Loan Charge

Stephen Metcalfe Excerpts

Thursday 11th April 2019 Commons Chamber

[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

Thank you for calling me so early in this resumed debate, Mr Speaker. I have to say that I had never imagined that I was going to speak in it, seeing as rain stopped play at about this time last week. I am by no means an expert on the 2019 loan charge, but I, like many others who expressed an opinion last week, have been contacted by numerous constituents who have set out in clear terms how they believe it would impact on them. They are being asked to pay back thousands, tens of thousands, and in some cases even hundreds of thousands of pounds that they never believed would be due.

Do not get me wrong: I believe that everyone should pay their fair share of tax. We know that that is what funds our public services, and we should clamp down on tax evasion at every possible opportunity. However, minimising tax exposure has always been a legitimate part of our tax system.

When looking at this issue, I have been on a journey. Initially I was in two minds about the validity of the arguments presented. Obviously, I had great sympathy for my constituents on both a personal and an individual level, but I felt that the old adage, “If something looks too good to be true, it is too good to be true,” applied. I have now, however, come to a different conclusion. I have looked at the individual cases presented and at the wider issues. To demonstrate why I have come to that conclusion, I want to use the words and sentiments that one particular constituent has sent me. He wants me to do this anonymously, as he does not want to prejudice himself or his case. As an aside, I am not sure that it is a healthy state of affairs when constituents are scared to speak out against a Government agency.

My constituent is a freelance IT professional who was advised to enter one of these schemes. When he entered the scheme, to give himself confidence that it was legally compliant and that what he was being told by his professional adviser was true, he contacted Her Majesty’s Revenue and Customs. The correspondence my constituent has from HMRC shows that in 2012, when he was checking for compliance under disclosure of tax avoidance schemes legislation, he asked HMRC to review the particular arrangements he had joined. I am informed that the HMRC anti-avoidance group concluded that no hallmarks of tax avoidance were in evidence and so HMRC did not assign a DOTAS number to that arrangement.

If that is true, which I obviously believe it is, I think it is fair to say that, under HMRC’s duty of care and due diligence, it had plenty of opportunity to inform my constituent that things had changed and that the particular arrangement that he had entered into would be liable to taxation. HMRC completely failed to notify my constituent that anything was amiss, so for years he relied on the initial HMRC advice he had received and continued as a customer of the arrangement.

[Mr Charles Walker (Broxbourne) (Con)]

That retrospective and disproportionate approach being taken by HMRC are what concern a number of my constituents. The people I represent are very reasonable, and they would be happy to come to an arrangement with HMRC, but HMRC seems to want to bankrupt its debtors, as opposed to getting some return from them.

[Stephen Metcalfe]

My hon. Friend makes an excellent point. All the correspondence I have had has been phrased in very reasonable terms. People want to do the right thing, but they feel under a huge amount of pressure.

[Bob Stewart (Beckenham) (Con)]

I am sure that, every year, my hon. Friend’s constituent sent in a tax return, which HMRC ticked, approved and sent back. Only recently has HMRC suddenly seen the way things are going and said, “Right, this is some kind of tax avoidance. Let’s get it all back, and in one year.”

[Stephen Metcalfe]

I do not know what the rules are on my hon. Friend reading the next line of my speech over my shoulder, because it says here that my constituent continued with these arrangements and, each and every year, dutifully declared on his tax return the amount he had received in loans and the amounts he had returned thereof. It came as a surprise that, years later, HMRC intends to use its newly granted powers—in what my constituent describes as “winding back the clock”—to retrospectively claim that the arrangements my constituent and others had used were not legal, had never worked and that the tax on the loans was always due.

[Dr Sarah Wollaston (Totnes) (Ind)]

I thank the hon. Gentleman for making these excellent points. Like me, does he find that he has several constituents who had no option but to be self-employed and were required to enter such vehicles?

[Stephen Metcalfe]

The hon. Lady makes an excellent point. For many there was no option. In many cases, as in the case of my constituent, people had to enter these schemes. My constituent even checked whether there were alternative options and checked the legitimacy of it, never thinking it would come back to haunt him.

I have to say that I do not like it. It feels wrong. I would like to think that I am a fairly reasonable chap, and when I feel that something is wrong or off and does not feel like natural justice, it tends to be true. Eventually, the Government will come round to my way of thinking, or I very much hope so.

