the hon. Lady has heard from me on many occasions about the tax gap and how successful the Government have been in that respect compared with Governments of the past.
The second issue the hon. Lady raised was charitable giving. She set up the prospect of a testimonial being held and the money going through the committee and then on to a charity. She asked what the tax treatment would be in those circumstances. It is open to a committee in that situation to route some of the money via payroll giving to the charity—that is without limit—to make sure that that is done in the most tax-efficient manner possible. However, she may wish to return to that matter in Committee, where we can perhaps have a more detailed debate about it.
The hon. Lady asked about seeking evidence of the abuse of termination payments—in other words, disguising what are essentially earnings by transferring them into a termination payment, thereby reducing taxation. HMRC is clear that there has been evidence of that in the past. I am sure that she will wish to revisit the matter in more detail in Committee.
The hon. Lady mentioned the impact of these measures on wages, citing the correct figure of 0.1% for the reduction by 2020-21. However, I point out that we have now had 10 months of increased real wages, due to our success in keeping inflation down and generating nominal wage growth. Of course, with regard to employment, which is part of the issue we are addressing, we now have among the highest levels of employment in our history, and the lowest unemployment since the mid-1970s.
The hon. Lady asked what guarantees there are that we will not reduce the threshold in either case. Of course, it is up to this Government, or any future Government, to take a view on these matters, but I can assure her that we have no expectation or intention at the present time to lower the thresholds. If we did, that would of course be by way of an affirmative statutory instrument, which means the measure would have appropriate scrutiny.
In conclusion, I thank the Opposition and all Members for their contributions, and for not opposing Second Reading.
Question put and agreed to.
Bill accordingly read a Second time.
National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill:
Committal
(1) The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 16 May 2019.
(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
Proceedings on Consideration and up to and including Third Reading
(4) Proceedings on Consideration and any proceedings in legislative grand committee shall (so far as not previously concluded) be brought to a conclusion two hours after the commencement of proceedings on Consideration.
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption that day.
(6) Standing Order No. 83B (programming sub-committees) shall not apply to proceedings on Consideration and Third Reading.
Other proceedings
(7) Any other proceedings on the Bill may be programmed.—(Mel Stride.)
Question agreed to.
National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill (Ways and Means)
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purpose of any Act resulting from the National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill, it is expedient to authorise provision adding termination awards chargeable to income tax to the amount by reference to which, in the case of Class 1A National Insurance Contributions, the appropriate national health service allocation (for England, Wales and Scotland) and the appropriate health service allocation (for Northern Ireland) are to be calculated.—(Mel Stride.)
Question agreed to.
Loan Charge
Mel Stride Excerpts(5 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Mel Stride)
I welcome the return of this debate, which was so interestingly interrupted by rain—I think that is about the only matter raised for which I have not been blamed at some point, as it was an act of God. I congratulate my hon. Friend the Member for Aberdeen South (Ross Thomson) on securing the debate, and I thank all those who have participated, both today and last week.
Perhaps I can try to find the one element of consensus that unites Members on both sides of the House. Most speakers have referred to the fact that they have no time for aggressive and contrived tax avoidance, and they are right. Every amount of tax avoided in such a way means more tax for other taxpayers to find, or less funding for our vital public services.
Mr Shailesh Vara (North West Cambridgeshire) (Con)
Will the Minister give way?
Mel Stride
I am afraid I will not. I want to make progress, as there is a lot to cover and little time.
For the benefit of the House, let me set out the heart of how these schemes work, so that we are clear on that point. An employer can engage an employee and pay them in the normal way, by way of earnings, in which case national insurance for the employer and the employee is due. Income tax must also be paid by the employee. Alternatively, they can use a loan scheme, which generally works like this: instead of the employer paying the employee in the way I have described, money is sent out to a low or no-tax tax haven, and placed in a trust. That money then comes from the trust back to the United Kingdom, where it is treated as a loan, even though there is no intention of ever settling that loan or paying it off. Because that money it is treated as a loan, it is claimed that it does not incur any national insurance or income tax because it is not earnings.
When confronted with the reality of how these schemes work, most people would say that that is not right. That brings me on to one of the most commonly held misconceptions about these schemes and the loan charge, which is that the loan charge is retrospective. There was never a time in the history of our country where the model for payment that I have just outlined has ever been correct within the tax rules of any previous year. That is a simple fact.
