MPs expenses saga continues - tax free
The MP expenses scandal reared its ugly head once more last week, but what will be the tax consequences of this ongoing saga? Mark Lee reports.
Last week Labour MPs Jim Devine, David Chayton, Elliot Morley and Tory peer Lord Hanningfield faced criminal charges of theft by false accounting over their expenses claims.
The scandals rumble on this week, with Labour launching an internal investigation after Devine claimed he was told that he could move money between expense accounts.
Sir Thomas Legg’s report on MPs’ expenses proved that abuse of the system was widespread with more than half of all MPs required to make repayments.
A shameful footnote to the whole affair is that the Additional Costs Allowance is tax-free - as determined by the 1983 Finance Act (which, like all tax law, was passed by parliament which, on this occasion, understood precisely what it was doing).
There are many tax related questions raised by this scandal, but the three most crucial ones are outlined below.
Continued...
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A wider review? - yes, of course, but it won't happen.
Mark Lee is, of course, absolutely right to ask, "shouldn't there also be a review of the extent to which MPs have received reimbursement of other expenses - especially as no tax exemption applies in such cases." But will there be such a review? No.
Why? Because MPs generally, and the leaders of the Tory and Labour parties in particular, do not wish to see yet more of their colleagues' dirty washing exposed to the public gaze. There is no guaranteed political advantage to either of these parties - both have far too much to lose.
No-one can currently estimate how much of individual MPs' expense claims would fall foul of the "wholly, exclusively and necessarily incurred" test. It seems reasonable to assume that more than half of all MPs have claimed expenses that they shouldn't. Such a review would therefore be very much to everyone's advantage; except of course the MPs who would end up with increased tax liabilities and political egg on their faces!
How can they get round it? By simply saying two things:
1. an MP's tax affairs are, and should be, a personal matter between them and HMRC; and
2. the money it would raise would be less than the cost of the review (particularly in the light of the fact that the Legg review cost £1.16m - more than the £1.12m demand for repayment), and would consequently be a poor use of public funds.
So, should they get away with it? No, absolutely not.
Will they get away with it? Yes!
What can we do about it? Nothing ... nothing at all ... except give candidates for the coming general election a very hard time at hustings and on the doorstep and then vote wisely for morally upright candidates who will not take advantage of their position as elected representatives to feather their own nests!