News Archive
MP Expenses scandal
ATLANTIC Chambers’ top tax barrister today urged for public perspective on the MP’s expenses scandal.
Nigel Ginniff, head of our Chancery and Commercial Practice Group and a former HM Inspector of Taxes, said those MPs that have been exposed as claiming relief from Capital Gains Tax have no legal obligation to pay back this tax.
More importantly he said those who have now offered to do so in respect of sales made over two years ago will be unable to as their payment will not be accepted by Her Majesty Revenue and Customs (HMRC).
Nigel Ginniff, a member of the Revenue Bar Association, said: “A number of MPs have been exposed as claiming relief from Capital Gains Tax on a nominated property whilst claiming allowances on another property as their main residence.
“This is questionable politically, but not legally. It is only immoral if you believe that arranging your affairs to minimise your tax liability is immoral.
“Everyone who has more than one residence may nominate one of those properties as their main residence for Capital Gains Tax relief.
“Anybody in that situation who sought tax advice would be told that they would be unwise not to take advantage of that situation to minimise how much tax they pay.
“Tax avoidance is very different to tax evasion. Avoidance is legal; evasion is not.”
For example it was recently revealed that Hazel Blears MP avoided paying up to £18,000 in tax on the sale of a taxpayer-funded home.
The Communities Secretary sold her flat in Kennington, London, in August 2004 for a £45,000 profit. It had been designated as her second home, allowing her to claim thousands of pounds in mortgage interest and running costs. But the MP did not pay any Capital Gains Tax on the windfall because she told the taxman it was her main home.
Capital Gains Tax has to be paid on profit from the sale of any property not classified as a “main residence” – meaning Ms Blears could have faced a bill of £18,000.
Work and Pensions Secretary James Purnell was last year accused of a similar practice when he avoided as much as £20,000 in Capital Gains Tax after selling a London flat designated as his main residence for the taxman and as a second home for Commons expenses.
But Nigel Ginniff again stressed that neither have broken any Commons rules or tax rules.
He said the offers by MPs to pay back this money are un-necessary as legally they have nothing to pay back. Nigel said: “This is unprecedented. I have never heard of anybody trying to pay tax that they have legally avoided paying - in other words – tax that isn’t owed.
“I do not believe that the HMRC will be able to legally accept it as it is not owed. They cannot accept tax that isn’t owed just because somebody wants to pay it. "
“The end game will be very interesting. I suspect that the MPs will be told their offer to pay this tax has been declined."
“If it is accepted then questions must be raised as to how HMRC is able to do this.”
Nigel Ginniff is an expert in Revenue Law, Pensions Law and Employment Law.
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