Roadchef Employees Benefit Trust

Neil Gray Excerpts

Tuesday 19th December 2017 Commons Chamber

[Neil Gray (Airdrie and Shotts) (SNP)]

Thank you, Madam Deputy Speaker, for granting this debate. I thank the hon. Members from across the House who have so far agreed to stay back to listen and perhaps contribute to the debate. What I am looking to discuss this evening can be boiled down to basic fairness and people getting access to what is rightfully theirs. I think it is important to set out some context to where we are today, before I come to the main points that I hope the Minister might be able to help with.

In 1986, the Roadchef employees benefit trust was established to give employees at Roadchef motorway services, such as those at Harthill in my constituency, Watford Gap, Hamilton or dozens of other locations across these isles, access to a John-Lewis-style employee-ownership scheme, whereby they would benefit from increasing share entitlements based on length of service. It was established honourably by the then chief executive Patrick Gee in consultation with and with the support of the GMB union. Sadly and tragically, Patrick Gee died aged 43 before the scheme could be fully realised and Tim Ingram Hill took over. He then transferred the shares that Mr Gee was making available to employees into a second employee benefit scheme, of which he was the only beneficiary.

When Roadchef was subsequently sold to the Japanese company Nikko about a decade later, Mr Ingram Hill made approaching £30 million on the shares that should have been made available to Roadchef employees. In 2000, he made a tax payment on his ill-gotten share windfall to Her Majesty’s Revenue and Customs to the tune of approximately £10 million, something which has only to come to light further down the line. On discovering the unjust enrichment, the trust then took Mr Ingram Hill to the High Court, and Justice Proudman found that he had acted in breach of trust and, crucially, that the shares were never his in the first place—they were the employees’ shares. The purchase of the shares in the sale of the company was therefore void and—this is important—the £10 million paid to HMRC also belonged to the beneficiaries, not Mr Ingram Hill.

Subsequent to the High Court ruling, Mr Ingram Hill settled with the trust, thus ending our interest in him for the purposes of this debate, but the trust then notified HMRC of the fact that the settlement had occurred and that it now intended to pay out to its beneficiaries, who total some 4,000 current and former Roadchef employees. The trust also wished to clarify that there would be no tax implications from the payments being made, thinking that that would just be a formality, but the response from HMRC was rather surprising. HMRC said that it would be happy to waive any tax implications for the beneficiaries as long as the trust did not pursue it for the £10 million paid in tax by Mr Ingram Hill. That was the first time that the trust had been made aware of such a tax payment. In accordance with any trustees acting on behalf of beneficiaries, the trust has challenged HMRC on the £10 million payment, which should be repaid to the trust with interest. That brings us up to date on this complex and unique case.

I am grateful to the chairman of the trust, Christopher Winston Smith, and to Huw Edwards for their insight ahead of this debate, and to the current CEO of Roadchef, Simon Turl, who I spoke to last night. Roadchef wants the issue settled for its current and former employees and has been working constructively with HMRC to that end. The trust has also worked with a number of hon. Members from across the House to raise the matter with HMRC, including my hon. Friend the Member for Linlithgow and East Falkirk (Martyn Day) and the hon. Members for Newport East (Jessica Morden), for Newcastle-under-Lyme (Paul Farrelly), for Congleton (Fiona Bruce), for Stafford (Jeremy Lefroy), for Dudley North (Ian Austin) and for Westmorland and Lonsdale (Tim Farron).

My constituents certainly want this issue settled. Twenty constituents, most of whom live around the service station at Harthill, have contacted me about the matter, but I am sure that more are waiting for their payment. They include Mrs Margaret Gibson, who lists some of the things that she has struggled to do in recent years that this money would have helped with, including borrowing money for home improvements, helping her son to pay for his wedding, or helping her and her husband to get by during periods of unemployment. She considers it a ridiculous amount of time to wait for what is rightfully hers, and I completely agree.

[Patricia Gibson (North Ayrshire and Arran) (SNP)]

My hon. Friend is making a powerful speech. Does he agree that what adds insult to injury here is that, as well as being deprived of the payments, many of the people concerned are also working on quite low pay?

[Neil Gray]

Absolutely. I believe that the main thrust behind Mr Gee’s setting up of the trust in the first place was to ensure that low-paid staff were able to benefit from the company doing well. That has sadly not happened yet, and many low-paid workers have suffered as a result. Many of my constituents—I will list some shortly—have suffered and continue to suffer as a result of the payments not being made, so my hon. Friend is absolutely right.

