Tax Avoidance, Evasion and Compliance — House of Commons, 2019-03-04
Topic: Macroeconomics
Melvyn John Stride (Conservative, Centre-right): With permission, I should like to make a statement on tax avoidance, evasion and compliance This Government take a balanced approach to the public finances, investing in our vital public services while getting our debt down and keeping taxes as low as possible, and part of that approach is that everybody must pay the tax that is properly due. The vast majority of taxpayers, from individuals and the smallest businesses to the largest companies, already pay their fair share. This Government recognise their duty to that compliant majority to build a fair and sustainable taxation system and, through that system, to make sure that those who try to avoid or evade their tax liabilities are held to account Our approach is working. At 5.7%, the tax gap is at a near-record low. The difference between the tax that should be paid to Her Majesty’s Revenue and Customs and the actual tax that has been paid is at its joint lowest level in five years, thanks to HMRC’s sustained efforts to tackle non-compliance and to help customers get their tax affairs right first time HMRC tailors its approach to different taxpayers, subjecting the largest businesses and the wealthiest individuals to the greatest level of scrutiny, while using data and digital tools to help smaller and mid-sized businesses to get it right, with close attention on those where avoidance or evasion is suspected. We must make sure the tax system is not a barrier to setting up, running or growing a business, but we should never forget that the tax brought in by HMRC directly funds our vital public services I am proud of this Government’s success in this respect. Since 2010, we have introduced over 100 measures to tackle tax avoidance, evasion and other forms of non-compliance. Alongside this, HMRC’s compliance work has secured and protected £200 billion in tax revenue that would otherwise have gone unpaid. In addition, at Budget 2018 the Government announced a further 21 measures that together are forecast to raise around £2.1 billion by 2023-24. This success demonstrates the Government’s continued efforts to address tax avoidance, evasion and non-compliance in all its forms At the same time, the Government recognise that these efforts must be designed and targeted carefully. All HMRC powers, which are given by Parliament, must be accompanied by the necessary safeguards to ensure that they are used correctly. The Government will keep the tax administration framework under review, in consultation with interested external stakeholders, to ensure that it continues to strike the right balance between robustly challenging tax avoidance, evasion and other forms of deliberate non-compliance and treating all taxpayers fairly As part of our continuing efforts to reduce the gap between money owed and money paid, the Government have also set about reforming the rules that govern off-payroll working. These rules, known as IR35, were first introduced in 2000 to ensure people working through their own company, who, but for the existence of the company, would be taxed as employees, pay broadly the same tax and national insurance as other employees. The rules do not affect the genuinely self-employed and the Government recognise the contribution that contractors make to business and to public services across the country. Our aim is simply to ensure that contractors who work through their own company pay the right tax However, evidence has suggested that these rules have been frequently misapplied, so contractors were incorrectly paying tax as though they were self-employed when they were actually acting as employees. It is right and fair that everyone must pay the tax that is due irrespective of the nature of their employment. We want a tax system that is simple and clear to use, so that businesses and individuals alike can understand what they owe and how and when to pay it In April 2017, the Government introduced new rules for public sector organisations that take on contractors through their own company. The reform means that public sector organisations are now responsible for deciding both whether the contractor is acting as an employee, and therefore within the rules, and ensuring the right amount of tax is paid I am pleased to report to the House that this has proved to be effective, with HMRC estimating that an additional £550 million has been raised in income tax and national insurance contributions in the first 12 months since the measure was introduced. However, non-compliance in the private sector remains a persistent and growing problem that, if left unchecked, will cost the taxpayer as much as £1.3 billion by 2022-23, according to the Government’s estimates In last year’s Budget, the Government announced that we will extend the reform of off-payroll working rules to the private sector from April 2020, and tomorrow we will publish a consultation to seek views on the detailed design of the reform to enable effective implementation. By changing the design of the off-payroll working rules, we are helping individuals working in this way to ensure that they are compliant with the existing legislation. For this reason, the Government’s focus will be on supporting organisations and businesses to apply the rules, rather than enforcing historical cases. Our aim is to provide individuals and businesses with greater certainty around how the off-payroll working rules will operate from April 2020 and the actions that individuals and businesses can take to prepare for the reform Our reforms to off-payroll working are just one of the ways in which this Government are ensuring that we have a tax system that is fit for the 21st century, and I commend this statement to the House.