As I said, I am not an expert on tax in general, but the charge is retrospective and HMRC failed to notify scheme users of the tax liability. Users sought professional advice or were advised to enter these schemes and, as in my constituent’s case, annually declared what they were doing.

[Bill Grant (Ayr, Carrick and Cumnock) (Con)]

Does my hon. Friend agree that, for some caught up in the loan charge, their circumstances may be the result of unfortunate omissions in, for example, professional advice or, indeed, HMRC advice, rather than a deliberate act on their part? For that reason, clemency and reasonableness should be applied by HMRC.

[Stephen Metcalfe]

My hon. Friend makes an excellent point that stands entirely on its own right, and I hope it has been heard.

[Sir Oliver Heald (North East Hertfordshire) (Con)]

On giving latitude, does my hon. Friend agree that these cases vary quite considerably? In some cases, it may be about allowing more time for people to pay; in others, it may be about looking at the detail of the debt and whether there is other evidence to suggest it should be less; and in some cases, it is a question of giving latitude on how many years HMRC goes back.

[Stephen Metcalfe]

My right hon. and learned Friend makes some good points, and I am aware that the Government have set out some of the mitigating measures they want to put in place. I am sure we all welcome those measures, but there is a need for both a pause and a full and proper review of what is being proposed to see whether we are acting in a way that would be considered to be natural justice.

[Sir Michael Fallon (Sevenoaks) (Con)]

rose—

--- Later in debate ---

[Stephen Metcalfe]

I want to continue. In failing to act back in 2012, when it had the opportunity—and surely the duty—to do so, HMRC denied my constituent the opportunity to depart the arrangements and seek an alternative solution for his payroll needs.

[Sir Michael Fallon]

My hon. Friend has been so generous in giving way that I hesitate to intervene once again. When he says that something feels wrong, he is on to something, because what feels wrong to some of us is that the equivalent effort does not seem to be put into pursuing the promoters of the schemes, or indeed the employers, and that the entire weight of recovering the so-called tax gap is falling only on the employees. That does not feel right.

[Stephen Metcalfe]

rose—

[Madam Deputy Speaker (Dame Eleanor Laing)]

Order. Before the hon. Gentleman answers that point, I should explain to the House that we have less than 50 minutes left for this debate, for obvious reasons. He finds himself in the difficult position of being the opening speaker, as it were, and therefore he has been required to take a lot of interventions because people have short points that they want to make, but of course this debate had the bulk of its time last week, and I know from what people have told me that what they actually want to hear is the Minister’s reply to the many questions that were asked last week, and will be asked this week. There will therefore be a very short time limit on speeches—probably two minutes. The hon. Gentleman has been very generous in taking interventions, and I am sure he wants to finish the points that he would like to make. I have no objection to his taking further interventions, as long as the House realises that that will be the bulk of the debate.

[Stephen Metcalfe]

Madam Deputy Speaker, I hear what you say loud and clear, but I did want to allow Members to intervene because I think it allows them to get their points on the record.

The point that my right hon. Friend the Member for Sevenoaks (Sir Michael Fallon) raised is completely valid. We need to be throwing the net wider to recover some of this money.

I reiterate that my constituent acted only under advice from a chartered accountant, with tax counsel’s opinion, so although everyone has a duty to pay the tax they owe, this feels off. It feels like a retrospective tax grab. We know that it is causing great stress, anxiety and depression. We know that there have been three suicides associated with it. It cannot be right and surely we must have a duty to look at it again.

If I may, I shall quote my constituent, who says:

“Very simply, if the loan charge is not delayed, and comes in as it is, it will destroy my quality of life and that of my family. It may well prevent me from working and lead me into bankruptcy. It has already caused me to suffer extreme stress, and is causing huge anxiety for my family. If the Government ploughs on with this retrospective legislation, it will be responsible for devastating the lives of families across generations.”

I will leave it there.

Will the Minister seriously consider a delay in implementation and a removal of the retrospective nature of the charge, so that it certainly does not go back further than 2017, when the charges were first announced? I hope that he will build on the assurances that he has given Members who have written to him—I am very grateful for those reassurances—by finding other mitigating measures, so that we can demonstrate, as a House, that we can respond positively and that we are capable not only of listening to, but of hearing and acting upon, the words of the people who come to us, asking for our representation.

[Several hon. Members rose—]