New tax year, same old MPs. After Budget promises to tackle tax avoidance, Parliament is passing legislation to block several loopholes – but an obscure clause specifically exempts MPs from these new restrictions.
Yes, really. Anyone who thought the denizens of Halitosis Hall had learned their lesson after the MPs’ expenses scandal will be disappointed. But it seems politicians still cannot get their heads round the childhood adage about sauce for the goose and gander – or why their constituents are fed up with buying them duck houses.
A reader who prefers to be known as ‘HTaxpayer’ emailed me to flag up this new scandal. He – or she – said: “Complex and at times draconian draft tax legislation, which has the potential to impact on any employee or employer in the UK, is contained in the Finance Bill.
“HM Revenue & Customs says that this legislation is only there to stop ‘tax avoidance’. However, Section 554E(8) specifically exempts members of the House of Commons and the Independent Parliamentary Standards Authority from the new legislation in situations where they are actually caught by it.
“If the legislation is fair and proportional, what is the need for a specific exemption for members of the House of Commons? Why don’t they rely on the same arrangements that every other employer and employee in this country has to rely on?
“If the legislation only targets tax avoidance, why is there a need for a special exemption for MPs?”
Good questions – but not good enough to merit a reply from the House of Commons Media Office. My calls this week remain unanswered and so I can only assume they cannot bring themselves to talk about it.
Undeterred, I asked Richard Mannion of Smith & Williamson if he could shed any light on the mystery. He told me: “The honest answer is that I don’t know why this clause has been inserted into the Bill, but I suspect it’s a question of MPs getting their retaliation in first.
“In other words, if there ever was a possibility that part of their tax arrangements might be caught then they are protected.
“These new rules relate to ‘disguised remuneration’. They are far-reaching and about as complicated as they could get.
“The point about MPs’ expenses is a good one. There are other examples of MPs having special tax breaks which don’t apply to ordinary taxpayers. This goes back many years to when the old Inland Revenue started to apply the letter of the law to MPs’ expenses and Ministers changed the law to relieve pressure from their colleagues.”
Mike Warburton of Grant Thornton said: “The new rules on disguised remuneration are intended to catch complex arrangements designed to avoid income tax through loans made to executives, typically through offshore structures.
“It is difficult to see why MPs need this specific exemption. After the uproar over their expenses, I can’t believe that our elected representatives would dare to indulge in provocative tax avoidance. So why do they need the legislation to protect them?”
Two years ago, I pointed out in this space the fundamental problem with MPs being subject to different tax rules from the rest of us. Unlike any of their constituents, MPs could claim tax-free expenses for second homes, rather than just rented accommodation.
That was one reason they ended up claiming average annual expenses of £135,000 or twice the backbench salary of £63,291 by the time the balloon went up. We are told they have cleaned their act up since then but the best proof of that would be for MPs to be subject to the same tax rules as their constituents. No exemptions, please.
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