Shadow chancellor's return not so transparent

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The shadow chancellor discovered the risks of making his tax affairs public this week.

In the wake of the Google tax settlement last week Labour’s shadow chancellor John McDonnell revealed his tax return in the Sunday Mirror.

But as eagle-eyed AccountingWEB readers pointed out when we followed up the story on Monday, McDonnell didn’t reveal all of his tax forms. What he published was a standard employment income summary form (SA102), without disclosing the Member of Parliament form (SA102MP) which MPs are required to submit.

McDonnell revealed a screen shot of his tax return on Twitter and subsequently opined in the Sunday Mirror that the Chancellor “should be open and transparent about their own income.”

McDonnell divulged his annual earnings as £61,575 and revealed his tax payment of £14,253 along with what he claimed was a screenshot of his tax return.

After the #googletax deal for openness and transparency I've published my tax return today. Now it's Osborne's turn pic.twitter.com/Zrkecsk2M7

— John McDonnell MP (@johnmcdonnellMP) January 31, 2016

AccountingWEB readers instantly spotted McDonnell’s oversight. James Reeves questioned McDonnell’s ‘open and transparent’ stance, commenting: “That's not the Member of Parliament supplementary form (SA102MP), it's a standard employment form (SA102). So presumably this is a second job and in addition to the 67K he gets for being an MP?”

As AccountingWEB member redboam pointed out, the SA102MP allows MPs to account for allowances and receipts associated with their office. McDonnell did not include information in regards to research, accommodation, expenses, travel, and so on. 

An HMRC spokesman clarified that in addition to the main employment return, MPs would be expected to fill out a SA102MP supplementary form setting out all the income, expenses and allowances relevant to their position.

In the article presenting his return, McDonnell claimed the Google tax deal had “created a lack of confidence in those politicians who manage our tax system”, adding that Google should have paid £200m a year, rather than the £130m 10-year settlement agreed with HMRC.

McDonnell said he released his tax return details “in the spirit of the ‘New Politics’”. He vowed to continue publishing his tax return every year while he seeks to become Chancellor. McDonnell said: “I think it is only fair that politicians set a good example. Especially those charged with or those who aspire to oversee the nations’ finances.”

If a politician who aspires to take charge of the tax system does not reveal how it works at the most basic, personal level, what chance does he have of unravelling the complexities that have been created by generations of his predecessors?

When AccountingWEB approached McDonnell’s press office for clarification we were threatened with legal action.  Rather than taking on this community in this way, the episode suggests he might have benefited from some advice from a qualified professional before submitting his tax return to HMRC, or making it public.

McDonnell has published his full tax return without the parliamentary supplement on his website. 

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By waltere
04th Feb 2016 09:08

Before you rush to condemn

It's a shame he made this elementary error.  A shame, too, that he became defensive when approached by AccountingWEB but it feels like a step in the right direction.

I understand that everyone's income and tax details are public knowledge in Sweden, Norway and Finland - I'm not sure how comfortable we would be with that in the UK but we'd probably all get used to it in time.  And perhaps it's one of the reasons why income inequality is so low in Sweden.

Should we worry that John McDonnell doesn't appear to understand how UK taxes work?  I suspect he's got a few years yet before he'll get anywhere near the levers of power, so plenty of time for AccountingWEB members to educate him in the finer points!

 

 

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By Duhamel
03rd Feb 2016 16:17

Who?

waltere wrote:

Should we worry that George McDonnell doesn't appear to understand how UK taxes work?

 

 

Who's George McDonnell?

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By waltere
04th Feb 2016 09:12

Who's George McDonnell?...

Sorry - he's a Freudian slip, a Frankenstein mash-up of John McDonnell and George Osborne - a Chancellor who gives with one hand and taxes back with the other.  Oh, no, hang on... that's what they all do, isn't it!  

@Duhamel - Thanks for spotting this - now corrected in my OP.

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03rd Feb 2016 16:06

Or ...

... just pay some poor hardworking accountant to do it for him.  If those are the only two entries I would do it for a special rate.

With kind regards

 

Clint Westwood

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03rd Feb 2016 16:35

Online filing

HMRC do not yet allow online filing of MP pages, instead their guidance is to include the details on the regular employment supplement and include a "white space note".

 

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03rd Feb 2016 16:56

Online filing - use of an Americanism in the United Kingdom...

"regular" isn't that an Americanism?  We in Britain, use "Frequent" as, to us, "regular" is a bowel movemet , amongst other things, except size -                      - The GoodEnglish Professor

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By chatman
06th Feb 2016 09:33

@AccountingWeb and others

tractorboy wrote:

HMRC do not yet allow online filing of MP pages, instead their guidance is to include the details on the regular employment supplement and include a "white space note".

 

Subsequent posters seem to have ignored tractorboy's observation. I would have thought at least a response from AccountingWeb might be relevant here.

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By Locutus
03rd Feb 2016 16:39

I always find it unusual ...

I always find it a bit unusual when earnings are well into the higher rate tax band, but there is no investment income.

