Tax evasion - I really do not think so
I was horrified this morning to hear on the radio a reference to tax evasion over the fact that MPs are making capital gains tax elections on their second homes and so not paying tax on the sale. A number of issues crossed my mind:
- if it is legal it is not evasion - avoidance possibly, but that is not a crime (whatever people say)
- an individual (or married couple) may have only one principal private residence. If they elect for this to be their second home in London, then for that period, their other home falls within the capital gain regime and on sale of that property some tax will be payable
- many individuals with two homes are using the law to defer tax until the second property is sold. This is proper planning and to be honest, any competent adviser would have at least considered this aspect
- should a change in a long-standing law be undertaken on a whim just to penalise MPs. Any change in the law will hit a lot of ordinary people who have done nothing wrong.
Whatever the rights and wrongs of MPs' expenses, accusing them of tax evasion is a step too far. Knee-jerk reactions to this type of headline will hurt many people, not just the MPs.
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Cathy Corns is a Corporate Tax partner at Mercer & Hole.
Date: 11th May, 2009
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