Loan Charge

Sammy Wilson Excerpts

Thursday 18th January 2024 Commons Chamber

[Sammy Wilson (East Antrim) (DUP)]

I beg to move,

That this House is deeply concerned that HMRC has confirmed the suicides of 10 people facing the Loan Charge and that, despite the Morse Review, thousands face unaffordable demands, with the risk of further suicides; notes that HMRC has also confirmed 24 cases of serious harm, including 13 suicide attempts; believes that many people who used schemes were victims of mis-selling, and that in other cases employers and agencies pushed people into using them, yet HMRC is demanding all disputed tax from scheme users, not from those who recommended, promoted and operated the schemes; further notes that section 44 of the Income Tax (Earnings and Pensions) Act 2003 deems agency workers to be taxable as employees of those agencies and that HMRC should have collected tax from agencies at the time; criticises HMRC transferring the liability to individuals despite its own failures; observes that HMRC is pursuing open enquiries for schemes before 2011 despite the Morse Review; also notes that HMRC is seeking additional payments from those who settled; further believes that the Morse Review was limited and not genuinely independent of HM Treasury and HMRC; highlights the resolution proposed by tax professionals; calls on the Government to work with all parties to find a fair resolution and for a full independent investigation, including into the conduct of HMRC; and believes that taxpayer rights must be enshrined in law and enquiries closed after four years if HMRC fails to act.

Before we start the debate, on behalf of my party, I pass on our condolences to the family of Tony Lloyd. He served for a short time as the shadow Minister for Northern Ireland. I always found him to be very courteous and well informed, and he wanted to be well informed. He asked the right questions and was always prepared to engage, even though he often did not agree with some of the stands we took. He was always happy to engage with all the parties in Northern Ireland, and we pass on our condolences to his family.

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. I am slightly concerned that there is something wrong with the sound. Let us start again.

[Sammy Wilson]

Thank you, Madam Deputy Speaker. I hope that the point I was making about Tony Lloyd was picked up. I want to pass on the condolences of our party to his family, and I pay tribute to the work he did as shadow Minister for Northern Ireland.

I thank the Backbench Business Committee for granting the debate. It is a timely debate and I know that the many thousands of people across the United Kingdom who have been affected by the loan charge in a very detrimental way will be glad that it is being considered in this House. Over the past two weeks, we have been looking at the dramatic fallout of the Horizon scandal at the Post Office and, quite rightly, we have been focusing on what belatedly can be done to repay and to deal with that great injustice. I say to the House—I do not think that I am being overdramatic when I say this—that we are looking at another Horizon scandal, and the parallels are frightening.

First, because of the actions of a Government Department, 10 people in the United Kingdom have committed suicide and many others have attempted to take their own lives because of the pressure they were put under by officials and by statute passed by this Parliament. We have heard time and again in evidence to the loan charge and taxpayer fairness all-party parliamentary group of the disruption and disaster this has caused in many families.

Secondly, despite the fact that alarm bells should be ringing in the Treasury, no action has been taken. Indeed, some Ministers have even refused to meet the group. Others have simply put out the party line and regurgitated the excuses of His Majesty’s Revenue and Customs for what is happening.

[Wera Hobhouse (Bath) (LD)]

Does the right hon. Gentleman agree that it seems to be the case yet again that people acting in good faith are being prosecuted and pursued, whereas the people who absolutely knew what they were doing are getting away scot-free?

[Sammy Wilson]

That is a point I want to come to.

We are seeing that once again Ministers are turning a blind eye, and these lessons should be learned. Apart from two examples of Ministers that I can think of, one of whom—a former Minister—is present, Ministers turned a blind eye for years. We then had the result, but it was not until an ITV programme brought this matter to the nation as a whole that action was taken.

We have had attempts by HMRC to justify what it has been doing. In the past, postmasters and postmistresses who had unblemished records for years were accused of being thieves. We are now being told that the people who HMRC is chasing today are—to use its words—“serial tax evaders”. Minister, I have to say that when I read the letter that you—

[Madam Deputy Speaker]

Order. The right hon. Gentleman knows that he does not address the Minister directly, but through the Chair.

[Sammy Wilson]

When I read the letter that the Minister sent to the joint chairs of the all-party group, he started by once again reminding us that

“As you are aware, disguised remuneration schemes are contrived tax avoidance arrangements that seek to avoid Income Tax and National Insurance contributions”.

It is almost like a warning: “Don’t be taking up these cases, because these are bad people that you are talking about.” That is exactly parallel to what we found with the Horizon scandal.

