Loan Charge
Debate between Ed Davey and Rushanara Ali
Sir Edward Davey
I agree with the hon. Gentleman. Let me take his point on retrospection into the substance of my speech.
Everybody has paid tribute to the Minister and I join in that, but I urge him to look at the retrospection issue. The all-party group has spoken to tax professionals and has read a lot of material. There is a debate about whether aspects of this are retrospective or not, and about where the retrospection lies. One group has been hit by the loan charge where the retrospective nature has been proven beyond doubt: taxpayers who have had their tax returned to the Treasury with DOTAS added—sometimes even without DOTAS added—and who have come clean on everything they have been doing. HMRC has accepted that and has not opened an inquiry. Their cases have been closed and time has passed. Under section 9 of the Taxes Management Act 1970, we have been giving taxpayers in that situation total protection from HMRC coming back to them. That has been true for decades. Indeed, we have signed international conventions to say that that is the way individuals should be treated. Yet here we are, going back on that. To be clear to the Minister, all the tax professionals we talked to believe that for closed cases, that was a transgression. Indeed, I asked them if they could find any example on the statute book ever of a Government passing a law to override taxpayer protections and they could not.
When the Government responded to that clause with a review, their argument against all the advice was that the charge was not retrospective because it was a charge on the loan as of now—the outstanding loan. That is interesting, because they had never before proven that loanable income. That was the whole point of this whole debacle. Moreover, the loans were taken out in the past. We might not call it retrospective and we might call it retroactive, but frankly it is the same thing for the ordinary person. The reply to the amendment to the Finance (No. 3) Bill was therefore simply not good enough; it was wrong. This is a breach in the rule of law, particularly for those people with closed tax years. At the very, very least, the Government should not apply the loan charge to those people; that is the recommendation of the all-party group.
We then come to people with open tax years. Sometimes there has been an inquiry years before—15 or 20 years ago. For many taxpayers, it was not really clear what that was. There was a little form. They were not told what their rights were or what they should do in response. They just sat there, and some of them did not even know there was an open inquiry. Those open inquiries have lasted for years, with, as the hon. Member for Scunthorpe (Nic Dakin) said, HMRC doing nothing. Surely that is HMRC incompetence, not mistakes by taxpayers. They are now paying because HMRC could not administer the tax system over that period, and tried and failed to get the law right. I am sorry, but HMRC cannot penalise our constituents with tax bills of tens of thousands of pounds because it could not do its job properly. That is not acceptable.
Rushanara Ali
As the right hon. Gentleman rightly points out, HMRC has been looking at disguised remuneration since the late ’90s and opened hundreds of thousands of cases. Mary Aiston, at the Treasury Committee, said that
“at that time our strategy meant that we weren’t telling taxpayers enough about what we were doing on their case—so they would have had an open inquiry or assessment…We recognise that at the time our strategy meant we weren’t communicating regularly enough to keep them in the picture.”
Does the right hon. Gentleman agree that if that was done people could have dealt with those cases and paid up immediately, and not had tens of thousands—or, in cases in my constituency, hundreds of thousands—of pounds to pay back?
Sir Edward Davey
The hon. Lady is precisely right. That is what I think has offended people. Technically for people with open tax years it is not retrospection, but in practice—and, frankly, morally—it is. One thing that I will pursue after this experience is the use of open tax inquiries by HMRC. It goes against the whole spirit of the 1970 Act and of the way the rule of law should operate. I believe that in all parts of the House we stand to defend the rule of law. When we see an abuse of it we should get angry, we should get passionate and we should pledge to do something about it. I hope we will.
How should the Government respond? I think they should call a halt and delay. That would send a clear message to people who are suffering mentally and socially with their families and their homes. Announcing that today from the Dispatch Box would give them some relief. We have been telling them that their tax bills are not due until 31 January 2020. Nevertheless, according to the guidelines, if they do not talk to HMRC by this Friday they could suffer severe penalties. A delay would therefore help.
A judge-led inquiry is the only way we will bring people back together. Such an inquiry could look at all aspects. However—to speak to the right hon. Member for Haltemprice and Howden—I do not want to leave it there. The policy should change now for people with closed tax years. There should be no debate about that. That is retrospection and an abuse of the rule of law. For those with open tax years, as the all-party group’s report says, a number of measures should be taken to reduce the pain and to ensure that they can get their tax affairs in order. This House is against abuse of the tax system. That is wrong and it should be stopped. But this House is also in favour of parliamentary sovereignty—the Government listening, upholding the rule of law and upholding long-standing taxpayer protections.
Oral Answers to Questions
Debate between Ed Davey and Rushanara Ali
Rushanara Ali (Bethnal Green and Bow) (Lab)
11. What recent discussions he has had with his EU counterparts on reducing European carbon emissions.
The Secretary of State for Energy and Climate Change (Mr Edward Davey)
I have frequent such talks—bilaterally at European Councils and in other forums. Last year, for example, I invited other Ministers from member states that share the UK’s high ambitions to cut carbon emissions to join me in a new group called the green growth group. This has met three times, most recently in Luxembourg last month.
Rushanara Ali
I thank the Secretary of State for his answer. Last week, however, the European Parliament voted to hold back carbon credits from the EU emissions trading scheme. Does the Secretary of State agree that the 20 Conservative MEPs who voted against the proposals were voting not only against action to tackle carbon emissions and prevent climate change, but against the interests of British business?
Mr Davey
The hon. Lady will know that the Government, across the coalition, supported the backloading proposal that the European Parliament voted through. Obviously, I regret the fact that MEPs from Britain or any other member states did not vote for those proposals. But let us be clear: the backloading proposals are a first step in the reform of Europe’s carbon market. We need to go further so that we can get the carbon market and the carbon incentives that we need to see clean energy coming through.
Mr Davey
I pay tribute to all the people who have worked on that community energy project. Micro-hydro plays a real role at community level. Last month we published the community energy call for evidence, which will cover issues that affect local community developers of micro-hydro. There have been problems, and my right hon. Friend has raised them with me, but I urge him and people who want to develop micro-hydro to respond to that call for evidence so that we can get it right in future.
Rushanara Ali (Bethnal Green and Bow) (Lab)
T3. Last year the Chancellor boasted he was the first to fund a green investment bank, but that is not actually the case, because the Government are now borrowing £158 billion more than planned, and we will not have a proper green investment bank until 2016 at the earliest. How can the green investment bank be part of a growth strategy, and will the Minister provide an update on this?