Tax Avoidance, Evasion and Compliance

Nicholas Dakin Excerpts

Monday 4th March 2019 Commons Chamber

[Mel Stride]

It is very important for us to be extremely clear as to what disguised remuneration is all about. It is a situation where I, as an employer, instead of paying an employee in the normal manner, on which basis PAYE would be due—that would be income tax, employee’s national insurance and employer’s national insurance—I say to the employee, “Look, we’ll do it a different way. I’ll send some money out, typically into a trust in a low-tax or no-tax overseas jurisdiction. That money will then come back into the United Kingdom disguised as a loan”—not a real loan, as the hon. Lady and I would recognise, but one where there is no expectation that it will be repaid—“and, as a consequence because it is treated as a loan and not earnings, it attracts no tax at all.” This Government do not believe that is right.

[Nic Dakin (Scunthorpe) (Lab)]

Clause 95 of the Finance Bill 2019, which the Government accepted on Report, agreed a review of the loan charge. I have met constituents. They are ordinary folk who, when they were working for particular people, were told that this was the arrangement they had to make. They are now suffering huge penalties, although they are still not clear exactly what those penalties are because HMRC keeps changing the rules. Following the question of the hon. Member for Bromley and Chislehurst (Robert Neill), will there be a proper independent review that reports by 30 March and allows time before these things come in? I like the Minister a lot and I think he is a good Minister, but what he just said suggests that the Government have already determined the outcome of that review, which is not very helpful.

[Mel Stride]

I am sorry if the hon. Gentleman formed that opinion. We are certainly not going to prejudge any review on any aspect of tax, whatever it may be. I gently say to him, and to those who got involved in these schemes, that by and large when something looks too good to be true, it is too good to be true. Where hon. Members refer to very large demands for tax, we are, of necessity, looking at situations where very large amounts of money went through tax avoidance schemes. We have had debates in this House in which Members have raised tax demands, on behalf of their constituents, of up to £900,000. In those circumstances, about £2 million-worth of income would need to go through one of those schemes in order to result in an unpaid tax bill of that magnitude.