[Chris Stephens (Glasgow South West) (SNP)]

I agree with how the right hon. Gentleman has introduced the debate. He mentioned the scale of how HMRC is going after people caught up with the loan charge. Is that not in stark contrast with how multinational companies are entering into sweetheart deals with HMRC, such as Google and Vodafone?

[Sammy Wilson]

Indeed, it is, and I will come to the issue of HMRC chasing the individuals, rather than the promoters.

[Mr Tanmanjeet Singh Dhesi (Slough) (Lab)]

Will the right hon. Member give way?

--- Later in debate ---

[Sammy Wilson]

Let me just make this point: it seems that HMRC is going after those whom it regards as easy targets. The promoters of the scheme have not paid one penny, despite the fact that they have made hundreds of millions of pounds from the schemes, have mis-sold them and have disappeared when there is any attempt to get at them. The promoters are not being pursued and, indeed, HMRC has admitted that it does not intend to chase after the promoters, and yet individuals are being harassed to the point where many of them have taken their own lives.

[Mr Dhesi]

I congratulate the right hon. Member on having secured today’s debate, especially given that at least 10 people have sadly committed suicide. It is of course essential that disguised remuneration schemes are dealt with fairly and effectively, but why does he think the Government and HMRC have not actively pursued the architects and promoters of the scheme, rather than the victims who have been led into the schemes?

[Sammy Wilson]

The answer is easy: the victims are easy targets. They are the ones who are easy to chase. The promoters of the schemes have all kinds of means of defence. Many disappeared when they realised that they may well be pursued. This is the baffling thing, and maybe the Minister can explain it: if these schemes are designed as contrived ways of avoiding tax, why is HMRC not pursuing even some of the new promoters who are establishing themselves today and who will have disappeared by tomorrow, once it is seen that their schemes are being challenged?

[Sir Robert Buckland (South Swindon) (Con)]

I am grateful to the right hon. Gentleman for his courtesy on this occasion. I share his comments about Sir Tony Lloyd, who was a member of the Northern Ireland Affairs Committee, which I chair.

The right hon. Gentleman makes an important point about the regulation of promoters. Where is the regulation of those individuals? This is an ungoverned space. Surely, as they are trying to sell financial service products, they should at least come under the control of the Financial Conduct Authority. We have to not just focus on what has happened in the past, but look at what is happening now, where innocent people are being exploited.

[Sammy Wilson]

I intend to come on to that point.

The parallels, as I say, are frightening. I ask myself this question and the Minister should be asking it of himself, too. In one, two, four, five or 10 years’ time, will we see the same embarrassment and see Ministers who parroted the Department’s line being asked the question, “Why did you not raise the alarm at the time? Why were the explanations not challenged, and why were the calls for help not heeded?” That should be a salutary warning to Ministers.

[Gavin Newlands (Paisley and Renfrewshire North) (SNP)]

It is very unusual that I agree with every word the right hon. Gentleman says—[Interruption.] I am being generous. The simple truth is that HMRC failed to police this issue. Many people made HMRC aware of their involvement in the schemes and it took HMRC years to get back to them or even to look into the issue. That is one of the real crimes here.

--- Later in debate ---

[Sammy Wilson]

I am glad the hon. Gentleman agrees with everything I have said today. I think he has even dressed to show that agreement, with his red, white and blue outfit, and I appreciate that very much. Maybe he has become a Unionist as well—even for a day, that would be something of a miracle.

Let us look at the role of HMRC and the approach it has taken. It has been rightly pointed out that there should have been much more supervision within HMRC of what was going on. HMRC is now saying that it believes that many of the people who used payroll loan schemes should have been paying pay-as-you-earn, but at the time HMRC was not challenging the schemes, and the promoters were able to say they were legitimate. For years, people were acting in the belief that they were legitimate and were no risk. And here is the ultimate irony: HMRC employed people on contracts to do work for it, knowing that those people were being paid in that way, and never challenged it. That being the case, we have to ask what the level of supervision was, or whether HMRC changed its mind and then, having done so, decided to go after the individuals who had undertaken those schemes.

Some people will argue, “Well, it’s their own fault. After all, they knew that when they went into one of these schemes their tax liability may have been reduced. If people did that, they took that risk.” The fact is that many people did not volunteer to go into those schemes. Many people were forced into them. Some people were put into those schemes and did not even know they were in them. As far as they were concerned, they were employed by a contractor and their tax was being deducted, and they only found out later on that that was not the case.

By the way, this was not rich people employing fancy accountants to tell them how to avoid their tax. Many of the people caught up in the schemes were ordinary workers—nurses, teachers, cleaners—and some were people who wanted to set up a company and, because of the flaws in IR35, this was the only way of dealing with their tax affairs. People did not always volunteer to go into the schemes. One of the ways we discovered that HMRC was involved in this was that one lady came to us and said, “I was employed by an IT consultancy, the contractor was working for HMRC and the only way I could get the job was to be paid through one of these schemes. I did not particularly want to, but I wanted the work, so I had to enter into the scheme.”

