Loan Charge — House of Commons, 2019-04-04
Topic: Macroeconomics
Edward Jonathon Davey (Liberal Democrats, Centre to centre-left): 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.