MPs 'should return second-home sales profits'

Published on Tuesday 16 February 2010 21:59

MPS should be forced to surrender any profits they make from selling taxpayer-funded second homes, the new watchdog on parliamentary expenses has declared.

Sir Ian Kelly, head of the new Independent Parliamentary Standards Authority (IPSA), said it was wrong for MPs to cash in on the property market when the taxpayer had met the cost of their mortgage interest and running costs.

MPs may now face bills running into tens of thousands of pounds for their second homes, if and when they choose to sell up.

It emerged last year that not only had many MPs made huge profits selling taxpayer-funded flats, but that they had also "flipped" their designated second home beforehand, thereby avoiding capital gains tax.

The mechanism by which MPs will be forced to pay back any paper profits was still unclear last night, with officials suggesting that the valuations for the second homes would be based only on their price at the end of 2009.

Meanwhile, sources at the Scottish Parliament suggested that any attempt to claw back profits from MSPs would be unenforceable. It follows a review of MSPs' expenses, which rejected any attempt to force them to surrender profits already made, under legal advice.

Sir Ian said he would be asking HM Revenue and Customs to decide how far back to go when calculating the profits made by MPs. If HMRC provides a solution, it will put the authorities at Holyrood under pressure to follow suit.

Sir Ian said yesterday that a scheme to force profits to be paid back was a "central question" for the new watchdog. The IPSA is being created as a result of last year's expenses scandal, with a remit to clamp down on Westminster's culture of expenses.

Sir Ian added: "Gains made in that way should not be retained. The mechanism for doing it is the only question we have to decide."

Sir Ian said he agreed with the chair of the independent inquiry into MPs' expenses, Sir Christopher Kelly, who also backed the call. "The view Kelly took, and we take, is that that gain ought to be surrendered because it is made courtesy of the taxpayer."

MPs who represent seats outside central London have been able to claim back up to 24,000 a year in mortgage and living costs for their second homes. Similarly, MSPs outside Edinburgh are able to claim 11,400 a year for their living costs.

The practice had prompted several revelations about both MPs and MSPs making huge sums on the booming property market.

A review of MSPs' expenses undertaken last year decided to phased out the housing allowance from 2011 onwards. Westminster is also phasing the allowance out, over a longer time-frame. But the Westminster authorities' claw-back plan goes a step further than the Holyrood scheme.

A Holyrood source said "This was looked at when our system was examined and the legal advice was that you simply couldn't do it."

SCANDALS

THE MPs' expenses scandal brought forward several cases where MPs were found to be benefiting from their second home.

Liberal Democrat MP Evan Harris made 200,000 by selling his taxpayer-funded home to his parents. He bought it for 150,000 in 1997, claimed 80,000 for its upkeep, and then sold it last year for 350,000. He has pledged to pay back the profits to the taxpayer.

Tory MP Anne Main was told to repay 7,100 after claiming for a rented flat in St Albans where her daughter lived rent-free. Her own family home was 20 miles away.

Former minister Hazel Blears, left, avoided paying capital gains tax on the sale of two properties by "flipping" them. She told the Commons authorities they were her second home in order to claim expenses, but told the tax authorities they were her main home. She repaid 13,000.