Mel Stride
I will not give way just yet. My second point is that the very nature of this means of payment, of tax avoidance, is that it involves a loan that is still outstanding—those loans are still outstanding today, at this very moment, for any schemes that still persist. It is a simple fact that most people, including the 99.8% of the tax-paying public who did not go anywhere near these schemes, would have concluded that if something looked too good to be true, it probably was too good to be true.
Colin Clark (Gordon) (Con)
The Minister is generous in giving way. In my constituency, 140 people are affected, largely in the oil and gas sector. Oil and gas employers encouraged people to enter these schemes. Does the Minister agree that companies in that sector should be held to account, as should employers and the people who sold the schemes?
Mel Stride
My hon. Friend is entirely right. I will come on, in the limited time I have, to deal with both employers and promoters, as those are very important aspects too.
When it comes to retrospection the other important point is that, contrary to the suggestion many right hon. and hon. Members have made that this issue has just suddenly appeared and HMRC has just started to address these scheme, it has been taken through the courts over countless years. In 2004, Dawn Primarolo, who was referred to earlier in this debate, was instrumental in bringing in the DOTAS legislation upon which recent cases have been concluded in HMRC’s favour. There has been a concerted effort by HMRC over many, many years to clamp down on these particular arrangements.
Some of the other misinformation includes the idea that thousands upon thousands of taxpayers are about to be made bankrupt. HMRC very, very rarely has a situation where somebody is placed in bankruptcy. That is not right for the individual and it is not right for our tax collecting authority. In fact, my hon. Friend the Member for Mole Valley (Sir Paul Beresford) gave several examples last week of where he had accompanied his constituents and got involved with their tax affairs and their dealings with HMRC. In each case, as he was able to state, a fair and reasonable settlement was entered into. That is the main thrust of HMRC’s approach.
It has also been suggested that people will lose their home as a consequence of the loan charge. It could not be clearer: HMRC has publicly stated that nobody will lose their primary residence as a consequence of settling their loan charge liability. On the point my hon. Friend the Member for Gordon (Colin Clark) raised about employers and individuals, it has been assumed widely in this debate that the vast majority of those impacted by these measures are individuals. That is not the case. Of the 6,000 settlements to date and the £1 billion that has been brought in, 85% by value has come from employers, not employees. In the first instance, HMRC will go to the employer, not the employee.
The issue of promoters is extremely important and, quite rightly, a number of right hon. and hon. Members have raised it. I want to make it clear that HMRC is cracking down on the unscrupulous promoters who sell these schemes. In fact, it is currently investigating more than 100 promoters and others involved in the promotion of tax avoidance. That includes promoters of disguised remuneration schemes. In recent years, HMRC has also litigated a number of cases of failure to disclose under DOTAS, which came in in 2004—not recently—and several recent decisions in cases on disguised remuneration have been found in HMRC’s favour. HMRC has also made successful complaints to the Advertising Standards Authority in relation to DR schemes to stop promoters making misleading claims about the arrangements they are selling. Just two weeks ago, HMRC announced that it had won a legal case against a loan scheme avoidance promoter, Hyrax Resourcing, which will help HMRC to collect over £40 million in unpaid tax. For the reasons I have set out, it would not be right to delay these arrangements.
Let me turn now to two particularly important issues that many Members have raised, first on the affordability of payment arrangements. Let me be very clear: it is never the intention of HMRC to bankrupt anyone who comes forward in good faith to agree a manageable payment plan. I can confirm that HMRC is authorised to agree tailored repayment plans for those affected by the loan charge based on ability to pay. Where tax is payable under self-assessment, payment will of course not be due until January 2020. There is also no maximum repayment period, and plans of 10 years or more can be put in place where required. Further, I can announce today that HMRC is now forming a dedicated team focused solely on agreeing these manageable payment arrangements for those due to pay the tax they owe by way of the loan charge.
Mel Stride
I have no time, I’m sorry.
The second very important matter I would like to address is the interaction between vulnerable people and HMRC regarding disguised remuneration and the loan charge, including where there are mental health issues. Let me make it clear that wherever HMRC is engaging with vulnerable people, it will do everything it can to ensure that they have all the support they need. This support includes a helpline that is dedicated solely to looking after loan charge customers, with a team fully trained to identify those who may be vulnerable and to provide appropriate support. Where necessary, HMRC will always refer individuals to the right external sources of support.
