Loan Charge
Debate between Mohammad Yasin and Seema Malhotra
Mohammad Yasin
I thank my hon. Friend for making that very important point. I entirely agree with him. It is very important that we make sure that people do not suffer because of this very unfair loan charge.
I have a number of constituents whose lives have been turned upside down by changes made three years ago to tax legislation for disguised remuneration schemes. On the face of it, I support the Government’s move to clamp down on tax avoidance schemes, but the way in which the loan charge has been handled is confusing and cruel, and seems less guided by principle than by rushing through a badly designed process to reclaim tax.
The director general for customer strategy and tax design at HMRC told the House of Lords Economic Affairs Finance Bill Sub-Committee in October 2018 that
“the loan legislation was put in place because it was just too much time and trouble for HMRC to exercise its pre-existing powers conferred by Parliament”.
Seema Malhotra
My hon. Friend is making a powerful speech. Some 100 people have been affected in my constituency. I am grateful to Mr Salotra and Mr Jhaj from Hounslow West who came to the rally yesterday. They highlighted the fact that families are under great strain and stress and that the situation is one of policy failure. Does my hon. Friend agree that inadequate research on and an inadequate impact analysis of the policy have also contributed to the pain and strain on people who thought they were doing—and who want to do—the right thing, and that a delay and review are not just the right thing to do, but the human thing to do?
Mohammad Yasin
I agree with my hon. Friend, who makes a very important point.
One of my constituents recently wrote to me:
“Essentially, we have legislation being enacted because HMRC find it too difficult or troublesome to follow the rules and yet they expect taxpayers to follow the rules.”
No one disputes that HMRC has a right to challenge companies and individuals who have participated in tax avoidance arrangements. However, Parliament gave HMRC powers to do so long before the loan charge legislation was proposed. Those powers have not been exercised, making a mockery of the existing legislation and denying taxpayers their legitimate right to have their dispute resolved by the courts.
Many have no idea whether the schemes their employers were getting them into were effective or defective. It is completely unfair to penalise those people, who are innocent, and not those who designed and enabled these complicated and vague structures. We must distinguish between those who entered into these arrangements with their eyes open and those who were entered into them by their employers. The legislation has resulted in thousands of people accruing a tax debt that had not been invented when employers invested in good faith. If nothing changes, thousands of people will be made bankrupt, families will be destroyed and innocent people will have their lives ruined.