13 May 2009

The strange case of Hazel Blears and the HMRC

If only we had a word for "Schadenfreude" in the English language - we would be getting such great value out of it at the moment, which is more than you can say about our Members of Parliament and their fondness for claiming the maximum possible allowances for everything from plasma screens to drawbridge wax (OK, that may not be entirely factual).

But more significant than over or "mistakenly" claiming for the odd bit of dog food, is the tax implications of all of this - or more precisely the capital gains tax implications of desingating a house as your primary residence for tax purposes and your second home for expense purposes.

One of the offenders in this respect, Hazel Blears, has said she is paying the tax on the £45,000 profit she made on the sale of her "second home" and has been waving around a cheque made out to HMRC. Aside from the point that she is paying £13,332 on a reported profit of £45,000, which is about 29.6%, which is nice for her given that the higher rate on earned income is 40% - or 50% (or even 60% - see earlier post), I am not aware that HMRC accepts voluntary donations of tax.

Mrs Blears is apparently making the payment on a without prejudice basis. This is just as well, as if she admitted having fiddled her taxes, she would be in line for interest, penalties and possibly prosecution (although, frankly, unlikely where a taxpayer fesses up before the HMRC investigate....).

So what will HMRC do? Will they bank the cheque, say thanks a lot and no further questions? Or will they say if the tax is not due they have no jurisdiction to collect it? And what if they return it, will Mrs Blears donate the money to charity? If so, Shelter might be appropriate.

: This post on Ben Brogan's blog appears to confirm my assumption that the HMRC can only take what is in fact due to it and a voluntary overpayment will (if not repaid) be set against future liability.

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