Finance Bill

Nigel Evans Excerpts

Report stage & Report stage: House of Commons & Report: 1st sitting & Report: 1st sitting: House of Commons
Wednesday 1st July 2020 Commons Chamber

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

I beg to move, That the clause be read a Second time.

[Mr Deputy Speaker (Mr Nigel Evans)]

With this it will be convenient to discuss the following:

New clause 1—Loan charge: report on effect of the scheme—

“(1) The Chancellor of the Exchequer must commission a review, to be carried out by an independent panel, of the impact in parts of the United Kingdom and regions of England of the scheme established under sections 20 and 21 and lay the report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider the effects of the provisions on—

(a) business investment,

(b) employment,

(c) productivity, and

(d) company solvency.

(3) A review under this section must consider the fairness with which HMRC has implemented the policy, including whether HMRC has provided reasonable flexibility around repayment plans with the aim of avoiding business failures and individual bankruptcies.

In this section “parts of the United Kingdom” means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

and “regions of England” has the same meaning as that used by the Office for National Statistics.”

This new clause would require a review of the impact of the scheme to be established under Clauses 20 and 21.

New clause 31—Restricting the loan charge to cases where taxpayer knew loan was taxable—

“(1) In Schedule 11 to F(No.2)A 2017 (employment income provided through third parties: loans etc outstanding on 5 April 2019) in paragraph 1(1)—

(a) at the end of paragraph (b) omit “and”; and

(b) at the end of paragraph (c), insert—

“, and

(d) if the relevant year is 2015/16 or an earlier tax year, one of the conditions 1 to 3 is met.”

(c) After paragraph 1(1), insert—

“(1A) Condition 1 is that—

(a) P submitted a return in accordance with section 8 of TMA 1970 for the relevant year,

(b) the loan or quasi loan was not accounted for in the return as income, and

(c) P knew that the loan or quasi loan should have been accounted for as income in the relevant year.

(1B) Condition 2 is that P has not been issued with a notice under section 8 of TMA 1970 for the relevant year.

(1C) Condition 3 is that P has been issued with a notice under section 8 of TMA 1970 for the relevant year but that notice is or has been withdrawn under section 8B(2) of that Act.”.

(2) In Schedule 12 to F(No.2)A 2017 (trading income provided through third parties: loans etc outstanding on 5 April 2019) in paragraph 1(2)—

(a) at the end of paragraph (a)(ii) omit “and”; and

(b) at the end of paragraph (b), insert—

“, and

(c) if the tax year in respect of which the loan or quasi loan should have been accounted for as income (or otherwise treated as a receipt of a revenue nature for income tax purposes) (“the relevant year”) is 2015/16 or an earlier tax year, one of the conditions 1 to 3 is met.”

(c) After paragraph 1(2), insert—

“(2A) Condition 1 is that—

(a) T submitted a return in accordance with section 8 of TMA 1970 for the relevant year,

(b) the loan or quasi loan was not accounted for in the return as income (or otherwise treated as a receipt of a revenue nature for income tax purposes), and

(c) T knew that the loan or quasi loan should have been accounted for in the return as income (or otherwise treated as a receipt of a revenue nature for income tax purposes).

(2B) Condition 2 is that T has not been issued with a notice under section 8 of TMA 1970 for the relevant year.

(2C) Condition 3 is that T has been issued with a notice under section 8 of TMA 1970 for the relevant year but that notice is or has been withdrawn under section 8B(2) of that Act.”.

This new clause provides that, in respect of loans made in 2015/16 tax year and any earlier tax years, the loan charge applies only if the taxpayer submitted their tax return and deliberately did not declare the loan to be income. The clause also extends this protection to taxpayers who were not required by HMRC to submit tax returns.

New clause 35—Review of Off-Payroll working (IR35) legislation—

“(1) The provisions of section 7 and Schedule 1 of this Act do not have effect unless the Treasury has conducted a review of Off-Payroll working (IR35) legislation and has laid a copy of the report of that review before both Houses of Parliament.

(2) A review under (1) must include assessment of—

(a) impact on individuals’ livelihoods,

(b) impact on individuals’ employment rights, and

(c) relevant business practices.

(3) Any review under (1) must be carried out no later than 31 December 2025.”

This new clause would provide that the IR35 provisions of the bill would not take effect unless the Treasury has conducted and published a review of off-payroll working legislation.

