Thursday, May 14, 2009

Hazel Blears and Gordon Brown - a genuine gesture or deliberately deceptive?

When it was fist reported that Hazel Blears had volunteered to pay 'back' the Capital Gains Tax (CGT) that she avoided through 'flipping' her main residence, I wondered whether she was simply naive, badly advised or deliberately deceptive.

According to the original Press Association report, Hazel denied that Gordon Brown had prompted her to resolve matters - which involves paying £13,332 CGT.

It's now been reported in the Independent that Gordon Brown did personally asked her to do this. In which case my question should be directed to the PM who was Chancellor for ten years. Whilst I wouldn't expect him (or anyone) to have full grip on all tax issues I would expect him to understand some basic points.

If someone, like Hazel Blears, voluntarily pays tax that HMRC's tax system is not expecting the money will be initially credited to her self assessment (SA) tax account. After a short while this will be checked and if no liability to tax is 'charged' to the account the 'overpayment' will be automatically refunded. Does she know this? Does Gordon know this?

For the computer to accept the monies as due they will need to be matched against a liability on Hazel's SA record. To create such a liability requires her to admit that her return was incorrectly completed, in which case interest will also be payable and possibly a penalty too. The return in question was filed under the old penalty regime so the unprompted(?) disclosure may justify a nil penalty, but nil interest too? I think not.

Or did Gordon tell Hazel that she can safely offer to send a cheque to HMRC safe in the knowledge that they will send it straight back?!

The only bit that seems odd here is that Gordon will certainly know that the taxman was renamed HMRC in 2005 so I'm sure he would have told Hazel to send the money to them. But I heard Hazel say she'd be sending a cheque to the "Inland Revenue".


  1. Great minds, as they say. I have taken a more aggressive view. The voluntary tax line is, of course, drivel, but there seems merit in arguing that it is an all or nothing issue. Either the MPs rest on the law and stick two fingers up to the electorate or, once they volunteer anything, they volunteer the lot.

    Not wanting to pick on Blears alone, it is handy that some non-entity Tory buffoon has also now volunteered the payment of CGT. By coincidence, his reported property profit over the past 4 years equates to his back bench salary for the same period. Since no one has ever heard of Greg Barker, it only seems proper, and neat, that him handing over "his" property profit means the public will recoup the cost of his salary.

    BTW, ref: Newsnight, a lady friend thinks you have gay eyebrows. I have no idea what this means but it is always useful to have incisive feedback from the fairer sex !

  2. I don't understand the problem of using the legal election for CGT of which of any properties you own and live in is your principle private residence for CGT. Due to way in which London properties are normally more expensive than those in other areas an election for that ar the one you are most likely to sell first is a perfectly logical procedure.

    The expression"principle private residence" seems to have been ignored by all the media.

  3. Thanks Andrew - I emailed you directly re your final comment! ;-)

    Geoff - I thought the issue was that MPs like Ms Blears were electing for one property to be their main residence for tax purposes at the same time as it is claimed to be their second home for the purpose of their expense claims.

    I think the PPR expression is used only as a ref to the election. Tax legislation itself only refers to 'Main residence'.

  4. Am i wrong in assuming that the tax relief for MP's came into existence because otherwise they would have to pay substantial cgt if they were moving house within London. For example if a MP bought a very small flat when first elected and having remained in post for 20 years decided they wished to move to better accomodation they would face massive cgt even if all the proceeds of the sale were used to buy another property.

  5. Thanks for your comment Peter.
    I'm doubtful that the rules exist for that purpose or that MPs positions would justify such treatment as compared with everyone else.