A client recently asked me why MP’s are able to claim for Widescreen TV’s, expensive rugs, leather setees etc etc and not have a tax liability. All these things wouldnt normally be allowed as expenses.

The reason is a piece of law that MPs have passed which applies only to their own expenses. It is S292 ITEPA 2003. This law gives exemption from tax to any expense paid in accordance with a resolution of the House of Commons.

So they are exempt from the usual test as applies to everyone else in terms of an expense being necessary for their duties as an employee. S292 states that allowance is given for expenses “expressed to be” in respect of additional expenses necessarily incurred by a Member…..in performing parliamentary duties.

The Green book explains for MP’s the code of conduct on expenses adopted in 1995. This states in respect of expenses for staying overnight away from their main home MP may claim for the following costs:

  • Rent or mortgage interest
  • Hotel expenses
  • Utilities and telecommunications chages
  • Furnishings
  • Maintenance, service agreements, cleaning and insurance
  • Subsistence

So providing an MP expresses an expense to be in performance of his or her duties and that expense is approved by the Fees Office then it is not subject to tax.

Isn’t it typical

  • Dream up a law that applies only to them….600 odd people out of a working population of millions
  • Make things complicated, so people can’t really see what is going on

Part of the problem of course is that the Fees Office have been approving expenses which the Inland Revenue would not dream of allowing. Duck islands, moat clearing, patio heaters, wisteria removal, tennis court repairs, dog food – the list is endless!

Why do we need such a complicated system?

Surely the solution is to adopt a simple transparent system?

If your constituency is outside London, then you need somewhere to stay in London. Some state owned accomodation could be made available, perhaps together with an alternative option to receive a fixed sum perhaps a maximum of say £100 per night. Transparent, simple but perhaps less lucrative for those involved!

Update 27th May 2009

The Daily Telegraph has reported that HMRC issued a statement yesterday (Tue 26th) to say that MPs were not exempt from tax laws and that tax must be paid on some expenses.

“It’s a general principle of tax law that accountancy fees incurred in connection with the completion of a personal tax return are not deductible.

“This is because the costs of complying with the law are not an allowable expense against tax. This rule applies across the board.”

So HMRC are clearly saying the Fees Office has been wrong in approving these expenses.

It seems to me MP’s are in the embarrassing position that these expenses are not taxable because of the law they have created just for themselves, even though HMRC is clearly saying they should be taxable.