Amendment 16, page 2, line 23, leave out clause 7

Amendment 55, in clause 20, page 15, line 6, at end insert—

“(3A) An amount paid, treated as paid or due to be paid under a qualifying agreement is also a qualifying amount if—

(a) the amount is referable (directly or indirectly) to a qualifying loan or quasi-loan,

(b) the tax year in which an amount representing the loan or quasi-loan should have been accounted for as income (or otherwise treated as a receipt of a revenue nature for income tax purposes) (“the relevant year”) is 2015/16 or an earlier tax year, and

(c) one of the conditions 1 to 3 is met.

(3B) Condition 1 is that—

(a) the person to whom the income tax liability the agreement referred to in subsection (2) relates (“P”) submitted a tax return in accordance with section 8 of TMA 1970 for the relevant year, and

(b) the loan or quasi loan was not accounted for in the return as income (or otherwise treated as a receipt of a revenue nature for income tax purposes).

(3C) However, condition 1 is not met if P knew that the loan or quasi loan should have been accounted for in the return as income (or otherwise treated as a receipt of a revenue nature for income tax purposes).

(3D) Condition 2 is that P has not been issued with a notice under section 8 of TMA 1970 for the relevant year.

(3E) Condition 3 is that P has been issued with a notice under section 8 of TMA 1970 for the relevant year but that notice is or has been withdrawn under section 8B(2) of that Act.”.

This amendment is consequential on the new clause “Restricting the loan charge to cases where taxpayer knew loan was taxable”. It provides that a prior settlement with HMRC can be unwound unless the worker failed to account for a 2015/16 tax year (or earlier) liability in his or her tax return deliberately despite knowing that the loan should have been included as income.

Amendment 17, page 85, line 2, leave out schedule 1.

Amendment 20, in schedule 1,  page 97, line 15, leave out “2021-22” and insert “2023-24”

This amendment and 21 to 36 and 57 seeks to delay the introduction of the IR35 changes until the tax year 2023-24.

Amendment 21, page 97, line 17, leave out “2021” and insert “2023”

Amendment 22, page 97, line 21, leave out “2021” and insert “2023”

Amendment 23, page 97, line 23, leave out “2021” and insert “2023”

Amendment 24, page 97, line 25, leave out “2021” and insert “2023”

Amendment 25, page 97, line 26, leave out “2021” and insert “2023”

Amendment 26, page 97, line 38, leave out “2021” and insert “2023”

Amendment 27, page 98, line 4, leave out “2021-22” and insert “2023-24”

Amendment 28, page 98, line 8, leave out “2021” and insert “2023”

Amendment 29, page 98, line 12, leave out “2021” and insert “2023”

Amendment 30, page 98, line 30, leave out “2021” and insert “2023”

Amendment 31, page 98, line 34, leave out “2021” and insert “2023”

Amendment 32, page 98, line 37, leave out “2021” and insert “2023”

Amendment 33, page 98, line 40, leave out “2021” and insert “2023”

Amendment 34, page 98, line 44, leave out “2021” and insert “2023”

Amendment 35, page 98, line 45, leave out “2021” and insert “2023”

Amendment 36, page 98, line 47, leave out “2021” and insert “2023”

Amendment 57, page 97, line 36leave out ‘2021’ and insert ‘2023’

New clause 12—Assessment of impact of provisions of this Act—

“(1) The Chancellor of the Exchequer must review in parts of the United Kingdom and regions of England the impact of the provisions of this Act and lay a report of that review before the House of Commons within one month of the passing of this Act.

(2) A review under this section must consider the effects of the provisions on—

(a) GDP

(b) business investment,

(c) employment,

(d) productivity,

(e) company solvency,

(f) public revenues

(g) poverty, and

(h) public health.

(3) A review under this section must consider the following scenarios—

(a) the Job Retention Scheme, Coronavirus Business Interruption Loan Scheme, Bounceback Loan Scheme and Self-employed Income Support Scheme are continued are continued for—

(i) six months,

(ii) the next year,

(iii) eighteen months,

(iv) the next two years; and

(b) the Job Retention Scheme, Coronavirus Business Interruption Loan Scheme, Bounceback Loan Scheme and Self-employed Income Support Scheme are ended or changed in any ways by a Minister of the Crown other than as specified in (a).

(4) In this section—

“parts of the United Kingdom” means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

“regions of England” has the same meaning as that used by the Office for National Statistics.”

