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Loan Charge 2019: Sir Amyas Morse Review

Part of the debate – in the House of Commons at 1:47 pm on 19th March 2020.

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Photo of Chris Matheson Chris Matheson Shadow Minister (Cabinet Office) 1:47 pm, 19th March 2020

I intend to speak for only a couple of minutes. That is partly because of the outstanding introduction from Mr Davis, which was clear, logical and unimpeachable—I congratulate him on securing the debate—but partly also because the situation is simple.

I am clear about two facts. First, disguised remuneration loan schemes—DR schemes—were clearly a tax dodge and were used for people to pay less tax. It is absolutely right, as Sir Edward Davey hinted, that we should close down those loopholes. However, it is also clear that the loan charge was put in place unfairly and unjustly as a retrospective measure. What is the proof of that particular pudding? Well, Sir Desmond Swayne beat us all to it, and he is absolutely right. Why on earth did we need to introduce the 2017 legislation to introduce the 2019 loan charge if, as the Government and HMRC claim, these schemes were already illegal? They were not. That is why the loan charge was brought in. It is utterly wrong to bring in retrospective legislation and retrospective taxation as a result.

HMRC is entirely within its rights to look at up to five years of someone’s tax records, but only if the information that the individual has given to HMRC can be proved to be incorrect. We are talking about individuals who had their correct tax returns signed off by HMRC, which agreed that they were perfectly legitimate and lawful under current tax law but then reopened them, not because there was a suggestion that the individuals had provided incorrect information, but because the law had changed or was not quite as HMRC thought it was at the time it signed off those tax regulations. That is HMRC’s problem, not the problem of my constituents.

Fortunately, I do not know of any constituents who have taken their own life, but I do know of constituents who have lost their business and their house. One constituent’s marriage broke up. One young lad doing his first contracting job was told on the first day, “This is the way that we get paid in this place.” He did not know any better; he was 21 years old and just out of university. That was how he was encouraged by the employer and, incidentally, his colleagues to undertake the scheme. He does not yet know what his liability will be. Will it be £16,000? Will it be £60,000? The uncertainty is dragging him down. At the moment, he does not even feel able to work.

I congratulate Mr Davis and echo the right hon. Member for Kingston and Surbiton, who says that it is not a party issue. Members will agree that it is a question of natural justice and fairness, and of not reopening tax returns that had previously been signed off by HMRC. By all means let us close the loophole, but let us not drag people into this dreadful sense of natural injustice.