Seema Malhotra
Main Page: Seema Malhotra (Labour (Co-op) - Feltham and Heston)
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
I congratulate the hon. Member for Aberdeen South (Ross Thomson) and his colleagues in the all-party group on the way they have taken up and pursued this issue, and on the incredibly well informed report they have delivered. Many of the points I wanted to make have already been made, but I think one or two are well worth underlining and reaffirming.
The first point is on the retrospective approach taken. The people caught by the charge are, by and large, on ordinary, or perhaps slightly better than ordinary, incomes and are law-abiding; they were advised, perhaps beguiled, and in some cases even coerced into being part of the schemes; and they filled in their tax returns and declared everything. There was no attempt to hide their tax status in returns to HMRC. Although it may be true that HMRC did not approve the schemes, it is self-evident that HMRC ignored the evidence in front of them that may have justified taking action, so to take action now, after 20 years, is totally unfair and defies all laws of natural justice.
Mr Bailey
Sorry, but I will not take interventions.
The Government need to do something about this problem. Astonishingly, it appears that, during those years, the Government had adequate legal redress available to them, had they wanted to take action. The loan charge legislation they introduced was designed to recoup the money simply, in a way that avoided the time and hassle involved in taking action under previous legislation. It smacks of trying to maximise income from the softest targets with the minimum of cost. The high volume of complaints that I have had about the process used to achieve that aim underlines that point.
It has been mentioned that the deadline is Friday for people to give evidence of how they will settle their outstanding bills. I have people in my constituency who are scared witless because they are not in a position to do that. It is not that they ignored HMRC; they provided it with the evidence, but they have not had the figures necessary to make the decision on how to settle their affairs. They are being threatened by HMRC that if they do not do that, penalties will be invoked, but HMRC has not provided them with the figures they need to do it. It is absolutely incredible, and it underlines the impression that HMRC is trying to maximise the amount of income that it can get from individuals who are trapped in this situation.
I looked at the HMRC document on the subject, particularly the “Supporting people” section. Unbelievably, it says that people must realise their assets, if necessary. I suppose that with a multimillionaire, that is a reasonable approach, but for ordinary people—especially retired people on low incomes, whose home may be their main asset—it is a totally inappropriate way to “support” people. One person who came into my surgery told me they think—they have not had the figures—that, after 5 April, they will have to sell their house. It is all right for HMRC to say people will not have to sell their house, but if that is their only asset and they have to realise their assets, they have no alternative.
The HMRC document goes on to say that people can remortgage. A retired person on a low income who goes to a financial institution and says, “I need to remortgage my property so I can pay off my tax debts” is unlikely to get a sympathetic response. Frankly, that document contains a lot of honeyed words that actually give no help or succour to those who are confronted with this potentially devastating and life-changing financial experience.
HMRC holds surgeries in the House of Commons that we can go along to. That is praiseworthy, but I went along with a couple of cases on loan charges and, unbelievably, there was no one there in a position to give me an answer. Given that this is the pre-eminent taxation issue that Members face at the moment, and HMRC is presumably trying to improve communication between constituents, MPs and itself, that is an amazing omission, which only underlines again the fact that HMRC appears to be totally indifferent to the plight generated by its processes and the culture that surrounds them.
I say to the Minister that there will be thousands of people watching us today, knowing that their future welfare, their livelihood and their happiness depend on the words of advice he gives at the conclusion of the debate. I just hope that his response will be favourable. Treasury Ministers do not often have a chance to make people happy, but here is an opportunity to do.
Mohammad Yasin
I thank my hon. Friend for making that very important point. I entirely agree with him. It is very important that we make sure that people do not suffer because of this very unfair loan charge.
I have a number of constituents whose lives have been turned upside down by changes made three years ago to tax legislation for disguised remuneration schemes. On the face of it, I support the Government’s move to clamp down on tax avoidance schemes, but the way in which the loan charge has been handled is confusing and cruel, and seems less guided by principle than by rushing through a badly designed process to reclaim tax.
The director general for customer strategy and tax design at HMRC told the House of Lords Economic Affairs Finance Bill Sub-Committee in October 2018 that
“the loan legislation was put in place because it was just too much time and trouble for HMRC to exercise its pre-existing powers conferred by Parliament”.
Seema Malhotra
My hon. Friend is making a powerful speech. Some 100 people have been affected in my constituency. I am grateful to Mr Salotra and Mr Jhaj from Hounslow West who came to the rally yesterday. They highlighted the fact that families are under great strain and stress and that the situation is one of policy failure. Does my hon. Friend agree that inadequate research on and an inadequate impact analysis of the policy have also contributed to the pain and strain on people who thought they were doing—and who want to do—the right thing, and that a delay and review are not just the right thing to do, but the human thing to do?
Mohammad Yasin
I agree with my hon. Friend, who makes a very important point.
One of my constituents recently wrote to me:
“Essentially, we have legislation being enacted because HMRC find it too difficult or troublesome to follow the rules and yet they expect taxpayers to follow the rules.”
No one disputes that HMRC has a right to challenge companies and individuals who have participated in tax avoidance arrangements. However, Parliament gave HMRC powers to do so long before the loan charge legislation was proposed. Those powers have not been exercised, making a mockery of the existing legislation and denying taxpayers their legitimate right to have their dispute resolved by the courts.
Many have no idea whether the schemes their employers were getting them into were effective or defective. It is completely unfair to penalise those people, who are innocent, and not those who designed and enabled these complicated and vague structures. We must distinguish between those who entered into these arrangements with their eyes open and those who were entered into them by their employers. The legislation has resulted in thousands of people accruing a tax debt that had not been invented when employers invested in good faith. If nothing changes, thousands of people will be made bankrupt, families will be destroyed and innocent people will have their lives ruined.