New Forest East

TREASURY – LOAN CHARGE - 19 March 2020

TREASURY – LOAN CHARGE - 19 March 2020

Dr Julian Lewis: My right hon. Friend [David Davis] is making an unanswerable case in logic, but I would like to put another political point to him. The cause of tax avoidance is not normally associated with such parties as the Labour party or the Liberal Democrats, but I am sure he would acknowledge that Members from both those parties have played a leading role in trying to put this injustice right.

Mr David Davis: My right hon. Friend is absolutely right. I started by saying that this is not a political issue; it is an issue of honour. As we would expect from our House – one of the greatest Parliaments in the world, if not the greatest – all sides take part in defending that honour.

Sir Edward Davey: The intervention from the right hon. Member for New Forest East (Dr Lewis) was spot on: this has brought the House together. The issue is not about tax avoidance. I think everyone on both sides of the House agrees that tax avoidance should be clamped down on, and there is no disagreement that the loan charge could apply in the future. What has deeply concerned many of us is that this is an offence against the rule of law, which is supposed to be a basic British tradition – one of our core values, which is taught in our schools. I therefore totally agree with the points made by the right hon. Gentleman.

[ ... ]

Mr Davis: ... He [Sir Amyas Morse] took the view that the attitude from 2017 should apply back to 2010, even though the law was not clear. He took the view that the principle of a taxpayer’s responsibility for their own tax affairs must be upheld. That is the point my hon. Friend is making, and it is right but only when the law is clear. That means that the Government have a responsibility to make the law clear and not to punish ordinary, hard-working taxpayers when Ministers fail to live up to that responsibility. ...  In his report, Sir Amyas Morse states:

“The Loan Charge can look back 20 years … This design has been described by HMT as ‘retroactive’.”

The report describes the loan charge throughout as backward looking. HMRC denies that it is retrospective; it says it is retroactive. If I may say so, that is a distinction without a difference. When I looked up “retrospective” in a thesaurus, guess what it said? It defined the word as “retroactive or backward looking”.

Dr Julian Lewis: Maybe the thesaurus wasn’t clear.

[ ... ]

The Financial Secretary to the Treasury (Jesse Norman): ... As this debate has made clear, the loan charge, and with it the wider issue of using disguised remuneration schemes to avoid tax, has been the subject of public concern and considera[ ble controversy. Let us be clear that tax is never popular, and my colleagues and I recognise the strength of  ]feeling and sympathise with those who may be subject to the charge. Today’s motion reflects some of the arguments and concerns expressed by colleagues that the loan charge is retrospective and unjust and that the law was not settled, it is claimed, until 2017. If I may, I will deal with each of those charges in turn.

First, however, we need to be clear what we are talking about. Disguised remuneration is a term of art – it is a fancy term –but the House should be under no illusion as to what it amounts to. Such schemes are a ​form of contrived tax avoidance in which people are paid in the form of a loan with no interest and no intention or requirement to pay the loan back.

Dr Lewis: If it were so clear and the schemes were so contrived, why did HMRC not point that out to people at an early stage, so that they would have seen what they were letting themselves become vulnerable to?

Jesse Norman: I thank my right hon. Friend for the question. All he needs to do is attend to the detail of the Morse report, in which Sir Amyas Morse goes through the efforts made at that time, before and after 2010, in some detail. That is the basis for the judgment that he reaches about the appropriate relief.

[For Julian's speech in this debate click here.]