Minister gives new reasons for not helping limited companies by adopting DISS

Jesse Norman has skirted over HM Treasury misunderstanding that dividends are not a part of the Directors’ Income Support Scheme proposal, in his latest explainer for not adopting DISS.

Instead, and ahead of rejecting the scheme, Mr Norman said figures indicated that financially helping directors with their dividends would not represent value for taxpayer money.

“There are just over 700,000 active company directors,” began the minister, not attributing the often-disputed total to any source.

“So if HMRC were to provide financial support to the 3.3million people who typically declare dividend income on their tax returns, more than three-quarters of those grants could go to unintended recipients.

“This would be an irresponsible and unfair use of taxpayer money.”

Onerous, imperfect, inequitable'

Mr Norman added that “to seek to identify [financially in-need] directors” by using proxies or assumptions, would be “extremely onerous, imperfect and almost certainly inequitable”.

Moving on to address DISS, the minister also spoke of “fraud and abuse” concerns with the scheme, allowing him to say that, to reject it, the government “by no means…rely on the suggestion that it involves dividends intrinsically.”

“We [now] recognise the construction of the scheme,” Mr Norman told ‘Support for limited company directors during the covid outbreak 19,’ a virtual House of Commons debate brought by Owen Thompson MP.

“But at this time, I and my officials do not believe that the scheme, as framed…overcomes the fundamental issues of protecting taxpayers’ money and safeguarding it against fraud and abuse.”

'Not a reason to do nothing'

Told before the debate by Mr Thompson that fraud concerns were “not a reason to do nothing”, and that such concerns with DISS were “misplaced,” Mr Norman said he was still listening.

And he pledged to keep meeting. “I’ve raised these concerns with the FSB and the other members of the DISS group, and I and other Treasury officials remain ready to engage with them on this”.

Online, one of those ‘others,’ Forgotten Ltd, confirmed that the Treasury’s financial secretary has now replied to November’s DISS proposal, with “a set of queries and concerns”.

'Small companies seen as a tax dodge'

Mr Norman is “open to dialogue,” the group said after the debate -- derided by one PSC online as nothing more than a “talk shop”, as it ended with no vote to bind the minister to action.

The 10 months of inaction by the government does not bode well to others either. “We know from our previous experience that HMT and HMRC see small companies as somehow a tax dodge”, said a chartered tax adviser.

Posting to LinkedIn, the limited company adviser added:“[That’s the case] even though all of us are simply following the law.”

'Those who need help most'

In his video phone appearance in the debate, the few occasions in which Mr Norman did not appear to be relying on a pre-approved script included one where he said the government was not making any judgement about the “trustworthiness” of company directors.

But potentially tellingly, he did read out twice (in error perhaps) that one principle upon which HMRC does act to support taxpayers during the pandemic relates to whom the government perceives “needs [help] the most.”

The minister ended his statement with exactly the same sentiment, concluding that help will be forthcoming to “those who require it most.”

'Technically hard for HMRC'

The wording comes after the Institute for Fiscal Studies found that on SEISS, (which DISS is loosely modelled on), excluding both the minority self-employed and £50,000-plus earners is a “straightforward policy choice by the government.”

So the government could help such individuals but has simply chosen not to, whereas, with company directors, it is “technically hard” for HMRC to support their incomes, the IFS study added.

Asked last night by ContractorUK if the victims of an exercise ‘too hard’ for HMRC to pull off could get backdated help if, say, DISS were unveiled at Budget 2021, the scheme’s architect said it was a possibility.

'Could be backdated at the Budget'

“But it would only be backdated if the government decides to first base DISS on SEISS, and then decides to backdate it,“ said Re Legal Consulting’s Rebecca Seeley Harris, who drew up the scheme.

Sounding more optimistic for some good news on March 3rd, Forgotten Ltd reflected: “Together with the [new] Targeted Income Grant Scheme and the Northern Ireland company director grant, there are now lots of options for the government to decide to help ideally before, or if not at the Budget".

As to the prospects for DISS specifically, a former tax inspector said: “Yes HM Treasury are ‘considering it.’ But I’m not holding my breath.”

'More irrelevant excuses'

Before the debate, said to be the first of its kind in the Commons where not a single participant was present in the chamber, the SNP’s Mr Thompson said he hoped the government would not “trot out more irrelevant excuses for inaction”.

“Campaigning will not stop until all excluded groups receive parity,” he added. “Above all else, this is a fundamentally a moral issue. These people [limited company directors]…deserve to be supported in the same way the government has supported others. Nothing more. Nothing less.”

UPDATE: On Feb 2nd, a spokesperson for the DISS group said: "We have received a letter from the financial secretary to the Treasury explaining that the Treasury cannot accept DISS in its current form because of issues with identification and other related matters. 

"The [minister] did, however, say that the government very much remains open to constructive ideas and dialogue. We responded by inviting the Treasury to work with us on the policy to make sure that these matters were addressed. The ultimate aim being for the Treasury to adopt the DISS policy and support these limited company directors."


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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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