Nicholas Dakin
Main Page: Nicholas Dakin (Labour - Scunthorpe)
Nic Dakin (Scunthorpe) (Lab)
It is a real pleasure to follow the hon. Member for Aberdeen South (Ross Thomson), who has so comprehensively put the case today. I congratulate him, other hon. Members and the Backbench Business Committee on allowing us to have this debate, which has clearly captured the attention of Members because it is very heavily subscribed, as Madam Deputy Speaker has observed.
As the hon. Gentleman said, this is about real people and real lives, not names on a spreadsheet. We should remain focused on that. I have serious concerns about the effect that the introduction of the loan charge is having on my constituents. Although my constituency cases are small in number, they are huge in impact. I am the first to say that people should pay their taxes and that tax avoidance is wrong and should be stopped, and I am grateful that HMRC and the Treasury are taking steps to address tax avoidance.
Several hon. Members rose—
Neil Parish
I thank the hon. Gentleman for giving way, and I very much agree with him. The biggest problem is the loan charge’s retrospective nature, because the tax situation, the way in which we pay tax and the attitude towards tax have changed so much over the years. Many people entered into these loan arrangements in good faith and, of course, they were brought on by the employer, not the employee. As my hon. Friend the Member for Orpington (Joseph Johnson) said, a tax judge needs to look at this because it is wrong to ask people to pay massive amounts of money retrospectively.
Nic Dakin
The hon. Gentleman makes the point clearly; the retrospective element is particularly disturbing. I am concerned that a small number of ordinary working people who are not millionaires with broad shoulders, but who are on average incomes and have acted in good faith, are being hit by significant tax penalties implemented in the most unfair manner.
Several hon. Members rose—
Nic Dakin
I will make a bit of progress.
I have seen HMRC’s briefing pack on the loan charge, and I note the line in bold that says:
“HMRC has never approved tax avoidance schemes.”
I am glad to hear that, but I am not sure in this case whether I completely believe it, because when this law was passed in 2017, it applied a retrospective tax going all the way back to 1999. Notwithstanding the trouble with retrospective law in general, 18 years is a very long time to disapprove of something but not say that or act to fix it. The reality is that, by HMRC not speaking out or acting to prevent these loan schemes from being used for 18 years, while it did not give explicit approval, it certainly gave implicit acceptance.
Richard Burden
My hon. Friend makes a powerful point. At best, HMRC was woefully slow on this. Does he agree that, even at that late stage, the Treasury could have sorted this out when it accepted the amendment to the Finance Bill tabled by the right hon. Member for Kingston and Surbiton (Sir Edward Davey) in February by undertaking a proper review of this, so that it does not have the impact on individuals that my hon. Friend and the hon. Member for Aberdeen South (Ross Thomson) have talked about? It is woeful that HMRC and the Treasury did not conduct a thorough review, and that is why we need a proper, independent investigation.
Nic Dakin
I tend to agree with my hon. Friend, but fortunately the Financial Secretary to the Treasury is a good Minister, and I echo the comments made about him. I am sure he will respond in a positive way to the debate and that we can anticipate positive moves that will reassure people.
It is easy to see why people such as tax accountants, employers and even my constituents who were employed under these schemes and told they could not be employed otherwise thought it was okay to use these schemes—they believed they were perfectly legal.
Lee Ashcroft, who is one of my constituents impacted by the loan charge, is an engineer in the construction industry. He is a normal working man who happened to find himself, through no fault of his own, in a sector where businesses contracting workers obliged them to enter into these schemes if they wanted to work. To Mr Ashcroft, these schemes seemed unfair because there was no holiday pay or sick pay, but they seemed perfectly legal. He was told that they were perfectly legal by the company he worked for and by advisers with whom he checked it out.
Mr Ashcroft needed to work and accepted that this was the deal. He tells me that, in relation to £6,500 in loan payments, HMRC expects him to agree to settle a bill of £25,500—money he clearly does not have. He strongly disputes the amount he has to pay, which is vastly in excess of what he earned, but the clock is ticking. If he does not enter into an arrangement to pay by the upcoming deadline, he will be expected to pay the full amount with fines added on top. He is being forced to make an impossible decision: accept paying a huge bill that he thinks has been miscalculated and is morally wrong, or try to get HMRC to re-evaluate what he owes, and if he is unsuccessful, he will have to pay the full amount with fines on top. Either way, it will have a life-changing impact on his prosperity. Given the amount of worry that this has caused him, I think it has already had a life-changing impact, and Members will have stories of other constituents whose lives have been turned upside down by this.
It is unclear to me why HMRC is going after Mr Ashcroft in the first place. After all, it was his employer who forced people into these schemes. It is the employer who has benefited financially from this, yet it is the employees who are being left to pick up the tab, after HMRC waited 18 years to collect it and now wants it all in one dollop. These advanced payment notices are being relentlessly pursued by HMRC with no independent right of appeal. That does not seem to be playing fair.
Matthew Pennycook (Greenwich and Woolwich) (Lab)
My hon. Friend makes an important point. One of the most iniquitous aspects of this is the fact that the promoters of these schemes are not being pursued. Does he know of any who have been prosecuted to date?
Nic Dakin
I do not know the details, but I think the Financial Secretary will be able to update us on that when he responds, and I think that that is being looked at. The reality is that people who wanted work were pretty much forced to go into these schemes, which they believed, having checked them out, were perfectly reasonable and legal. Many years later, they are picking up a big tab that does not seem to equate to the money they got at the time, but seems much bigger.
Nic Dakin
No, I will complete my speech, because other Members need to speak.
Another of my constituents, Jonathan Davidson, told me:
“The loan charge continues to be a real worry to myself and my family. HMRC have only now”—
this is a couple of weeks ago—
“advised me of the actual settlement figures which are much higher than my expectations, as such I am being forced out of retirement even though my health is not great and I am now actively looking for employment.”
That is an example of what is happening to real people’s lives. For all my constituents affected, this issue is causing severe emotional and financial distress, which HMRC is neglecting and not taking note of. It is behaving as though it does not understand that this is about real people’s lives. This is serious and should not be minimised. This is having a devastating impact on people’s lives, and the distress is very real.
HMRC’s actions are also self-defeating, as they will undoubtedly push ordinary working people into bankruptcy, restricting HMRC’s ability to recover these tax liabilities. That does not seem very sensible, and it will create pressures on the public purse in other areas. We need some common sense—I see the Financial Secretary as the personification of common sense. It is time for the Government to pause the loan charge and think again about the best way forward, which should be fair to the Exchequer but also fair to honest working people who believed they were doing the right thing and have unfortunately—and, for many, unavoidably—been caught up in these schemes.