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Loan Charge 2019: Sir Amyas Morse Review

Part of the debate – in the House of Commons at 2:34 pm on 19th March 2020.

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Photo of David Simmonds David Simmonds Conservative, Ruislip, Northwood and Pinner 2:34 pm, 19th March 2020

Like many of those who have spoken in this debate, I have met many constituents, during the election and since, who have been directly affected by this issue. I have had the chance to go through with them many of the contracts they have signed and some of the advice they received from many of the professionals, who, we would all agree, based on what has been said today, are the villains of the piece from the perspective of this House. I have heard many examples of where professionals were paid and people should have been able to rely on their providing good, clear and legal advice, but they have left those people in a difficult financial position today.

I sympathise with the position that Sir Amyas Morse found himself in, and I believe that what he has put forward in his report, although a number of points and concerns remain, represents a reasonable attempt at a compromise to bring about a resolution of this situation. It is my understanding that many of these legal cases revolve around the question of how we define a loan. The position of the Inland Revenue, as it was, and now of Her Majesty’s Revenue and Customs is that money that someone receives for doing their work and that they spend as their income is their income and should be taxed as such. The Inland Revenue and HMRC have always permitted both employees and directors to receive loans from the organisations for which they are working. Indeed, many of our constituents will have access to things such as season ticket loans, provided on a regular basis, which are free of tax because they are loans.

From reading the contracts that many of my constituents have signed and having heard in detail the advice that they received, it seems clear that at the heart of this is a fundamental problem: the schemes themselves were lawful because it was lawful to receive a loan, but the money the constituent received was tax-free only if it was genuinely a loan. But as five, 10, 15 or 20 years have gone by and there has been a complete absence of evidence that these things were genuinely loans, because the person has received that money as remuneration and spent it as their income, HMRC has naturally begun to take a lot more detailed interest in that, and this situation has left many of our constituents in a real bind.

I am mindful that, when we read Morse’s proposals, we see that he proposes a process of resolution containing a number of different avenues that the individual taxpayer affected can explore. I hope the Minister will consider that somewhere at the heart of this is making sure that individuals who acted in good faith, notwithstanding the fact that they were badly and incorrectly advised by professionals, should be enabled to have the benefit of the fact that they acted in good faith when they signed their tax return, even if the information on it, prima facie, was not correct. They were not intending to evade tax and thought they were doing something that was within the law.

In summary, I am also conscious that although we have heard a vocal campaign on this during the election campaign, 99% of taxpayers in this country never go near a scheme such as this. Quite a few of those taxpayers have said to me that they find it hard to credit that anybody thought that by describing the pay they received for their work on their tax return as a “loan” that meant they did not and never had to pay any income tax on it.