Self assessment

Another allegation is raised concerning a New Labour minister. The work and pensions minister, James Purnell, is alleged to have provided inconsistent information to Parliament and to Customs and Revenue:

The controversy centres on a flat that he bought in London before becoming an MP and his Manchester constituency home, which he acquired several years later. He was able to claim thousands of pounds of MPs’ expenses on the London home and is accused of exploiting a tax loophole to avoid a huge bill on its sale.

Purnell, the work and pensions secretary, received about £20,000 a year in allowances on the London flat because he had told the Commons authorities it was his second home.

But when he sold the flat in October 2004 he told the Revenue that it qualified as his main home, allowing him to escape thousands of pounds in capital gains tax charges, which can be levied at up to 40%.

According to the article in The Times, James Purnell bought the flat in 2000, and started collecting £20,000 a year in expenses from Parliament when he declared the residence as his second home. He sold the flat in October 2004 and avoided capital gains tax by stating that the flat was his main residence.

There is no suggestion that Purnell broke tax laws or flouted Commons rules, but Mike Warburton, of Grant Thornton, the accountants, said: “The rules around capital gains tax are very complicated and there are plenty of ways to get around them if you know how. The difference is, of course, that MPs can also claim lots of tax-free allowances and expenses to run these second homes.”

If this is the case, then there is no story. But if you state that your flat is a second home in one financial transaction and is your main home in another financial transaction, both of which are to your advantage, then the above paragraph becomes inadmissible. This is not a good advert for self assessment.