Danny Alexander has made a statement, following an article in the Telegraph on Sunday night, which reported that he had avoided paying Capital Gains Tax on a south London property in 2007:
My wife and I bought our property in Elspeth Road in 1999, we sold it and moved to the current property in June 2007.
Until the spring of 2006 this was the only property we owned. I had rented a place in Aviemore until then, we subsequently bought a place there and moved into it.
I have always listed London as my second home on the basis set out in the parliamentary rules as I spent more time in Scotland than I did in London.
I sold the Elspeth Road flat in 2007 and moved to another flat but was advised that CGT was not payable because of the operation of final period relief, which exempts homes from CGT for 36 months after they stop being the main home. I paid all the taxes required but CGT was not payable on the disposal of my Elspeth Road flat.
I have already publicly declared that I will pay Capital Gains Tax if the time comes for me to sell my second home.
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97 Comments
Can’t imagine that there would have been any gain in the period when he was an MP (May 2005 to June 2007) and owner of this property. Prices of properties were generally static or falling then.
In any case this shows that all the Telegraph are interested in is seeking to undermine Lib Dem ministers and the governmnet.
I think their editor should resign .
What I do not understand is why MPs – who usually need a second home in order to DO their job – would have to pay CGT on this.
Nick Clegg has been very adamant that no Lib Dems would treat homes differently for tax and expenses purposes. Danny Alexander has fallen foul of that, at the very least.
Typical media, always seeking the negative! on sky just now heasdline was coaition government in crisis, then the story is both conservative and Liberal Dermocrat MPS suporting David Laws! Hopefully David wil stay in politics.
I’m sick of the Telegraph right now.
They got this information before the election. To only release it now is a flagrant attempt to undermine the coalition which is not in the interest of this country.
Andrea, CGT is perfectly acceptable on an MP’s second home IMO if they profited from it. In this case, I don’t believe Danny did in the period he was an MP and that the gains were made when the flat was his only home.
Chris Mills, the Telegraph are being vindictive and spiteful in pursuit of their capital gains tax agenda. It is appalling journalism, but the facts themselves seem correct to me.
Danny Alexander seems to have profited from an increase in capital value in the flat paid for by the taxpayer between 2005 and 2007.
Mr Alexander declared his property his secondary residence for the purpose of getting expenses but it his primary residence for the purpose of avoiding tax.
This is worse than anything Mr Laws is supposed to have done, this is deliberate, fraudalent lying. It is dishonest, immoral deceit.
The Telegraph are just making themselves look ridiculous now.
So the Telegraph story is a complete non-story. As I understand it, there’s no aspect of “one law for them, another for the rest of us” about this, since the final period relief applies to anyone, MP or not.
That Danny treated this house as his main residence for the purposes of CGT is hardly surprising, since it is the only residence that he had owned until less than a year before he sold it. Even if he designated the property in Aviemore as his primary residence when he bought it in 2006, there would have been no change in the CGT liability on the London property when he sold it, since the rule on final period relief states:
. So if it was Danny’s primary residence at any time in his ownership of the property, it qualifies for the final period relief. And, like I said, that’s a relief to which everyone is entitled.
Anyone who’s more up on their tax stuff than me see any holes in what I just said?
Perhaps someone should point out this article to the Telegraph: http://www.telegraph.co.uk/finance/personalfinance/consumertips/tax/2811055/Home-sweet-second-home.html
How about new campaign for Editor of Telegraph to resign over spurious stories aimed at political interference…
The story is complete and utter rubbish and they should pay with their jobs for this blatant attempt to fix our country!
Can’t believe that lots of posters on this site still believe that the DT is anything other than out to tell us all how to run the country with only their own vested interests at stake.
So, it’s ok for Liberal Democrat politicians to lie and commit fraud then?
@Coalition Liberal hahahahahahahaha. Proof of the Hypocrisy of the Telegraph.
@C H Ingoldby perhaps you’d like to check the HMRC Link provided and work out that no fraud was committed, even the Telegraph agree that “There is no suggestion that Mr Alexander has broken any tax laws.”
Methinks that Mr Alexander should contact a solicitor regarding a possible libel claim.
Paul,
We could also usefully remind everyone of the following:
(1) The current whereabouts of the “Torygraph’s” former proprietor – that well-known paragon of virtue and commercial integrity, Mr Conrad Moffat Black.
(2) The place of residence of the “Torygraph’s” present proprietors, and why they choose to live there.
Chris Mills,
Mr Alexander claimed that his property was his primary residence for the purpose of reducing taxation at the same time as claiming it was his secondary residence for the purpose of claiming expenses.
That is dishonest and fraudulent behaviour.
@C H Ingoldby prove the lies and fraud that Danny supposedly committed. He acted within the tax laws, not for MPs but for the general public. You or I could sell a second home in the same way that we had (within the last 3 years) lived in as our main home and not pay CGT.
@C H Ingoldby.
He did no such thing…
“I have always listed London as my second home on the basis set out in the parliamentary rules as I spent more time in Scotland than I did in London.”
