To set the scene for this HMRC Q&A, Mel Stride’s opening words to Monday’s House of Commons debate were: ‘With permission, I should like to make a statement on tax avoidance, evasion and compliance.’

This statement was in place of an organised debate and the ultimate amendment of the Financial Services (Implementation of Legislation) Bill. It was referred to as ‘nothing but a fig leaf to cover the embarrassment that the UK Government feel over the amendment tabled’. This pretty much encapsulates the general tone of the entire debate, which saw the Loan Charge Action Group's APPG speak and I urge you to read in full here.

In the name of convenience though – we’re all busy earning a living, after all – we’ve cherry-picked some particularly relevant highlights for you.

Will HMRC actually do a serious review of the effects of the Loan Charge?

Ruth Cadbury, Labour, Brentford and Isleworth, asks:

The Minister needs to clarify whether he is just writing a report or whether he will genuinely do a serious review. He says that the bulk of the loan charge tax by volume has already been collected. However, 50,000 ordinary, hard-working people are in despair and living in limbo, waiting to know whether the tax returns they put to bed years ago are to be reopened.
I am the vice-chair of the all-party loan charge group, and last week we heard from the family of a man who committed suicide over a small amount. It was the shame and fear that he would go to prison that sent him over the edge. The Sunday Telegraph has reported on a leaked HMRC letter from 2011 that clearly shows that it knew it was out of time for pursuing these cases back then, so will the Financial Secretary now admit that the real reason for the loan charge is HMRC’s failure to act when it was legally entitled to do so and that that is no good reason to undermine the rule of law by retrospectively rewriting the rules?

Mel Stride, Financial Secretary to the Treasury and Paymaster General, responds:

May I correct one thing the hon. Lady said? She said I suggested that the bulk of the money due under the disguised remuneration measures has already been collected, but I am pretty certain I said that, of the £1 billion that has been collected thus far, some 85% has come from companies, as opposed to individuals. HMRC will go for the company before the individual. We have to get back to the reasons for this charge, which I have just set out. As for whether it is retrospective as the hon. Lady says, I can assure her that there has been no time in our history as a taxing nation when this kind of structure—this kind of contrived arrangement, which is set up simply for the avoidance of taxation—has ever fallen appropriately within our tax code. It has never been right. These schemes have been taken through the courts, not just the general courts, but the Supreme Court, over a number of years and they have always been found to be defective and not to work.

What does it actually mean?

None of Ms. Cadbury’s points (i.e. numbers that don’t add up, a family tragedy caused by the legislation, a leaked letter saying HMRC knew better in 2011) were met with a suitable response.

Sadly, this seems to be a cookie-cutter answer to a complex and urgent question. However, there is no explicit denial of the points made, and with the LCAG APPG now up and running, hopefully these kinds of questions won’t continue to go unanswered.

Has HMRC learned from the Loan Charge that retrospective application of IR35 would be bad?

Nicky Morgan, Chair, Treasury Committee, asks:

The Minister, whom I respect greatly, has been handed an enormous hospital pass today, although perhaps not as great as the one handed to the Secretary of State for Health earlier, when he had to justify the conduct of one of his Cabinet colleagues. I should like to ask the Minister to build on what Jonathan Reynolds, the shadow Minister, was saying. The Minister said in his statement that
“the Government’s focus will be on supporting organisations and businesses to apply the rules [of IR35], rather than enforcing historical cases.”
Have the Government learned from the 2019 loan charge cases, where people are very concerned about the importance of historic cases rather than looking forward? Is the Minister saying that these changes will be done differently from what we see happening under the loan charge?

Mel Stride, Financial Secretary to the Treasury and Paymaster General, responds:

I thank my right hon. Friend for her questions. To reiterate, there is no connection between the loan charge and IR35; they are two distinctly different aspects of Government taxation policy. The purpose of my statement, in making it clear that we will not be actively or aggressively looking at previous activities in this area, was to show that we recognise that we need to get this right and that we need to support employers and contractors as we go through this process. That is the approach that we will take.

What does it actually mean?

The loan charge and IR35 do get somewhat bundled up together sometimes but both have one very intrinsic thing in common: contractors, genuine or otherwise.

Both pieces of legislation have been approached similarly too; little mainstream media coverage, no direct communication to those at risk of an investigation, and a history of heavy criticism by both those it’ll impact and MPs alike.

Fingers crossed lessons have been learned.

Why do HRMC favour chasing working families for tax over large corporations?

Christine Jardine, Liberal Democrat Spokesperson (Scotland), asks:

Can the Minister explain why, on a day when they pulled business to avoid defeat on an amendment that could have meant the wealthiest businesses paid millions of pounds in tax, the Government feel it is acceptable to clamp down on ordinary families for national insurance and not pursue widespread, large-scale tax avoidance?

Mel Stride, Financial Secretary to the Treasury and Paymaster General, responds:

On the first part of the hon. Lady’s question, I think I have already answered why we decided not to go ahead with the legislation today. On clamping down on national insurance issues, I am not entirely sure to what she is specifically referring. If she would like to have a word with me after this statement, I would be happy to have a look at it.

What does it actually mean?

Sounds suspiciously like HMRC dodged being on the record with that one – the non-answer speaks volumes, mostly about easy targets and quick revenue wins.

Takeaways for the week

To quote Jonathon Reynolds, Shadow Economic Secretary: ‘The Bill [was] pulled, and this statement scheduled instead, for one simple reason: the Government thought that they were going to lose.’

This overarching sentiment tainted the entire debate, with speaking MPs frankly frustrated (some outright angry) that no debate was to be had, or consequential amendments to be made. While it’s not a necessarily good situation, one positive can be drawn – perhaps the House of Commons may finally hold HMRC to some consequence in the near future.

See here for even more information on IR35 and how you can protect yourself against an investigation, or take a look around our Knowledge Hub for more contractor guides, IR35 news and expert advice.

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