Public Anger Grows Over UK MPs Expense Claims

by Jason Gorringe, Tax-News.com, London

29 May 2009

The UK tax authority is set to investigate several members of parliament (MPs), including government ministers, after it was revealed that many did not pay tax on money reimbursed for the cost of accountancy fees.

The latest set of embarrassing revelations about MPs’ expense claims published by the Daily Telegraph shows that more than 30 junior ministers and 9 cabinet ministers, including Alistair Darling who, as Chancellor of the Exchequer, presides over UK tax laws, claimed back money paid to accountants to prepare personal tax returns, but did not pay tax on the perk as a ‘benefit in kind’ as the vast majority of employees must do.

The new disclosures are part of an ongoing investigation by the Telegraph into expense claims made by MPs for maintaining second homes in London closer to the House of Commons, which are funded from the public purse. They claim to show that in February last year, Chancellor Darling claimed more than GBP1,400 for accountancy fees for a two-year period, including advice on the tax treatment of rental income. Previous revelations have also suggested that some senior government figures may have illegitimately avoided capital gains tax on the sale of second homes.

The paper has so far disclosed details of expense claims of more than 300 MPs from all parties. The reports have shown that MPs frequently ‘flipped’ their second homes from their London residencies to their constituency houses and made spurious expense claims for such things as the cost of replacing light bulbs, designer furniture, maintaining a moat, and, in the case of one Conservative MP, a floating ‘duck house’ for his pond, costing GBP1,500. The revelations have understandably prompted an angry response from taxpayers and led to calls for far-reaching constitutional reform.

HM Revenue and Customs (HMRC) has said that it will be looking into the tax arrangements of many of the MPs and ministers concerned. In a statement publicized on the evening of May 26, HMRC explained that accountancy fees are, as a rule, not a deductible expense – a rule that applies to MPs as well as the tax-paying public.

“It’s a general principle of tax law that accountancy fees incurred in connection with the completion of a personal tax return are not deductible,” the department stated. “This is because the costs of complying with the law are not an allowable expense against tax. This rule applies across the board.”

A statement issued by Darling in response to the report said that the Chancellor employed an accountant to “ensure the correct amount of tax was paid” in relation to office costs.

If the Chancellor of the Exchequer cannot complete his own tax return with out professional help, what chance do us mere mortals stand of complying with this nation’s increasingly complex tax laws?

Recommended