2019 Loan Charge

Siobhain McDonagh Excerpts

Tuesday 20th November 2018 Westminster Hall

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

On behalf of all Members here, I congratulate the Loan Charge Action Group on its effective lobbying of so many MPs. I would not wish its members to think that this number of MPs normally turn up to such a debate. It has done very well and has clearly done its members proud.

I start by emphasising that I cannot defend tax avoidance in any form. I strongly believe that everyone should pay their fair share and that there should be repercussions for those who do not. However, the case at hand is not quite so simple. This loan charge will affect up to 100,000 people, many of whom acted in good faith and were acutely unaware that they were ever doing anything wrong. Several of those impacted were forced into schemes as prerequisites of taking up a job, following guidance given in good faith, rather than attempting to avoid their tax responsibility. They are being taxed retrospectively for something that was technically allowed at the time.

What is more, the proposed 20-year range is usually reserved for blatant acts of criminality. We are talking about life-changing amounts of money. For some people, the sums involved run into hundreds of thousands of pounds. This will lead to bankruptcy. This will lead to mental breakdown. This will lead, and has led, to suicide. I will quote directly from the letters and emails sent to me by my constituents, so that the Minister can hear the reality behind these excessive measures.

Mr M describes a dark cloud hanging over his head. He says:

“It has been hell and I have at times considered suicide. It will affect my kids’ entire lives, in that I will be unable to support them as they grow older and I may be unable to buy a property for the rest of my life.”

Mr M argues that governing with life-changing force and 20 years in the past is nothing short of grossly unfair, and that it sets a dangerous precedent that HMRC can, where it suits its need, change or create laws and retroactively and aggressively enforce them.

Mr C says that bankruptcy is his only option. He says that he took and followed professional advice and declared his arrangements at the time to HMRC, which did not act. Mr L describes the impact of the stress levels on his health since he was made aware of the legislation, particularly as he believed the scheme to be legitimate. He claims that these schemes are still freely available for contractors to sign up to.

My constituents are not alone. The Loan Charge Action Group has conducted analysis of those affected. It highlights the fact that 68% describe depression, 71% fear bankruptcy, 31% fear relationship breakdown and 39% have suicidal thoughts. The policy will cost lives.

Would it not be more sensible for HMRC to pursue the enablers of the schemes? I am talking about the client organisations, agencies and umbrella companies, all of which have benefited and which, I believe, hold the most responsibility. Perhaps HMRC does not do that because even HMRC itself was using and paying contracts now subject to the loan charge, working through arrangements that HMRC now declares to be tax avoidance schemes.

Let me re-emphasise that if and when an individual or organisation has purposely dodged tax, they must be penalised. But what strikes me is that HMRC is ruthlessly pursuing hard-working contractors, while rolling over in the face of obvious and aggressive tax avoidance by so many of the UK’s largest corporations. Why did Amazon pay just £1.7 million in taxes last year, despite profits almost trebling to £72.3 million? Why did Facebook pay just £15.8 million in taxes last year, despite collecting a record £1.3 billion in British sales? Why did Google pay just £49 million on UK sales of £7.6 billion? Richard Murphy, a professor of practice in international political economy, estimates that such tax avoidance costs the UK about £7 billion each year. That is enough to pay for 180,000 nurses or 150,000 secondary school teachers.

Tax avoidance in any form must not be tolerated. While the Government bankrupt unknowing individuals across the country, multibillion-pound corporations make a laughing stock of their tax collection efforts. It is high time that those organisations and those who have enabled the schemes described today were made to pay their fair share once and for all.