Loan Charge 2019: Sir Amyas Morse Review

Paul Holmes Excerpts

Thursday 19th March 2020 Commons Chamber

[Paul Holmes (Eastleigh) (Con)]

I congratulate my right hon. Friend the Member for Haltemprice and Howden (Mr Davis) on securing the debate, and all Members who are members of the all-party parliamentary group for being here today. Having been in this Chamber for only four months, I am not as experienced as others in complicated tax arrangements, but, very quickly during my election campaign and during my surgeries, this issue has proven to be a huge worry for the many of my hard-working and honest constituents who run small businesses. For me, thankfully, this is not a debate that revolves around complicated tax issues. It is a debate that revolves around fairness and proportionality, and I think the Government have got that drastically wrong. That is where the Morse review has not gone far enough.

Like my hon. Friend the Member for South Basildon and East Thurrock (Stephen Metcalfe), I believe that everyone in our country must pay the taxes they owe—individuals, businesses, everybody. That is how a responsible society works. But the people this affects are not tax avoiders, so I have some concerns on behalf of my constituents about some aspects of the Government’s approach. I believe that it is my duty as a constituency MP to bring them up with Ministers.

Many constituents have come to see me at the surgery and have told me the severe pressure that this has put them under; the pressure of making payments and possible insolvency has, in some cases, caused the breakdown of marriages, physical exhaustion, and suicidal thoughts through no fault of their own whatsoever. I am also aware from my constituents that many of those who used some form of disguised remuneration scheme did so at the behest of financial professionals they had hired to advise them. Some were told that these schemes were HMRC compliant. Others were not even told that these schemes were tax avoidance and thought that they were normal procedure.

I want briefly to ask the Minister to consider the following points. Of course, any shortening of the time for which people affected are liable for these payments is welcome, but even after 10 years the payments over three years are too regimented and draconian. What thoughts has the Minister had about lengthening the terms? It is simply not fair of HMRC to impose the retrospectivity that follows from this review. As I have said, many people were advised by financial advisers and are now being penalised because of the late realisation and intransigence of HMRC. Does the Minister accept that that should not be a portent for any decision making on policy in this area? What steps is he taking to share the cost burden with the financial advisers who recommended these schemes? They are getting away scot-free.

Lastly, I want to raise the subject of HMRC. Even in normal times, it is not the most transparent Government Department, or the easiest to deal with; it is not known for its empathy or human nature. I really hope that the Government do not continue down this path, but if they do, it is vital that a bespoke, compassionate team be set up solely to deal with the vulnerable people in our constituencies who are affected by this issue.

[Anthony Mangnall (Totnes) (Con)]

That is a gross understatement of HMRC’s lack of compassion. If we are to move forward, HMRC must give individuals who have suffered as a result of the loan charge situation certainty that there will be finality in the way the issue is dealt with.

[Paul Holmes]

My hon. Friend is absolutely correct. His point backs up mine. Any team that the Treasury sets up—and there should be one—to deal with people affected by the issue should treat them as people, not as numbers, which is unfortunately how HMRC has a track record of treating them.

[Richard Fuller (North East Bedfordshire) (Con)]

My hon. Friend puts his finger on one of the core points. Who is running the show here? Is it HMRC, or are the Government making sure that law on this matter is paramount? Does he not find it ironic that HMRC’s annual report this year says that HMRC wants a system that can

“be trusted and seen to be fair, with the right safeguards in place to protect customers”?

Does this case not show that it is falling woefully short of meeting that ambition?

[Paul Holmes]

I agree entirely. This is not the only case of people being treated unfairly by HMRC. I really hope that the Minister listens to the concerns being expressed across the House, particularly about the issue under discussion. There is a wider point here about HMRC. As my right hon. Friend the Member for Haltemprice and Howden said, it has decided to charge people retrospectively although the situation arose through its negligence. Never again—I feel this strongly—should it be allowed to adopt retrospective measures to cover its failure to get its policies in order.

Lastly, the Minister needs to make it clear, hopefully today, that the people affected by this are victims. They are struggling after following advice given to them by independent tax experts. I hope that he will look at lengthening the repayment period, commit to dealing fairly with the people affected by this, and never allow this to happen again. Ideally, he should at the Dispatch Box this afternoon scrap the loan charges affecting so many of my constituents.

--- Later in debate ---

[Chris Stephens]

I am not only very concerned, but angry about some of these actions and what I have heard today about what HMRC is up to. I will speak more about that.

When constituents such as Fraser Kennedy and Jason Millington come to us to discuss this issue, three immediate things leap out at us. This has come up in the debate, including in a fantastic example from my hon. Friend the Member for Ayr, Carrick and Cumnock (Allan Dorans). In this Parliament, we really need to deal with the relationship between an employer and a worker and their status in the workplace, because it really is time to end the bogus self-employment that we have heard about in this debate and in other examples. This needs to be addressed because what this issue has proven is that the wrong people are being targeted.

The hon. Member for Beckenham (Bob Stewart) said that when people first come across this issue, it looks like some sort of tax avoidance scheme, and I think it is perfectly natural for someone to think that when it is first explained to them. In the back of my head, when I first heard about it, I thought, “Well, maybe I will approach HMRC as an MP and try to get the same sweetheart deal that Google got only a couple of years ago,” when it paid the equivalent of 4% corporation tax. It seems that there is a disproportionate way that the people who have been caught up in the loan charge are being dealt with compared with other people who can get a sweetheart deal. That is how I thought I could try to deal with it, because if the answer is, “Yes, it is tax avoidance”, then the people HMRC should really be going after are those who contrived and promoted such schemes, because they are the ones who are directly responsible. They should be pursued and punished, and there should not be the blunt instrument that is being used for those caught up in the loan charge.

The third conclusion is, as the hon. Member for North East Bedfordshire (Richard Fuller) said, that there have been disproportionate actions from HMRC towards the individuals who have been caught up in this and how they feel. My constituent, Fraser Kennedy, sums it up well. His employer, Winchester, assured him and HMRC that it had paid all the tax and moneys, but he is still getting chased by HMRC. He feels bullied and harassed, and is suffering from stress and anxiety because of how it has handled the matter. He believed that it was settled a year ago, but he is still getting correspondence.

[Paul Holmes]

The hon. Member’s speech perfectly sums up the problem for many of my constituents in Eastleigh. So many times, they get a letter and desperately try to get through to HMRC, but there is no constructive dialogue with HMRC. Does he agree that we need a better bespoke team to work with the people affected by these measures?

[Chris Stephens]

I entirely agree. The hon. Member’s constituents in Eastleigh and my constituents in Glasgow South West will have the same feelings about this matter and how they are being treated.

Jason Millington emailed me his thoughts last night, because he knew that the debate was today. He said that he when he was advised of the changes in 2016, he stopped immediately and put his affairs in order, totally unaware that HMRC was looking for back taxes. The requests that are being made are entirely unreasonable. The stress of not knowing how he can ever repay what HMRC is looking for is having a serious impact personally, and indeed professionally. I do not remember the tax avoiders such as Google complaining publicly that they were feeling bullied and harassed, or that they were under stress or feeling anxiety. It seems appropriate to point out, as many hon. Members have, that if the law on tax was changed in 2017, that is when the law should apply from. Going back to 2010 is entirely unreasonable. I support the motion.