This new clause would require a review of the impact of the Bill in different possible scenarios with respect to the continuation of the coronavirus support schemes.

New clause 18—Review of changes in Act—

“(1) The Chancellor of the Exchequer must review the effect of the changes in this Act in each part of the United Kingdom and each region of England and lay a report of that review before the House of Commons within two months of the passing of this Act.

(2) A review under this section must consider the effects of the changes on—

(a) business investment,

(b) employment, and

(c) productivity.

(3) A review under this section must consider the effects in the current and each of the subsequent four financial years.

(4) The review must also estimate the effects on the changes in the event of each of the following—

(a) the UK leaves the EU withdrawal transition period without a negotiated comprehensive free trade agreement,

(b) the UK leaves the EU withdrawal transition period with a negotiated agreement, and remains in the single market and customs union, or

(c) the UK leaves the EU withdrawal transition period with a negotiated comprehensive free trade agreement, and does not remain in the single market and customs union.

(5) The review must also estimate the effects on the changes if the UK signs a free trade agreement with the United States.

(6) In this section—

“parts of the United Kingdom” means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

and “regions of England” has the same meaning as that used by the Office for National Statistics.”

This new clause requires a review of the impact on investment, employment and productivity of the changes made by the Act over time; in the event of a free trade agreement with the USA; and in the event of leaving the EU without a trade agreement, with an agreement to retain single market and customs union membership, or with a trade agreement that does not include single market and customs union membership.

--- Later in debate ---

[Crispin Blunt (Reigate) (Con)]

On a point of order, Mr Deputy Speaker. Forgive me; I might have missed the reason why are we are not going to be able to divide on new clause 31, but I would be grateful if you could explain it to me. I have today become the longest serving Member for Reigate since the Great Reform Act, so I might have missed one or two things that are going on, but I would be obliged if you could tell me why we are not going to have the opportunity to divide on new clause 31.

[Mr Deputy Speaker (Mr Nigel Evans)]

I thank the hon. Member for his point of order, but I think we have to wait until the end of the debate before these decisions are made.

[Mr Davis]

Thank you, Mr Deputy Speaker. I shall move on to the other issue that I want to discuss today.

Amendment 20 would delay the imposition of the IR35 rules from 2021 until April 2023. It is very unlikely that the economic crisis we are facing will be over by April 2021, and attempting to implement IR35 will cost jobs and do serious economic damage. A few months ago, the powerful Cross-Bench House of Lords Economic Affairs Committee wrote a report on IR35, and much of what I am going to say involves quotations from that report. I will start with this:

“It is right that everyone should pay their fair share of tax. But the evidence that we heard over the course of our inquiry suggests that the IR35 rules—the government’s framework to tackle tax avoidance by those in ‘disguised employment’—have never worked satisfactorily, throughout the whole of their 20-year history. We therefore conclude that this framework is flawed.”

It is right not to impose unnecessary burdens on business at a time like this. I agree with a great deal of what the right hon. Member for Wolverhampton South East had to say about the importance of preserving—and, indeed, not destroying—employment in the current circumstances. This goes right to the issue of IR 35. The report states that

“the government made this decision after considering the issue too narrowly, in terms of its tax take. It has severely underestimated the costs to business of implementing the changes…And it did not analyse sufficiently the unintended behavioural consequences of the proposed reforms or their wider potential impact on the labour market, and on the gig economy in particular.”

Many contractors in the coming years will be left in an “undesirable halfway house”. They do not enjoy the rights that come with employment, yet they are considered employees for tax purposes. In short, IR35 will create “zero-rights employees”. I am saying this directly to Labour Members, because the idea that a Government action can create a class of employee with zero rights is an issue close to their hearts. Such employees have no rights under employment law but under tax law they are employees.

The Lords Committee called on the Government to commission an independent review to devise a better implementation of the scheme. I think that is exactly right, which is why I want to see another two years before we implement whatever the decision is. We need that time to understand precisely what the effect of our new policy will be.

It would be a disaster if, in the context of the economic crisis and the growing gig economy, the Government accidentally created that class of zero-rights employees with no holidays, no sick pay, no pension, no redundancy —no employment rights whatsoever. We must stop that happening either accidentally or deliberately, and on that basis I ask the House to support amendment 20.

--- Later in debate ---

[Taiwo Owatemi]

I agree with my hon. Friend; that is completely wrong.

