Can anyone explain please? Paying tax on claim.

[lynbrown]

I cant follow the latest scam. If an MP pays an accountant �1000 to do his taxes, and the MP then claims the �1000 as an expense ( having handed it over to the accountant who did the work), at what point does the MP have to pay tax? Should the claimed �1000 be treated as income?

[VHG]

Well it could be argued that most of their expenses should be treated as income and taxed.

When I had a company car I had to pay tax on it as it was a "perk" of the job.

The rest of us earn our money, pay 25% or more tax on it, THEN go out and buy things (so a �750 TV actually means we have to EARN �1,000 to buy it).

But these MPs are claiming around �20,000 a year in expenses, but paying no tax on that money, so that is like them earning �25,000 or more a year.

This is partly what all the fuss is about (that and the fact that these expenses were supposed to be for "essentials").

[buildersmate]

In every other 'profession' (and in this case I use the word loosely), HMRC agrees a tight band of specific expenses that can be claimed against tax. The general principle is that the expenses should have wholly and necessarily be incurred in doing the job. In the absence of such an agreement with HMRC, the 'rules' are even tighter about what can be claimed - extending to a few old stalwarts like private car usage at 40p per mile, the exact cost of overnight stays away (on receipt of bills). Everything else is not allowable as a tax free expense - meaning that tax at the marginal rate (40% in the case of MPs) and NI should be paid on it. The cost of the NI alone is 23%. Therefore when an MP claims �20k pa in 'allowances' the actual value of the claim because no tax/NI is paid is actually more than �45k pa.

Here we now discover is a system that allows this particular 'profession' the right to make the rules up as they go along - without the apparent direct overseeing by HMRC. At the very least, the Tax Inspector responsible for Westminster SW1 area should be fired for not doing his job properly.

[New Judge]

Yes, builder is quite right.

The additionally galling feature of this particular aspect of the scandal is that normal mortals are specifically prohibited from offsetting accountancy fees for personal income tax advice against their tax bill.

HMRC guidelines says this and it justifies it by saying that it is not proper for individuals to claim tax free status for such accountancy advice when that advice is designed to reduce one�s tax bill.

But that, of course, only applies to �ordinary� people.

[fredpuli47]

An example of how tightly (and sometimes strangely) HMRC controls expenses:
Barristers who practise from chambers (their office) in London are entitled to claim only for travel from the London office to whatever court their case is in. They are not allowed the travel cost of travelling from home to the office or back nor for taking transport from home to the court directly i.e. without going via the office..And, surprise, surprise, any barrister who keeps two or more homes isn't entitled to claim the cost of any of them as expenses LOL That the lawyers can't get away with a tax fiddle just shows how bad the MPs must be!