Former Treasury Minister Mel Stride must not be allowed to “mark his own homework” following his election as chair of the House of Commons Treasury Committee, a committee member warned.
The All-Party Parliamentary Group (APPG) on the loan charge called on Stride to investigate the conduct of HM Treasury and HM Revenue & Customs in relation to the charge, and to investigate “why it was deemed acceptable to retrospectively change the law and sweep away statutory protections.”
Stride was the financial secretary to the Treasury from June 2017 to May 2019, and leader of the House of Commons until Boris Johnson became prime minister in July 2019. Amyas Morse, the former head of the National Audit Office, is leading a review of the charge and is expected to report to Treasury by mid-November. Tax professionals giving evidence to the review said the loan charge controversy has damaged the integrity of the tax system.
In an October 23 tweet, the APPG published Stride’s statement on the charge in respect of disguised remuneration schemes. The APPG had asked the four candidates for the role of chair to set out their approach to the controversy. “I do not think that anyone should prejudge [the review’s] likely conclusions but when the report is published I think that it is highly likely that the committee will wish to look further into the recommendations and issues that it may raise. I would work very positively with the committee to that end,” Stride said.
Stride also committed to “approach all consideration of the government’s policies in relation to disguised remuneration in an entirely fair and open-minded spirit,” and to examine this and other issues “in a nonpartisan manner and with parties from right across the House.”
The Loan Charge Action Group, which offers information and support to loan charge taxpayers, had urged APPG members not to vote for Stride. It noted that he refused to give evidence to the House of Lords Finance Bill Subcommittee examining the charge, and it argued that Stride “showed disrespect for parliamentary committees and their role scrutinizing government.”
But Stride pointed out in October 2018 that no Treasury minister had given evidence to the subcommittee since its creation in 2002, and said he was satisfied that evidence given by senior Treasury officials would suffice.
“We will have to take appropriate steps to ensure that there is no conflict of interest when [Stride] comes to scrutinizing decisions he was party to at [Treasury],” Wes Streeting, a Labour MP and member of the Treasury Committee, tweeted on October 23.
Both Streeting and fellow Labour MP and committee member Rushanara Ali had signed an open letter from the APPG to Chancellor of the Exchequer Sajid Javid, calling for an immediate suspension of the loan charge and related HMRC activities.
The Telegraph on October 23 quoted Streeting as saying the loan charge was “highly sensitive and a subject of significant controversy within Parliament and in wider public debates.” Stride “had a prominent role in this at the Treasury,” Streeting said. Having Stride give evidence to his own committee would be unprecedented, he added. But Streeting suggested the committee should be careful to avoid being put in a position where “the chair is marking his own homework from his time at the Treasury.”
The paper also quoted Conservative MP and committee member Steve Baker as saying that investigating the loan charge would be “a great start” if Stride wished to demonstrate his independence.
The Treasury Committee heard evidence from HMRC officials on October 22. Ali suggested that “one reason why we have ended up in this mess is because there have been organizations promoting these schemes.”
“This year, we are doubling the resources that we have involved in tackling promoters,” Penny Ciniewicz, HMRC director general for customer compliance, told the committee. “We have over 100 investigations into promoters at the moment, and we are keeping a very close eye on the market for avoidance. We are spotting schemes as they emerge, and we are tackling promoters.”
Ali asked HMRC interim chief executive Jim Harra about “just over 20,000 people who have not shown an interest in settling” with HMRC. Harra said that, of about 50,000 people believed to be within the scope of the loan charge, about 28,000 people have expressed an interest in settling. “About 19,000 provided all the information we needed to settle and about 8,000 of those have settled,” he said.
The remainder of the 50,000 face the loan charge unless they repaid their loan by April 5, 2019, Harra added. But Gordon Berry, a chartered tax adviser, suggested that Harra had failed “to provide any clarity” in response to Ali’s question. “Three years down the line, some 40 percent of the estimated 50,000 haven't ‘come forward.’ Does HMRC know who they are? Do they ‘get away with it’?” he tweeted.
In a September 30 submission to Morse’s review, the Institute of Chartered Accountants in England and Wales (ICAEW) noted that, while it supports measures to counter tax avoidance, it had suggested HMRC should take a sympathetic approach to resolving cases in which taxpayers were misled into using disguised remuneration schemes or “had little choice but to accept them.” Concerns raised by the ICAEW and others regarding the legislation were not addressed and there was insufficient parliamentary scrutiny of the legislation, it said.
“We believe that it is for Parliament to now resolve this situation. However, the controversy surrounding the loan charge has damaged the integrity of the U.K. tax system and lessons need to be learned for the future to ensure it does not happen again,” said Frank Haskew, head of tax at the ICAEW Tax Faculty.
Javid has confirmed that he will not deliver a budget on November 6 as planned. He set the date for his first budget on October 14, but wrote to Stride on October 25 noting that “Parliament has voted for a delay to the U.K.’s withdrawal from the EU, so the government is now calling for a general election.” MPs are expected to debate on October 28 a government motion calling for an election on December 12, amid continued uncertainty over the Brexit process.