HMRC under fire in Opposition Day debate

MPs were debating a Conservative motion that accused the government of driving investors and entrepreneurs overseas and claimed that over 200,000 businesses have closed since Labour took office, which the Conservatives blamed on the government’s tax rises and additional costs placed on business by the Employment Rights Bill. The motion “calls on the government to urgently change course to support jobseekers, small and medium-sized enterprises, family businesses and entrepreneurs who take risks to create wealth and jobs that benefit people across the country.”

Conservative contributions

The Shadow Secretary of State for Business and Trade, Andrew Griffith, open the debate, accusing Labour of creating an anti-business environment with bureaucracy and taxes that “they promised would never come”, sending a message to those who seek to create wealth: “Don’t bother. Don’t even try.” He criticised the government’s inheritance tax relief policy, citing analysis from the Confederation of British Industry that estimates that this measure alone will result in 208,000 job losses and a £2 billion net loss to the Treasury.

The shadow minister emphasised that to achieve growth, “we need a country in which everybody’s spark of ambition can find ignition”. Not everyone needs to run a business, but for those who do, “we want a country that values, cherishes and honours its wealth creators; where transforming a side hustle into a main hustle is straightforward; and where His Majesty’s Revenue and Customs is transformed from a predator to a partner, and the tax system goes out of its way to reflect the risk of investing, and of running a business”.

Another Conservative MP, John Cooper, suggested the approach of HMRC reflected that of the wider government: “The government’s attitude to business is that it is a dripping roast to be devoured and taxed to a standstill.”

Griffith agreed that “so many businesses feel like that, even when HMRC is doing its legitimate job of trying to balance the books and raise money for the public purse”. He said that: “That is because of how it goes about that job, its one-sided nature, and the uncertainty that it inflicts on small businesses, whose biggest asset is their time, and whose greatest opportunity cost is the need to comply with myriad regulations and taxes.”

A further Conservative, Gagan Mohindra, also criticised HMRC, labelling the department “increasingly aggressive and not necessarily fair”. He had a particular problem with rates of interest charged: “If an employer or business makes an overpayment, the interest rate that they receive is different from that which HMRC takes. We should not regard businesses as a cash cow if they have done nothing wrong”.

He said he would prefer HMRC “not to be an arm’s length body”, adding: “I would be willing at least to investigate whether ministerial control and oversight was practical, on the full understanding that civil servants need to have the freedom to raise and collect revenue.”

Other Conservative MPs weighed in with their own criticisms of tax rises. Jerome Mayhew said that the combination of reducing business rate relief for and the employers’ NICs increase has hit pubs and part-time employers “so badly”. Damian Hinds believed that the government’s changes to business taxation would particularly affect labour-intensive sectors.

Sir Oliver Dowden and Neil O’Brien disapproved of the non-dom reforms, with Dowden calling them “ideologically driven” reforms which would not raise any money. “If the government want to increase job opportunities, they should take the chance at the next Budget to reverse that foolhardy policy,” he added.

Griffith, the shadow minister, agreed, saying: “My right hon. Friend is exactly right. He will correct me if I am wrong, but as I understand it, one millionaire is leaving our wonderful country every 45 minutes.” It is unclear whether he was agreeing with the statement that the changes as a whole should be reversed or just with elements of Dowden’s analysis. The Conservative position up until now has been critical of aspects of the non-dom proposals (mostly the changes made to the plans by Labour) while remaining supportive of the underlying principle, which was of course announced by Conservative chancellor Jeremy Hunt.

Gareth Davies, the Shadow Financial Secretary, wound up the debate for the Conservatives. He told the House that, in Labour’s ‘fiscal funfair’, the only ride is a merry-go-round: “Round and round the vicious cycle goes, to the point where we no longer ask whether Labour’s next Budget will bring in more tax rises, but which taxes it will hike.” Referring to the Deputy Prime Minister’s leaked memo published in the press that morning, he said that the measures in it to raise taxes on pensioners, on retail investment and on incomes were all anti-growth.

Other contributors

Liberal Democrat Sarah Olney said the NICs rise was damaging to small businesses and people’s living standards. She urged the government to scrap the measure, suggesting that Labour’s approach undermines its own growth ambitions. She said that the government should look to raise revenue in much ‘fairer’ ways, including taxing big tech and online gambling firms, and abolishing the current business rates system and replacing it with a commercial landowner levy.

“To say that employers’ national insurance is not a tax on working people stretches disingenuousness to its absolute limits”, stated Dave Doogan (SNP). He considered the measure ‘counterproductive’, suggesting that the £22 billion or £23 billion— the government’s target amount was to take in from employers—has already been “attrited to well below £10 billion”.

For Plaid Cymru, Llinos Medi noted that Family Business UK says “that 55% of businesses have paused or even cancelled planned investments due to the government’s plans to cap business property relief.” She said that the government should delay the planned BPR changes and conduct a thorough consultation and an impact assessment. Doogan agreed.

Three Labour backbenchers contributed to the debate, two of them members of the Treasury Committee. All focused their remarks on non-tax aspects of economic policy such as trade and investment, infrastructure and industrial policy. Jeevun Sandher praised the “permanent 40% reduction in business rates for high street shops”.

Government response

Business minister Gareth Thomas defended the government’s approach, telling MPs that business investment grew by 5.9% in the first quarter of 2025—the fastest in two years. He cited the CEO of BlackRock, Larry Fink, who praised the government’s pro-growth agenda and said that investment in Britain is “undervalued”. The minister added: “We are delivering lower tax rates for retail, hospitality and leisure properties from 2026-27”.

Thomas challenged the Conservatives’ business closures claims, suggesting that the number of closures has actually fallen by 4.4%. He cited the Institute of Directors, which reports rising business confidence, with more firms increasing recruitment and investment.

Responding to the debate, Torsten Bell, Parliamentary Secretary to the Treasury, accused the Conservatives of hypocrisy, suggesting that “the increase in taxes under the Tories in the last Parliament was significantly higher than any change in taxes under this government”.

On whether HMRC is behaving more aggressively, Bell said Mohindra “favoured direct control of HMRC by government ministers”, and noted that the Exchequer Secretary does now chair HMRC. With tongue perhaps slightly in cheek he added that the department is not as aggressive as “the Customs department was in the olden days” when “there were guns involved”.

The minister said that the government has protected working people by not increasing the rates of income tax, national insurance or VAT. He concluded that the UK is maintaining an internationally competitive tax system with the lowest rate of corporation tax in the G7. “Nobody on this side of the House is pretending that these were easy decisions, but they were the right ones and the responsible ones, yet each and every decision has been opposed by the opposition parties”, he claimed.

You can read the full debate here.