HMRC, apparently, was quite happy for that contractor to pay its workers in that manner. In many cases, if people wanted to work, they were forced into these kinds of schemes. For years, although it was quite clear that there was an employer-employee relationship and they were under the direction and supervision of a company, they were treated as if they were separate stand-alone employees or individual self-employed people who could pay tax in that way.

The result was, of course, that when it was decided that the schemes were not tax compliant and there were years and years of back tax, Ministers were persuaded to introduce the loan charge in the Finance Act 2017. It was very convenient for HMRC to have that arrangement in place, because using the loan charge enabled it to decide what tax an individual was liable for and people could not challenge it in the normal way tax disputes can be dealt with, through either tribunals or courts. That was ruled out for them. In many instances, HMRC did not even have to explain how the tax bill was reached. If people do not have any redress to a court or tribunal, they really have no chance of negotiating whether or not the tax they have been deemed liable for is a liability and a correct liability.

Added to that was the fact that many employers saw the schemes as an advantage, because they could employ people without paying employment taxes or having to deal with pensions or holiday pay. That is why many employers forced individuals to be paid in that way. Those who argue, “Look, these people tried to avoid paying tax, so slap it up them now, they have reaped the consequences and they should just grin and bear it.”. should bear in mind that thousands of people are affected by this because they were impotent to stop that method of payment being used and were told by the promoters that it was all compliant and that there was no risk. In fact, 93% of those in the schemes were assured there was no risk and that they were compliant.

Indeed, they probably were compliant until, in later years, HMRC decided they were not compliant. People were left with tax investigations going back to 2010, which have resulted in many of them finding it impossible to pay. I want to mention a couple of case studies, because the confusion in HMRC made it very difficult for people to settle. HMRC did not seem to have the capacity to tell people. In one particular case, an individual was told after six years, “You owe £91,000.” He wanted to settle rather than be put in the loan charge. He was told, despite the fact that that was not in the criteria, “We don’t believe you can afford to pay £91,000 on the terms you have given.” So no settlement was granted and he was put in the loan charge, and the man who could not afford to pay £91,000 was then hit with a bill of £124,000. He could not afford to pay £91,000 in a settlement, but he was pushed into a loan charge where he had to pay £124,000.

We have the back charges, tax years that people thought were closed have been reopened, the confusion and some people now have to pay more in tax than they actually earned. HMRC does estimates; I think one person was told, when an explanation was sought of why they owed so much, that it was because everybody else paid that amount—and of course there is no redress.

[Ashley Dalton (West Lancashire) (Lab)]

I congratulate the right hon. Gentleman on bringing such an important debate to the Chamber. I have been contacted by several constituents who have described themselves as victims of this situation. Does he agree that those people who are being asked to pay what my constituents describe as incomprehensible amounts of money, while their employers and the people who provided those schemes are not being pursued for one penny, are victims, but are assumed to be criminals? Does he agree that they must be treated as victims and that this must be covered by a truly independent inquiry?

[Sammy Wilson]

That brings me to the very last point— I promise it is my last, Madam Deputy Speaker. I will simply list the points and other people can take them up and expand them later on. There are a number of issues the Minister must consider. First, while I have no evidence of this, we have been told that HMRC officials, just as Post Office officials were, are on commission for the money that they bring in through the loan charge. The Minister must confirm whether that is the case, because if so, it would act as a huge incentive for them to pursue individuals relentlessly.

Secondly, I trust that the Minister, in his new position, will challenge the Department’s lines on this matter. We need a greater challenge than we have had so far. Thirdly, I believe that the loan charge needs to be repealed because it is not fit for purpose and is having a detrimental effect. Fourthly, the employers and promoters must be pursued. Under the law, they were responsible for collecting tax from the employees. That is the basis on which tax demands are now being made of people—that they were employees, not self-employed.

Fifthly, of course we recognise that the Government have to collect tax when it is due, but the current method of pursuing this will not bring in tax revenue because people are going bankrupt. A group of professionals has proposed that the Government could claim back an affordable proportion of the tax that is owed. They would get at least some tax revenue out of it while stopping this relentless pursuit of individuals. In the longer run, I think we need a Bill of rights for taxpayers, and for tax fairness to be built into legislation, but that is a matter for a longer debate.

There are people who are suffering today because they are being battered by the cosh that HMRC officials are using on them to extract money that they do not have and which many of them do not believe they owe. I ask the Minister to grasp this nettle and ensure that we do not have another Horizon scandal.