Mel Stride
I have little time and I must cover the ground. HMRC also has a vulnerable customers team available to provide specialist, one-to-one support for vulnerable customers in need of it. Today, I can confirm that HMRC will be expanding its specialist service for customers with additional needs so that it will include anyone who finds their tax affairs under scrutiny. As we roll out that additional support, we will start with those affected by the loan charge as our first priority.
I appreciate that facing any tax bill is unwelcome, but it is only right that we deal with disguised remuneration. When we fail to do so, we are effectively saying to the 99.8% of taxpayers who have not been involved in these schemes that we expect them to pay more, and we deny our vital public services—our nurses, teachers, doctors, police and many others—the funding that they deserve.
Justice
Mel Stride Excerpts(5 years, 7 months ago)
Ministerial CorrectionsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Stephen McPartland (Stevenage) (Con)
The Financial Secretary to the Treasury (Mel Stride)
This Government have made very significant progress in reducing the burden of taxation on the low paid, including by recently increasing the personal allowance to £12,500—thus taking 1.7 million of the lowest paid out of tax all together since 2017.
[Official Report, 9 April 2019, Vol. 658, c. 165.]
Letter of correction from the Financial Secretary to the Treasury:
An error has been identified in the response I gave to my hon. Friend the Member for Stevenage (Stephen McPartland).
The correct response should have been:
The Financial Secretary to the Treasury (Mel Stride)
This Government have made very significant progress in reducing the burden of taxation on the low paid, including by recently increasing the personal allowance to £12,500—thus taking 1.7 million of the lowest paid out of tax all together since 2015-16.
Oral Answers to Questions
Mel Stride Excerpts(5 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Stephen McPartland (Stevenage) (Con)
The Financial Secretary to the Treasury (Mel Stride)
This Government have made very significant progress in reducing the burden of taxation on the low paid, including by recently increasing the personal allowance to £12,500—thus taking 1.7 million of the lowest paid out of tax all together since 2017.[Official Report, 11 April 2019, Vol. 658, c. 5MC.]
Stephen McPartland
What the Treasury gives with one hand, local authorities are taking away with the other, with relentless rises in council tax, and parking charges and fees affecting households up and down the country. What are we actually doing to help families, instead of paying them lip service?
Mel Stride
My hon. Friend makes the important point that there are many costs and taxes that bear down on the lowest paid. That is why, in addition to increasing the personal allowance, the Conservatives have introduced the national living wage, which has gone up well above the rate of inflation this April. We have frozen fuel duty for nine years in a row, which has saved the average car driver £1,000 cumulatively. We should also not forget that 28% of all income tax is paid by just the highest 1% of earners.
Thangam Debbonaire (Bristol West) (Lab)
The Minister can say anything he likes, obviously. In fact, he knows that the tax system is skewed in favour of richer people. The poorest 10% pay 42% of their income in taxes, whereas the richest pay 34%. Does he have any plans to achieve greater parity, particularly in VAT?
Mel Stride
I am surprised that the hon. Lady should mention the level of tax paid by the most wealthy, because under this Government, as I have just stated, the highest-earning 1% pay a full 28% of all income tax. Under the last Labour Government, that figure was substantially lower at around 24%.
Charlie Elphicke (Dover) (Con)
Does the Minister agree that taxes could be lower if spending was better controlled, yet this House provides no scrutiny of spending whatsoever? The supply and appropriation Bill that he presented just over a month ago was not debated or voted on. Is it not time that, like other Parliaments, we had a Budget committee and a parliamentary Budget office to scrutinise spending and hold Government properly to account?
Mel Stride
My right hon. Friend the Chief Secretary has just appeared before the Procedure Committee to address just the issue that my hon. Friend raises.
Tim Farron (Westmorland and Lonsdale) (LD)
Given that our social care system is breaking, causing indignity, poverty and hardship to millions of people in their old age, might it be time to consider increasing fair taxes, so that we can live in a civilised society that looks after its most vulnerable people?
