TaxPersonal TaxThis week’s blogs: claim culture

This week's blogs: claim culture

MPs excessive expenses claims feature heavily in the blogosphere this week

Under section 292 of the Income Tax (Earnings and Pensions) Act 2003, MPs
granted themselves exemption from tax on their overnight expenses. The
legislation says:

1) No liability to income tax arises in respect of any overnight expenses
allowance paid to a member of the House of Commons in accordance with a
resolution of that House.

2) ‘Overnight expenses allowance’ means an allowance expressed to be in
respect of additional expenses necessarily incurred by the member in staying
overnight away from the member’s only or main residence, for the purpose of
performing parliamentary duties – a) in the London area, as defined in such a
resolution, or b) in the member’s constituency.

In the fiscal year 2007/08, the maximum that any MP could claim for overnight
accommodation away from home was £23,083. And in that year, some 390 MPs claimed
£20,000 or more.

Remember that, under section 292, this is tax free. So the £23,083 is the
equivalent of £38,471.67 of taxable income: it’s a pretty hefty allowance.

But what strikes me as interesting is the definition in the act of the
‘overnight expenses allowance’ as ‘additional expenses necessarily incurred…
in staying overnight.’ (the caps, of course, are mine).

Now perhaps I’m wrong, but it seems to me this legislation should oblige Her
Majesty’s Revenue and Customs to take quite a close interest in the Daily
Telegraph’s revelations about how MPs actually spent their allowance.

Robert Peston, BBC business editor
bbc.co.uk/blogs/thereporters/robertpeston

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 ref
unded. 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.

Mark Lee, chairman, Tax Advice Network
taxadvicenetwork.blogspot.com

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