Friday, January 23, 2009

MP expenses row: The tax angle that's getting missed

The row about disclosure of MP's expenses is about more than the shameful attempt to exempt disclosure of their expenses from the Freedom of Information Act.

We also have to consider the lax rules as regards their receipts for those expenses. These came to light last year when the current system was described as "deeply unsatisfactory" by the Information Tribunal. Liberal Democrat MP Norman Baker, who won his own FOI battle to get MPs' travel expenses broken down, told the BBC the judgment had been "inevitable".

The press focused on what they called the 'John Lewis' list. My interest was more in the reports that:
"Each MP can claim about £23,000 a year and can submit claims of up to £250 without a receipt and up to £400 a month for food".

Along with this revelation was the suggestion that detailing all of their expenses and retaining all of their receipts would be too onerous for MPs.

And that's the bit that, to me, is so very shameful. Why should MPs be exempt from the very rules that they impose (through HMRC, the taxman) on all of their constituents?

MP's do not pay tax on their reimbursed expenses. And that's right as long as those expenses were properly incurred on fulfilling their roles as MPs. With no obligation to retain receipts as evidence of the expenses they have incurred, there is no proof that the expenses were properly incurred. And that's exactly what the taxman says to all self employed taxpayers, all employees, all directors and all entrepreneurs. If you want to avoid becoming liable to pay tax on reimbursed expenses then you must retain receipts and proper records.

On 1 April 2009 HMRC gain new powers as set out in Schedule 37 of the Finance Act 2008. This authorises HMRC to specify what they consider is a 'statutory record' that taxpayers will then need to produce to prove that, for example, expenses were properly incurred for genuinely business reasons. Sdly such a power will never be imposed on MPs if they continue to be expemt from having to retain receipts.

It is a total disgrace that public officials should be exempt from a similar requirement. If the obligation to retain receipts for all receipts is too onerous for them it's too onerous for everyone. If it's a reasonable obligation to impose on taxpayers generally then it's even more important for MPs whose expenses and salaries are funded from the public purse.

The taxman wanted the new powers in Schedule 37 because there are some people who do not tell them the truth. For example claiming thast they have incurred business expenses that were more of a personal nature. Are there perhaps some MPs who might be similarly tempted or who might have done this in the past?

What do you think?

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1 comment:

  1. I agree. But what about the ability of MPs to employ their spouse or children and effectively spread their earned income around the family, - something that other normal employees can't do. What's more this is a tax planning move that The Treasury has indicated is a heinous crime when small businesses try to do the same.