Mel Stride
As the hon. Gentleman may know, £400 million went into social care just at the last Budget. It is the mission of this Government to get taxes as low as possible so that we have a strong economy. Our record is good: we have about the highest level of employment in this country’s history, more women are in work than at any time in our history, and we have halved unemployment since the mid-1970s. All of that is about creating the wealth and the money to make sure that we can afford the public services that the public expect.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
Greg Hands (Chelsea and Fulham) (Con)
The Financial Secretary to the Treasury (Mel Stride)
The Government have made substantial progress in reforming the stamp duty regime. At autumn statement 2014, SDLT was cut for 98% of those people due to pay it.
Greg Hands
Since we last spoke about this, the spring statement showed a further decline in receipts of an additional £2.7 billion over the scorecard. That was not due to changes in Wales and the welcome first-time buyer reforms, which were already in the October Budget numbers. What are the Government going to do to reform the system, protect revenue, grow social mobility, allow the elderly to downsize and get Britain moving again?
Mel Stride
The year-on-year changes to the level of receipts from SDLT have reduced recently, but that is due largely to the fact that we have put a great deal of relief into first-time buyers’ relief, which is already helping 240,000 first-time buyers get on to the housing ladder.
Alison McGovern (Wirral South) (Lab)
However the Minister dresses it up on stamp duty land tax and other issues where the wealthy have seen their taxes cut, the impact on our economy is clear. Will he explain why stamp duty land tax reform is a priority rather than addressing the fact that in our country today one third of all families with a child under five are in poverty?
Mel Stride
It is most certainly not our priority to reduce SDLT for the very wealthy. In fact, the current levels—12% plus 3% if it is an additional dwelling—are high. I can also inform the hon. Lady that the amount we raised through stamp duty land tax in 2017-18 was twice the amount raised back in 2010-11.
Christian Matheson (City of Chester) (Lab)
The Financial Secretary to the Treasury (Mel Stride)
The loan charge was announced at Budget 2016 and was subject to public consultation. We have received representations, including from campaigners and the wider public. Disguised remuneration schemes pay loans in place of ordinary remuneration, with the sole purpose of avoiding income tax and national insurance.
Christian Matheson
I fully support measures to close loopholes for disguised remuneration, but not when they affect my constituents retrospectively. If the loans were illegal at the time my constituents took them out, why is it now necessary to introduce the loan charge?
Mel Stride
It is important that the House fully understands how disguised remuneration works. If, instead of paying an employee their earnings in the normal way, an employer pays them by way of a loan via an offshore trust in a low or no-tax jurisdiction—with no intention of ever repaying the loan and simply to avoid national insurance or income tax—that is wrong. As for the matter of retrospection, that model has never, ever complied with our tax code. The loans to which I refer are persisting today, not retrospectively. That is why it is right—and only fair on those taxpayers who pay the correct amounts at the right time, and on our vital public services, which rely on that money—that we collect it.
Gill Furniss (Sheffield, Brightside and Hillsborough) (Lab)
Dr Rupa Huq (Ealing Central and Acton) (Lab)
The Financial Secretary to the Treasury (Mel Stride)
It is indeed incumbent on HMRC to take its duty of care towards customers—particularly vulnerable customers —very seriously, and I am confident that it does just that. There is a dedicated helpline for those who have been affected by the loan charge, and a vulnerable customers team provides one-to-one support. We recently announced that we would extend the needs enhanced support service to those who are subject to open investigations of their tax returns.
The hon. Lady mentioned promoters. My right hon. Friend the Chancellor has already mentioned that more than 100 investigations of companies that promote tax avoidance are currently taking place. Other litigations in respect of offences relating to the disclosure of tax avoidance schemes have resulted in wins for HMRC. In the Hyrax case, which was concluded recently, it was found that the promoter was not behaving appropriately, and about £40 million worth of tax is likely to be recouped as a consequence.
Kevin Hollinrake (Thirsk and Malton) (Con)
Will we continue to invest in the northern powerhouse, and, in particular, will we fully fund the Transport for the North plan for a TransPennine rail upgrade?
Toby Perkins (Chesterfield) (Lab)
Mel Stride
It is largely companies that fall due to the loan charge, rather than individuals—of the 6,000 cases currently being settled, 85% by value relate to companies. HMRC has always been clear that appropriate payment arrangements will be in place to ensure that those outstanding amounts of tax, which after all have been avoided, aggressively and in a contrived way, can be settled sensibly.
Greg Hands (Chelsea and Fulham) (Con)
What priority will the Chief Secretary to the Treasury give to reducing the tax burden in the coming spending review?