TaxPersonal TaxOverview: privilege probe

Overview: privilege probe

Prospects: the taxman may be about to probe MP's expenses

Not many university students manage to earn £45,000 during their degree by
stuffing envelopes and going through the post. But Freddie Conway was lucky ­
his dad was an MP with a parliamentary allowance.

The revelation that Derek Conway paid his son Freddie for a job in which the
Standards and Privileges Committee found he was ‘all but invisible’ at
Westminster opened a huge can of worms in the Commons.

The row, a flashpoint in an ongoing scandal about party funding and MPs
feathering their nests, threatens to spill over into a fully-fledged probe into
their tax affairs too.

What’s happened

Nobody likes to have their pay and expenses publicly scrutinised in every
detail, do they? But that’s what MPs are facing. The Conways aren’t the only
ones running a family business. Up to 170 MPs employ family members.

And the furore over MPs allowances intensified following the revelation that
Tory MPs Sir Nicholas and Ann Winterton were exploiting a loophole and using
their parliamentary allowance to pay rent for a flat they had paid off some
years ago.

The house they owned had been put into a trust, for IHT avoidance. There’s
nothing irregular about that arrangement, but getting parliamentary allowances
to pay the presumed ‘rent’ to a trust their family are beneficiaries of looks a
bit much. David Cameron, the Tory leader, called it ‘indefensible’.

Coming on the back of scandals about party funding, the rows are ramping up
the pressure for an extensive review of MPs remuneration.

What’s going to happen?

The scandals have prompted greater calls for transparency of MPs expenses.
Michael Martin, Commons speaker and chairman of the members’ estimates committee
called for a ‘root-and-branch’ review of expenses and said MPs could face random
audits in future.

Greater transparency is one thing, but could there be tax investigations?
There have already been raised eyebrows about peers claiming expenses without
receipts. In the real world, that would mean the expenses were taxed as salary.
But not in parliament.

Equally, given Derek Conway has no record of the work done by his sons, it
could be construed as an attempt by him to limit the tax payable on his salary
by using their allowances.

The Commons has to vote soon on the ‘income-shifting’ proposals ­ which have
a clear application to Conway-like set-ups ­ and will hammer small family-owned
businesses.
Is there any chance of the MPs seeing
the connection?

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