Linda McLeod and Margaret Main pointed to the time it has taken for their money to be returned, but they also highlighted the number of former colleagues who have sadly passed away and will not get the benefit their hard work merited. Caroline Todd contacted me on behalf of her mother, Mrs Quigley from Harthill. She desperately hopes this gets resolved soon so that her mum, who is getting older, is able to enjoy her own money. Margaret Forsyth just wants HMRC to settle matters so that she can have some security, a sentiment echoed by Jane Paxton and Elizabeth Campbell.

Joyce Simm’s husband has been receiving treatment for small-cell carcinoma for three years, and she has been out of work while she cares for him. They have had to survive on pensions and savings, which are fast disappearing. They have now been hit with the sad news that he has a carcinoid tumour and will be undergoing surgery on 21 December. I am sure the whole House will join me in wishing the family well, but clearly any pay-out now would be particularly beneficial.

Another constituent of mine visited my surgery. He is seriously ill and in a difficult financial situation, and the money he is entitled to get back would simply be life changing and would help him immensely. He is desperate to see HMRC settle as soon as possible. I know many other hon. and right hon. Members on both sides of the House will have constituents who are affected and, sadly, will be able to share similar stories. Indeed, I understand Mr Speaker has constituents who are affected by this issue.

It is worth mentioning someone else who has been affected by this case. The former company secretary at Roadchef, Tim Warwick, blew the whistle on what the then chief executive was doing before there was any kind of whistleblower protection. Exposing this affair effectively ended Mr Warwick’s career, and we should all thank and pay tribute to him for his efforts.

What can the Minister do to help my constituents and their 4,000 colleagues across these isles who are waiting for their money? I understand that HMRC is a non-ministerial department of Government and that the Minister is therefore somewhat restricted in what he can do, but I hope he can join me and colleagues on both sides of the House in calling on HMRC to settle this case with the trustees and to return the £10 million, plus interest, to the rightful owners—the trustees and beneficiaries.

[Peter Grant (Glenrothes) (SNP)]

My hon. Friend is giving a moving account of how the wrongdoing of one person, compounded by the inaction of HMRC, is causing real misery to a lot of people. Does he see a contrast with HMRC’s generosity when it comes to settling deals with big multinationals that have been caught avoiding tax through barely legal, and sometimes non-legal, methods? Would it be fair to say that his constituents must now think HMRC applies one law to the rich and another very different law to the poor?

[Neil Gray]

My hon. Friend makes a fair point, and I draw the House’s attention to his professional background and expertise in this area. He makes a valid point to which I am sure the Minister has listened.

If HMRC does not settle the case, it will stand accused of laundering illegally obtained funds at the expense of those who have been defrauded. I understand from correspondence that HMRC is concerned about setting a precedent in this case. As far as I can tell, this is the only EBT fraud case that involves a tax payment made in error, so I am not sure what exactly the precedent would be. But even if it were not the only such case, returning the money to its rightful owner would be a pretty good precedent to set.

Will the Minister advise the House on whether today was the first time he was made aware of the £10 million that was wrongly paid in tax? I say that because, to date, as far as I can see, the £10 million figure has not been mentioned in all the correspondence between Members of this House, Ministers and HMRC. At best, it would appear that officials are failing to apprise MPs of the full facts, which is a very serious matter indeed.

HMRC might also have briefed the Minister to say that this case is time barred, which of course will not be the case until the two-year anniversary of the High Court ruling comes round early next year. Unfortunately the right hon. Member for Loughborough (Nicky Morgan), the Chair of the Treasury Committee, is not in the Chamber, but I hope she takes note of what I have presented to the House today, as I believe there is a role for her to play in getting the lead officials at HMRC to answer for the delay. I will be writing to her, as the Chair of the Select Committee, in the new year to get her to look at ministerial guidance to HMRC on unjust enrichment and to get this issue scrutinised in more detail.

I look forward to hearing the Minister’s response to the issues I have raised this evening on behalf of not just my constituents, but constituents from across these isles. Some 4,000 low-paid workers have been denied what is rightfully theirs, first by the breach of trust by their former boss and now by HMRC. I hope the Minister will agree to meet me and the chair of the trust, Mr Winston Smith, so that we can all work together to finally see justice for current and former employees of Roadchef. This is about natural justice, and it is not good enough for HMRC to say that it is too difficult or that it is precedent setting, or to give any of the other excuses offered so far. This is not HMRC’s money. It is my constituents’ money—it is our constituents’ money—and it should be returned to them without delay.

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

I am grateful to the hon. Member for Airdrie and Shotts (Neil Gray) for having raised this issue and secured this debate. I congratulate him also on the vociferous energy with which he has pursued these important matters—the Government recognise their importance. I appreciate that this matter is a source of long-standing concern for those affected, and I can fully understand that they would want a resolution soon. I assure the House that HMRC is working hard towards resolving this issue. As the hon. Gentleman has recognised, I am of course constrained by HMRC’s duty of maintaining taxpayer confidentiality, so my remarks on the case will, of necessity, be limited to matters already in the public domain. HMRC will, however, continue to correspond in writing with the trustee chairman and assist the employee benefit trust’s representatives.

