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Loan Charge 2019: Sir Amyas Morse Review

Part of the debate – in the House of Commons at 2:46 pm on 19th March 2020.

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Photo of Ruth Cadbury Ruth Cadbury Labour, Brentford and Isleworth 2:46 pm, 19th March 2020

I thank the Backbench Business Committee for allowing the debate when I know they had a backlog of requests on many important issues. I also thank my fellow sponsors of this debate, my fellow chairs of the loan charge APPG, particularly Sir Edward Davey, and Sir Mike Penning, who cannot attend today because he is dealing with a family medical emergency. We wish him well.

I also thank the officers of the loan charge APPG and the action group. I can confirm that the three co-chairs of the APPG, from three different parties, all endorse the APPG report that was released tonight and is on our website. It is a pleasure to follow so many Members who have described in vivid terms the experiences of their constituents, so I will not dwell on those too much. I have similar experiences.

This is a time of incredible worry for most people in this country for their loved ones, their neighbours and themselves, and many of our constituents—perhaps most of them—are facing catastrophic and even absolute loss of income. While this debate is wholly unrelated to the covid-19 virus, for the victims of the loan charge scandal, who are already worried about their financial futures, the coronavirus outbreak only heaps more agony on top.

I agree with the points that others have made about tax avoidance, but this is not about tax avoidance, which we abhor and would like to see closed down. This debate is about natural justice, as has been said by so many. When the APPG started, the Treasury and former members of the Government said there was no problem with the loan charge and it was a perfect piece of Government policy. They said there was no need for a review of the policy. The right hon. Member for Kingston and Surbiton tabled an amendment calling for a review, we had a debate in the Chamber almost a year ago and a Treasury report that was a whitewash, frankly. Meanwhile, more and more Members were being contacted by worried taxpayers describing the bullying of HMRC and their fears for themselves, their families and their work. We kept standing up, we kept asking questions and we kept lobbying Ministers.

The Prime Minister, in his leadership bid, promised to hold a full review of the loan charge. We have had the review, led by the highly respected Sir Amyas Morse, whose report was released on 20 December, and on the same day, HMRC released its response. For taxpayers, the Morse review means that they are looking to the future, but I have heard several extremely troubling cases from my constituents who face the loan charge. This is about HMRC behaviour. In one case, my constituents provided all the information asked for and heard nothing back for two years. They received a note from HMRC saying they were facing the loan charge with interest added, including for the two years when they had had complete radio silence from HMRC. How is that justified or proportionate? Based on evidence to us, and I assume to Sir Amyas, along with casework and conversations with colleagues, including some casework wholly unrelated to the loan charge, it feels as though HMRC is just not capable of providing a competent service.

Others today have rightly mentioned the anxiety and uncertainty of taxpayers as they are chased for almost immediate payment of sums that they just do not have, and without any justification for the amount demanded. Usually, any previous information that they may have sent to HMRC is completely ignored.

I just want to touch briefly on poorly paid and vulnerable people. The Morse review recommended that, after 10 years, the loan charge should no longer apply to people who earn less than £30,000 a year, but the Government rejected that recommendation. Let us remember that many of these people are working in the public services—in the NHS and local authorities—and many of them do not have accountants. Many were effectively in a position where they were told that, if they wanted this work, they had to sign up to this umbrella scheme. The head clients will now no longer contract with personal services companies, so these umbrella schemes are all that is available to them.

We have social workers, junior doctors, nurses, cleaners and so on facing many charges year after year. To address this injustice, Sir Amyas made a reasonable request. It was that HMRC should not chase loan charge payments between 2010 and 2016 if the individual made a reasonable disclosure, but the words “reasonable disclosure” were changed by the Treasury to “full disclosure”—a term which, according to tax experts, has little or no relevance in tax law.

Where do we go from here? For months and months, we have heard the Government say that this is not a retrospective matter, yet they made an agreement with Sir Amyas Morse and shifted the date that the loan charge applied from 1999 to 2010. If they can change their mind once, surely they can do it again. If the Government can defer the roll-out of IR35 to the private sector, as they did earlier this week following extensive concerns, they can change their mind on the loan charge, I hope. The new suggested cut-off date of 29 December 2010 is based on the law being clear, yet we know now that this was not the case. If the law was clear then why did we need the loan charge and another change in legislation in 2016?

I would like very briefly to list some of the concerns that are in our report but that have not yet been raised in this debate—[Interruption.] Madam Deputy Speaker is coughing at me, so I urge anyone reading Hansard or watching this debate to please look at the report that we released last night. It is on the loan charge action group and the loan charge all-party group website.

In finishing, let me return to a core question. Is applying the loan charge from 2010 justified and proportionate? The answer to that from the all-party group is, no, it is not. I would go further and ask: is HMRC abiding by Adam Smith’s principles of fair taxation, which were mentioned at the beginning of this debate. Furthermore, are HMRC and the Treasury abiding by the Nolan principles of public service, particularly selflessness, objectivity, accountability, openness, honesty and leadership? I urge the Government to listen to the strong opposition to this retrospective, unjust and unfair tax and, quite simply, to do the right thing.