I guess McDonnell just doesn't believe in saving for a rainy day.

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03rd Feb 2016 17:08

Maybe his wife has all the income? Or it is in ISA's? Think he needs to clarify the point re MP pages but good start - can't see Cameron, Osborne or Johnson publishing their returns. Also - he had no gift aid payments!

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03rd Feb 2016 17:20

movemet?

I see your use of English is impeccable!

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By abaco
04th Feb 2016 09:36

Same old.

McDonnell claims that his action in publishing his tax return was in the spirit of Labour's new politics. By cynically withholding SA102MP though (it is most unlikely an elementary error) he has demonstrated that the "new" is just as unreliable as the old.

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04th Feb 2016 12:07

Gift Aid....

 Very interesting that a man very keen to give away taxpayers money to all and sundry around the world and looking to be elected for doing so has not put his hand in his own pocket to give to any charitable organisations himself !!

Like many I believe that this return has nothing to do with the full return submitted to HMRC in his name. As they say in 2016....How do you tell when a politician is lying? Answer: His lips are moving or he is tweeting.

 

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04th Feb 2016 13:38

Expenses Received and Paid

What is always the interesting thing about our MPs is what expenses were paid out and what were received?  SA102MP shows this information.

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05th Feb 2016 11:58

The expenses claimed by him and all other MPs are a matter of public record and easily searchable by anyone http://www.parliamentary-standards.org.uk/

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By James26
05th Feb 2016 12:28

Gift aid

Before getting carried away don't forget that just because one doesn't claim a deduction for gift aid doesn't mean one doesn't give to charitable organisations.  Claiming the deduction is not compulsory, if his wife pays tax she may claim the deductions, not all charitable organisation qualify (e.g. overseas via his family connections with Kenya).  Of course there are also other than financial ways of supporting charities; time / effort / lobbying.

While I don't know the details of his financial affairs I do know for a fact that his family supports financially at least one charitable organisation that I also support.  I'm a long way from where he is on the political spectrum but please can we be careful not to make 1+1 = 3!

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By jcace
05th Feb 2016 13:26

What about....

The claim that "here's my tax return so I'm being open" is something of a nonsense. I'm sure if Google published their tax returns for the last five years they wouldn't show vast profits and zero tax. And that surely is the point. It's not so much about what you declare, as what you don't declare - the income that you shelter elsewhere or route though channels so that it doesn't show as yours.

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@James26

Your comment about Gift Aid reinforces one of the points in the article, that the shadow chancellor doesn't appear to be on top of the tax system at an individual level. As I understand it, the charities get to keep their hands on a larger amount based on the amount of tax that would have been paid on the donation.

If McDonnell understood this, he would have ensured he opted for Gift Aid to increase his support for any organisation by 40%.

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By James26
05th Feb 2016 14:25

@John Stokdyk

I'm not defending his politics / capability in the unlikely event he were in charge of the Exchequer.  I was merely saying that just because a gift aid deduction has not been claimed one can not infer that no giving has been made to charitable organisations and we need to be careful not to draw as firm conclusions what are really just inferences not fully supported by the facts.

Clearly one would expect the vast majority of higher rate tax payers to claim every penny but I expect a higher percentage don't than one might think. Because they don't claim 25% of their gift back from HMRC doesn't mean the charity has lost out as it doesn't stop them having ticked the gift aid declaration so the charity gets the 25% uplift.

As has been pointed out, we don't know his wife's tax affairs.  If she is a higher rate tax payer they may have decided to route all giving through her for privacy and not have lost out a penny.  You may be right though it could be that he didn't understand the system, but we can't be sure on the facts as presented  Given how far left on the political spectrum he is, perhaps he feels by claiming gift aid he will be labelled a serial tax avoider by those in the PAC/media!  That is all speculation, we can't be sure and need be careful not to make inferences beyond the facts else one strays over towards slander/libel. I.e. a few good old fashioned caveats would perhaps have been advisable on some of the 'conclusions' in this thread.

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By chatman
06th Feb 2016 09:38

.

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05th Feb 2016 16:49

@ James26

I was not aware that the gift aid box in the tax return is voluntary.  It is actually quite possible (although not in this case) for a taxpayer to have a liability to HMRC if they have signed a gift aid declaration on a donation, such as if they have insufficient tax deductions to frank the payment.

I am being picky, of course, and as penalties are tax based there would be none. But if you are in the position of shadow chancellor and wish to make political capital out of publishing your tax return, I would have thought that it behoves you to have it stand scrutiny.

Nor is gift aid unique in this regard.  Excessive pension contributions could give rise to tax charges.  Even in a trade, suppression of purchases to maintain a veneer of profit margins.

With kind regards

Clint Westwood

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Thanks for clarifying @James26

He who lives in glass houses, eh? Before tossing around too many allegations about the shadow chancellor's grasp of tax detail, perhaps I should brush up my own a little. My ire is directed less at McDonnell that the nature of a system that means it quite hard to find a definitive answer to a simple point on charitable donations.

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