Sir Mike Penning condemns retrospective nature of the Loan Charge

4th April 2019

Sir Mike Penning condemns the retrospective nature of the 2019 Loan Charge and highlights the impact it is having on people who joined taxation schemes on the advice of professional advisers and with full disclosure to the HMRC at the time.

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I should not be here today. I should be at the funeral of my constituent Graham Smart. He was the chairman of Leverstock Green football club, and as his constituency MP and president of Hemel Hempstead football club—another community club—I desperately wanted to be there and had promised to attend. However, my place is here in this debate, making sure that I stand up for, initially, one of my constituents, who came to see me many months ago, which is when I joined the all-party group. I was informed this morning that I now have 100 constituents who are affected by the loan charge.

I sat in on some of the all-party group’s evidence sessions. There is a really important point to make here. We have Select Committees in this House and other Committees. All-party parliamentary groups can be a complete waste of time, or they can really make a difference. I jointly chair one of these groups—the all-party group on medical cannabis under prescription—and we managed to change the law. I truly hope that the all-party loan charge group, with the backing of the House, will be able to sway Ministers and the Treasury’s view on this, which I think is one of the great disasters that we are bringing on our communities.

More than 900 years ago, this House was formed to represent the people who paid tax. Admittedly, it was completely unelected in those days, but that remains our job. Unlike some of my colleagues, I have clearly upset the Financial Secretary to the Treasury. I was over-zealous defending my constituents. I have apologised to him privately and I apologise to him publicly now. I think that he is fundamentally wrong in what he said to me, but at the end of the day that is his opinion and, I am sure, the Treasury’s. In my opinion, what is happening here is that some of my constituents took advice from the companies—if they had not, they would not have got the job—and from some very large taxation accountants; they submitted completely openly that they were in one of these schemes; they had a registration number from Her Majesty’s Treasury; and now they are getting bills for hundreds of thousands of pounds, which, as we have heard, is completely and utterly destroying their lives.

Like lots of colleagues, I have had constituents come to me. I am not making it up, but I am not going to name these people, because—it is part of the problem we face—they are too ashamed to tell their loved ones that these bills are coming down the line. They are petrified of their employers knowing. Many of the people in my constituency who have come to see me and written to me are employed in the financial sector in the City. There is absolutely no doubt that they will lose their jobs and their livelihoods.

I will give way twice: once to my hon. Friend and then to another colleague.

I am grateful to my right hon. Friend for putting forward a strong and moving case. Is he aware that some early-retirement benefit schemes—so-called EFRBS, or employer-financed retirement benefits schemes—are also being unpicked retrospectively, causing an equal amount of pain and suffering to constituents, including one in my constituency who is having to pay back £175,000?

I do not agree with the way the Treasury has started to unpick people’s personal taxation schemes. This is not the big companies that frankly get away with murder because they can employ the right sort of lawyers, but the small people. They are the people who are getting messed about.

I will give way once more; then I will make some progress.

I am grateful to my right hon. Friend for giving way; I know he is short of time. He and the House might be interested in the reply given to me in the Public Accounts Committee by Jim Harra, the second permanent secretary at HMRC. He said:

“Among the disguised remuneration users, there are undoubtedly people who have liabilities for years, where under the normal rules we do not now have assessing rights. In our settlement opportunity, we have asked those people to settle for all years, including the years for which we do not have those assessing rights. If they choose not to do that—I can’t make them settle voluntarily for those years”.

Does my right hon. Friend not think that the Financial Secretary should formalise that tax advice?

May I just warn Members that because of the interventions the time limit will need to go down to five minutes to get everyone in?

On that basis, Mr Deputy Speaker, I will not give way anymore. It would be right and proper to let colleagues speak, no matter how short their contributions.

My hon. Friend makes a good point. Is there is one rule on taxation in this country for one person—a small business—and another for others, or am I missing something here? For instance, a constituent came to see me who worked alongside a colleague who was in the same kind of scheme. Constituent A had had his scheme agreed and closed. He had disclosed everything, including the registration number and the DOTAS number, and it was closed—finished. He came to me because he sat next-door to a colleague who was doing exactly the same job under exactly the same contract and exactly the same kind of scheme, with exactly the same declarations, but for nearly 15 years this scheme had been left open. There is something fundamentally wrong in that.

The Lords Committee’s conclusions are eminently sensible. I agree with my right hon. Friend the Member for Haltemprice and Howden (Mr Davis) that perhaps they could have been a bit stronger, but that might have lost some people on each side. We can work with them. I am slightly concerned about the reference to tax judges. Ray McCann, the president of the Chartered Institute of Taxation, has said that technically the charge is not retrospective—so that is the position the taxation people are going to come from—but he went on to say that it has an effect of being retrospective. That sounds like semantics to everybody else out there, but that is what a specialist judge involved in taxation will look at when we argue the point. The point is that it is clearly retrospective, and that is where the Minister and I completely disagree.

The Minister has an absolutely golden opportunity to say, “Stop. Let’s see what the effect is here.” Why are we picking on these people who in many cases cannot pay—not will not pay but cannot pay. As we heard earlier, they are being advised to get loans. How are they going to do that? Where is the equity? Are they going to use their house? Many of them are of a similar age to myself. They have absolutely no chance. They can pay through the nose on interest rates and borrow money from anybody, but do we really want to encourage that? Or, would we like to say, “We think something has gone wrong here.”?

The House has come together—I think the chairman of the all-party group, the right hon. Member for Kingston and Surbiton (Sir Edward Davey), said the group represents six parties—because there is something seriously wrong. These people are petrified. My constituent said to me, “If my wife finds out about this—she has suicidal tendencies, and we already have major problems.” Other constituents say they need to come out of retirement—“I’ve been out of the IT industry for about five or six years now. I have no chance of coming back into the industry.” Others work in the finance world and if their employers find out that action is being taken in this sort of way, they have had it. What are we doing driving people into this sort of debt when they thought they were doing the right thing?

I say to the Minister in all candour: take a look around the House today, a Thursday on a one-line Whip. Even the Whips could not have got this many people in here from both sides of the House, given what is going on at the moment. [Laughter.] I am really serious: I do not think the Whips could have got this many people in here on a Thursday, on a one-line Whip. What has driven us here is our constituents. It is our job. It is what this Parliament was set up to do—to defend the little guy against the big guy. The big guy is the Government, and we will defend the little guy.

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