It may be helpful if I first set out the typical tax treatment for the sale of shares from EBTs. When a person exercises an option to obtain EBT shares, this is often chargeable to income tax and national insurance contributions, based on the difference between their valuation when they are obtained and the amount paid for them. If the shares are sold to a third party, the sale will then be subject to capital gains tax on the difference between the valuation used for the taxation of the option and the sale prices.

Turning to the Roadchef EBT, as we have heard, the issue we are discussing today has a long history. Before the sale of Roadchef in 1998, the company’s then chairman arranged for shares held by the EBT to be transferred to him. He subsequently sold the shares for a profit. Both the acquisition and sale were taxed appropriately at that time. The former chairman’s actions were contested, and in 2014 the High Court ruled that effectively the moneys from the sale of shares had to be paid back, net of tax, to the trust for distribution to its beneficiaries. The judgment stated that the proceeds from the shares sold had been held on constructive trust by the chairman for the beneficiaries. However, the implementation of the High Court’s ruling in 2014 and the subsequent distribution of the original shareholders has proved to be very complex.

HMRC has since been engaging with the Roadchef employment benefit trustees’ representatives to determine the correct tax treatment for the trust and the relevant distributions to its beneficiaries. This involves HMRC working closely with the trust’s representatives to fully explore all potential legal options to settle this matter. HMRC’s most senior technical people have been working on different aspects of the tax position, and a senior HMRC representative is regularly discussing the progress of the case with the trust’s representative. Several media outlets have also reported how earlier this year HMRC provided a technical analysis of its view of the correct tax treatment to the trustee chairman and its representatives. To be clear, HMRC has no interest in prolonging this matter. It is, however, legally bound to be even-handed and impartial in applying the law.

[Neil Gray]

Can the Minister understand my concern at HMRC’s approach to this? When the trust was first made aware of the £10 million tax payment, HMRC apparently told the trust that the beneficiaries would not have to pay any tax on any pay-out that is made as long as the trust does not pursue HMRC for the £10 million. I think he can understand why that is a little concerning.

[Mel Stride]

The hon. Gentleman has raised a specific set of suggestions in the context of the dialogue between HMRC and the trust, and that very much strays into the area of confidentiality around discussions between our tax authority and a particular organisation. It would therefore not be right for me to comment on that. Indeed, in the normal course of events, I would not even be aware of such matters—certainly not from an HMRC perspective.

[Neil Gray]

I thank the Minister and understand the constraints he is under, which is why I hope he might agree to meet me and the trust to try to find a way through this. I hope he will agree to do that sometime early in the new year.

[Mel Stride]

I thank the hon. Gentleman for his invitation, which he also extended in his speech. I am certainly prepared to consider meeting him and potentially others, although I would like to take advice on whether that would be entirely appropriate, given the situation. I would appreciate it if the hon. Gentleman could explain more fully the exact nature of such a meeting, including who would be present and so on. In no way am I seeking to be unhelpful—quite the opposite—but I am conscious of the clear line that there must always be between members of the Government, MPs and, indeed, other members of the public, and the tax affairs that pertain between our tax authority and another organisation or business.

HMRC has a taxpayer confidentiality obligation, so I cannot comment in more detail on the specific tax treatment of the case. I can, however, assure the House that HMRC is doing everything that it can to resolve this issue promptly and fairly, while ensuring that the tax is paid appropriately in respect of the sale and distribution of the shares. Although HMRC has discretion as to how it goes about fulfilling its duties, as a statutory body it must of course apply the law fairly and collect the taxes set out in legislation by Parliament. When the law is unclear, HMRC can exercise some discretion to ensure that it gives effect to Parliament’s intent. For example, HMRC can exercise discretion to give up some tax if there is an unintended or unforeseen effect only a small group of taxpayers or that will be apparent only for a short time. I should note, though, that that discretion is by its nature limited and would not be applicable in all circumstances—for instance, it would not apply if the courts had made a specific ruling on a particular issue.

In summary, I thank the hon. Member for Airdrie and Shotts again for securing this debate and for the tenacity with which he has pursued these matters on behalf of his constituents and those of other Members. As I have said, I can appreciate the frustration of those affected, who naturally want a swift end to this matter, which I hope there will be. I hope I have been able to provide at least some reassurance that HMRC is doing everything in its power to resolve this issue in a fair and timely manner.

Question put and agreed to.