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MPs 'should repay home profits' MPs 'should give up home profits'
(about 8 hours later)
The head of the new authority tasked with overhauling MPs' expenses has said profits made on taxpayer-funded second homes should be "surrendered". MPs should not keep profits made on the sale of taxpayer-funded second homes, says Parliament's new expenses chief.
Sir Ian Kennedy told the Times gains made from rises in the value of properties should not be retained. Sir Ian Kennedy told the Times profits should be "surrendered" - but it was up to HM Revenue and Customs to manage it.
"The mechanism for doing it is the only question we have to decide," he said. He also said the tax authorities should decide how far back to go when calculating profits.
Sir Ian is chairman of the new Independent Parliamentary Standards Authority (Ipsa), set up in the wake of the MP expenses scandal last year. Some MPs have been accused of making tens of thousands of pounds after selling homes on which the taxpayer paid their mortgage interest.
He said sitting MPs and candidates would know the details of his new expenses regime by the end of March. Lib Dem leader Nick Clegg has repeatedly criticised the practice, saying it amounted to some MPs becoming "spivvy property speculators, trading up from one home to the next for personal profit".
'Courtesy of the taxpayer' 'Central question'
MPs from outside central London are permitted to claim back the interest on mortgages taken out on second homes, to reflect the additional cost of maintaining a base near Westminster as well as in their constituencies. In the wake of the MPs' expenses scandal last year an independent inquiry said all claims for mortgage payments should be banned and instead MPs should rent second homes.
It said those who already owned second homes should be able to keep claiming for up to five years - but should have to give up any profits made from that point on - in November 2009.
The view Kelly took and we take is that gain ought to be surrendered because it is made courtesy of the taxpayer Sir Ian Kennedy Thousands voice expenses views Expenses authority to cost £6.6mThe view Kelly took and we take is that gain ought to be surrendered because it is made courtesy of the taxpayer Sir Ian Kennedy Thousands voice expenses views Expenses authority to cost £6.6m
Until now, they have been able to pocket any profit when they sell their homes - though they have to pay capital gains tax if the property is classed as a second home for tax purposes. There had been suggestions that Sir Ian - who is deciding which of the inquiry's recommendations to take forward - might seek to water down that proposal.
Last year's report on MPs' expenses chaired by Sir Christopher Kelly recommended an end to taxpayer-funded mortgages, following a transitional period. But he told the Times: "This is a central question for me. Gains made in that way should not be retained.
Sir Christopher also said MPs should forfeit any rise in the value of second homes between the publication of his report in November and the implementation of the new allowances system. "The mechanism for doing it is the only question we have to decide.
Although Ipsa is not required to follow the Kelly recommendations, Sir Ian told the Times he agreed with Sir Christopher. He said he agreed with Sir Christopher Kelly - who chaired the independent inquiry: "The view Kelly took and we take is that that gain ought to be surrendered because it is made courtesy of the taxpayer."
"The position we take is that gains - an increase in the equity value of the property - should be surrendered to the state in one way or another," he said. However he said it would be up to HM Revenue and Customs to collect the money and decide how to manage it.
"The view Kelly took and we take is that that gain ought to be surrendered because it is made courtesy of the taxpayer." New system
It was unclear whether Sir Ian wanted the clawback to be retrospective or to come into effect when the new system is implemented following the election. And he said it might require Parliament to pass new legislation or rules, before the general election, to allow tax officials to do so.
He said that would be a matter for tax authorities to decide. Sir Christopher has said without "clawback" of profits it would be difficult to justify making transitional payments and said it could be enforced by making any further payments "conditional" on MPs agreeing to give up profits when they sell the property.
If HM Revenue & Customs lacked powers to retrieve the cash, Parliament should legislate before the election to allow it to do so, he said. Sir Ian was selected to head the new Independent Parliamentary Standards Authority, which will run a new expenses system, by a committee of long-serving MPs.
He also defended Ipsa's £6.6m start-up cost - six times as much as MPs have been ordered to repay after an audit of their second home claims. He has been consulting on a range of proposals including stopping MPs employing relatives and ending large pay-offs to retiring MPs.
Sir Ian told the Times there would about 60 staff and the running costs would be below that of its predecessor, the Commons Fees Office. On Monday it announced that 2,703 people had responded to the consultation and the final details would be published by the end of March.
Meanwhile, Ipsa announced on Monday it had received more than 2,500 responses from individuals and organisations during the public consultation on proposed reforms to the system of MPs' expenses. All MPs other than those representing seats in central London have previously been allowed to claim back mortgage interest payments on their second homes - up to about £24,000 a year - as well as other costs.
It allowed them to maintain a home near Parliament and one in their constituencies and they were allowed to keep any profits made when they sold the property on.
But when receipts were leaked showing how MPs had used the allowance, some were accused of "flipping" their second homes, refurbishing one at public expense before switching claims to another, and of making huge profits on sales.
Others were criticised for labelling a property as a "second home" for expenses purposes - but as their main home for tax purposes, allowing them to avoid paying capital gains tax when they were sold.
The system is being overhauled and a new one is expected to be in place by the start of the next Parliament.
In the interview Sir Ian also defended the £6.6m start-up cost of the new expenses body - six times as much as MPs have been ordered to repay after an audit of their second home claims.
Sir Ian told the Times there would be about 60 staff and the running costs would be below that of its predecessor, the Commons Fees Office.