No business or individual should be left behind. Every livelihood deserves the chance to survive this crisis. Otherwise, who knows what impact it will cause? Where there are job losses, will the Government commit to retraining those workers, whether old or young, through a future jobs fund so that they can harness the jobs that will come out of the crisis? Those jobs should be part of a new, prosperous economy, and they should be green, well-paid and sustainable. We do not need a race to the bottom, the slashing of safety regulations or the austere measures that we have seen in the past 10 years. The Chancellor said that he would do “whatever it takes” and frankly that is the least that my constituents in Coventry North West deserve. We have seen 18 years of growth and millions of jobs lost in two short months. To restore dignity, to save jobs and create new ones and to stimulate this much-needed recovery, bold progressive action is required. Nothing less will do.

[Mr Deputy Speaker (Mr Nigel Evans)]

If Judith Cummins wishes to speak until 8.39, she may do so. Otherwise, I need to call the Minister.

[Judith Cummins (Bradford South) (Lab)]

I have 40 seconds. Thank you, Mr Deputy Speaker!

I want to comment on two things. The first is the beauty, aesthetic and wellbeing industry, which is far wider than the nail bars that the Prime Minister has flippantly referred to. It is a sector that contributes a hugely significant £6.6 billion to the UK economy, employs more than 300,000 people across the UK and provides 16,000 apprenticeships, yet it seems to have been forgotten. Hundreds of jobs are at risk. The industry needs clarity, and it needs it now. Those people want to know when they can go back to work. Also—

[Mr Deputy Speaker]

Order. It is now 8.39 pm. I call the Minister.

[Jesse Norman]

I take my hat off to the astonishing hon. Member for Bradford South (Judith Cummins), who brought so much content into such a short presentation, and I thank her for that. We have an enormous body of material to get through quickly, so I shall deal initially with the question relating to new clause 26 on job creation and related measures. The new clause would require the Government to conduct an assessment of the effect of the Act on job creation. As the House will know, the Government have announced unprecedented support through the coronavirus job retention scheme, the self-employed scheme and the like. The Office for Budget Responsibility has said that those actions will directly help to support the incomes of individuals. The Treasury does not produce economic forecasts and the OBR does, publishing them twice a year. For that reason, I ask Members to reject the new clause.

New clause 12 relates to a matter previously considered in the Public Bill Committee, the impact on regions and nations. The new clause would require the Chancellor, within one month, to review the impact of the Act. As I emphasised in Committee, the provisions in this Bill have already been developed with careful consideration. Analysis of Government decisions on GDP is also carried out by the independent OBR. Again, we will continue to monitor the impact of the crisis, but I ask Members to reject the new clause. SNP new clause 18 would require a review of the impact of the Act on investment, productivity and employment. Again, it would require the Government to look at hypothetical scenarios, whereas the OBR is required by law to produce its forecasts based on stated Government policy, so I ask Members to reject the measure.

I come now to IR35 and the off-payroll working rules. I have been pressed vigorously on this issue by my hon. Friends the Members for Milton Keynes North (Ben Everitt), for Guildford (Angela Richardson), for Workington (Mark Jenkinson) and for Barrow and Furness (Simon Fell). Amendments 16 and 17 seek to remove the reform of these rules from the Bill, which would be a serious mistake, costing the country many hundreds of millions of pounds. The level of non-compliance at the moment with the rules is scheduled to cost the country £1.3 billion in 2023-24 if not addressed. As I do not believe the SNP really wants that, I encourage Members to vote against it.

I come now to the cross-party amendments framed by my right hon. Friend the Member for Haltemprice and Howden (Mr Davis), as it is important to engage with several of the things he said. He said that contractors could be pushed into a state of no benefits employment. It is important to note the contractors already receive a number of benefits funded by the Government when they are employees of their own personal service companies. Such benefits include statutory maternity, paternity, adoption, parental bereavement and shared parental pay, and they are provided by PSCs, which are then able to claim 100% of those payments plus 3% compensation from the Government. My right hon. Friend said that at least seven people have taken their own lives as a result of the loan charge. It is important to put on the public record that of course every single death of an individual is a tragedy. The circumstances surrounding those deaths have been considered by the coroner, the Independent Office for Police Conduct and HMRC’s own internal independent investigations. None of them has suggested, in these four reports, that HMRC is to blame for these deaths; no conduct issues have identified either by the independent office or internal investigations that would warrant disciplinary actions.