[Madam Deputy Speaker (Dame Rosie Winterton)]

As colleagues can see, this is a very well-subscribed debate, with another debate to follow. In order to give equal time to Back Benchers throughout the afternoon, my advice—I would rather not put a time limit on—is that colleagues stick to about seven minutes. I am sure that Greg Smith will lead the way.

--- Later in debate ---

[Nigel Huddleston]

That is another important point to which I will come in a moment. I will now make some progress before I take further interventions, because I fear that otherwise I may ruin my responses.

As I said, the way in which we recover tax owed is important, including the interactions that individuals have with key bodies such as HMRC. The Government recognise that there were areas where the impact of the original loan charge was disproportionate to its aims. We have listened to concerns raised by hon. Members in the years since the loan charge was announced, and I have had conversations with HMRC about how it has, for example, endeavoured to improve the tone of communication with impacted individuals.

Changes in approach were also made following Lord Morse’s review, about which I have heard many comments today. Many people may not be aware, but in September 2019, the Government asked the former Comptroller and Auditor General of the National Audit Office, Lord Morse, to lead an independent review of the loan charge policy and its implementation. Lord Morse had full discretion over how the review was run, who he consulted and the recommendations made. That consultation included the APPG and many of the people in the Chamber today.

Following the review, Lord Morse recommended notable changes to the policy, and the Government accepted 19 of his 20 recommendations. Those changes benefit about 30,000 people and meant that the loan charge would apply only to outstanding loans made on or after 9 December 2010, rather than April 1999. That was the date when the Government announced anti-avoidance legislation that put beyond all doubt that the schemes were taxable—a very important date. The loan charge would also not apply to outstanding loans made in any tax years before 6 April 2016 where a reasonable disclosure of the use of a tax avoidance scheme was made to HMRC, but HMRC did not take action—again, some have made that point today. Taxpayers were also given additional flexibility in the way they pay in line with their individual circumstances, but Lord Morse was clear that the loan charge was necessary and in the public interest, and should remain in force.

[Sammy Wilson]

Does the Minister accept that HMRC officials helped to service the Morse review, and restricted its grounds and parameters? The original of that review has not been disclosed, and we do not know how it was changed in the meantime. There are great doubts about whether or not the Morse review was ever an independent review, and ever came to conclusions that would have dealt with the issues and the unfairness we have been discussing today.

[Madam Deputy Speaker (Dame Rosie Winterton)]

Before the Minister replies, I do want to say that I have given him more time than would normally be allocated for a Backbench Business debate. Several colleagues have tried to intervene, but do be aware that we have another important debate to follow. I am sure the Minister will be cognisant of that fact.

--- Later in debate ---

[Sammy Wilson]

Since time is short, I will not go through all the speeches, but I thank Members for taking part and for the powerful speeches they have made. There are two points that I will take away. First, there is the frustration, fear and powerlessness that many of our constituents feel in the face of oppressive Government bureaucracy, and the pursuit of those individuals by people who are not and currently cannot properly be held to account. Secondly, to repeat what the right hon. Member for Hayes and Harlington (John McDonnell) said, I hope that we will not be sitting here in four years’ time finding out that, although we had this debate, we heard platitudes from the Minister and there was no action. I do not want to take part in a debate similar to the one we have taken part in today. I think it is the duty of the Minister and the duty of Parliament to hold those who have this power to account and to make sure that it does not continue to be abused.

Question put and agreed to.

Resolved,

That this House is deeply concerned that HMRC has confirmed the suicides of 10 people facing the Loan Charge and that, despite the Morse Review, thousands face unaffordable demands, with the risk of further suicides; notes that HMRC has also confirmed 24 cases of serious harm, including 13 suicide attempts; believes that many people who used schemes were victims of mis-selling, and that in other cases employers and agencies pushed people into using them, yet HMRC is demanding all disputed tax from scheme users, not from those who recommended, promoted and operated the schemes; further notes that section 44 of the Income Tax (Earnings and Pensions) Act 2003 deems agency workers to be taxable as employees of those agencies and that HMRC should have collected tax from agencies at the time; criticises HMRC transferring the liability to individuals despite its own failures; observes that HMRC is pursuing open enquiries for schemes before 2011 despite the Morse Review; also notes that HMRC is seeking additional payments from those who settled; further believes that the Morse Review was limited and not genuinely independent of HM Treasury and HMRC; highlights the resolution proposed by tax professionals; calls on the Government to work with all parties to find a fair resolution and for a full independent investigation, including into the conduct of HMRC; and believes that taxpayer rights must be enshrined in law and enquiries closed after four years if HMRC fails to act.