He sold the flat as his second home within 3 years of it being his primary home. Perfectly legally
Before you label me a ‘troll’, I make no secret of the fact that I’m a Labour Party member. My party has been persecuted by most of the press for as long as I can remember, and Gordon Brown had to endure a spiteful and vitriolic campaign against him throughout his premiership.
‘The Telegraph’ will publish its stories when they are likely to have their maximum effect. Unless of course they’ve only just received their information. Perhaps Alastair Campbell (who was snubbed by Laws on ‘Question Time’) and Peter Mandelson have been enjoying themselves, they seem to know where all the bodies are buried!
The more likely scenario is that ‘The Telegraph’ has decided to help the Liberal Democrats down their chosen path of self-destruction, after they turned their backs on their progressive supporters. This government isn’t right-wing enough for ‘The Telegraph’ because it is a coalition. It could be that the paper believes that another election soon, before the cuts make the Tories unpopular, will see the LD vote disintegrate, and even if it divided equally between the Tories and Labour, it should just give the Tories a majority. Then more of the ‘nasties’ can come crawling out of the woodwork and inflict on us a real regressive right-wing Tory regime in the traditional manner. Just my theory.
Chris Mills.
Mr Alexander claimed his property as a primary residence for the purposes of avoiding tax at the same time as claiming it was his secondary residence for the purpose of claiming expenses.
What part of that is confusing you?
C H Ingoldby, the quote you are making is from the Telegraph – they are wrong WRONG and they’ve misquoted him. Wait for the libel writs to fly on this… THERE IS NO CGT and there have been no lies and no fiddles.
Paul, i hope very much that libel writs ‘fly’. I would love to see this matter attended to in a real court.
Bert Finch
Thanks, fact is this story is wrong – made up.
Yes Labour MPs and Cabinet ministers were attacked over expenses and most of that was true…
How about new campaign for Editor of Telegraph to resign over spurious stories aimed at political interference…
C H Ingoldby
Mr Alexander claimed his property as his primary residence until 2005 when he became an MP. That’s because HE LIVED IN LONDON. At the time he worked in a press office in London.
He rented a flat in his constituency when he was elected and spent more time there than in London. Legally, his London flat became his second home.
In 2006 he bought a place in his constituency. His London flat remained his secondary home until 2007 when he sold it.
This was within 3 years of it becoming his second home and therefore qualified for “final period relief”
The facts are rather clear.
Alexander has to go. Roll on an October election.
Paul, you actually want newspaper editors to resign for having political agendas? Are you completely stupid? The whole point of a free press is that you get different papers with different political biases.
As for this story being made up, it seems pretty serious to me. Mr Alexander claimed a residence was his primary residence when it came to tax but claimed it was his secondary residence when it came to claiming expenses. Straightforward contradiction there.
Bert Finch wrote:
“after they turned their backs on their progressive supporters”
It isn’t the Liberal Democrats who have turned their backs on their progressive supporters, it is the Labour Party that has done that.
How can a progressive voter conscientiously support a party that does the following?
(1) Joins Cheney’s illegal war for oil in Iraq?
(2) Lies to Parliament to get it to support UK involvment in Cheney’s illegal war for oil in Iraq?
(3) Covers up the murder of a UK scientist by agents of a foreign government?
(4) Sells peerages?
(5) Declines to refer a bid by porn king, Richard Desmond, to buy Express Newspapers to the Monopolies and Mergers Commission in return for a contribution to Labour Party funds?
(6) Pursues the control agenda at the behest of a foreign government?
(7) Widens the gap between rich and poor?
Moreover, the BBC’s role (R4, I follow, but possibly not for much longer) has been completely nauseating, disgusting. In terms of ‘agenda setting’ they’ve been toadying to the Telegraph on this one, but very much making the issue their own (viz. Sean Lay on Sunday’s World This Weekend, Carolyn Quin on Sunday 10 pm news) as they cannot stand the Coalition getting in the way of their pro-nuclear agenda. Quin had the nerve to query, in her bleating way, why Chris Huhne wasn’t given the Sec to Treasury role instead of Danny Alexander – this would have just suited her fine as she is a maniac pro-nukie – and Huhne would thereby have been taken off the Energy portfolio. This stymieing of their nuclear dreams just doesn’t suit the Booby C … They kept any possibility of an energy debate scrupulously off the air-waves for the duration of the election campaign, and now feel they’ve no option but to fight a rear-guard action. Vested interests in Canada Sqaure and Brecqhou have the same agenda …
C H Ingoldby:
Where is this “free press” about which you speak?
Are you referring to the newspapers owned by Rupert Murdoch, the Barclay brothers, Lord Rothermere and Richard Desmond, by any chance?
Don’t be so naive Sesenco.
Sesenco. I would agree that Labour in office was not as progressive as it should have been, but there’s nothing progressive about sitting in a Cabinet with Hague, Duncan Smith, Pickles and Fox.
The history books tell me that it was the Liberal Lloyd George who started the practice of selling peerages and it has, in effect, continued ever since.
I didn’t support the invasion of Iraq but whether or not it was illegal is still a matter of conjecture (for example, UN Resolution 678 from 1991 was still in force but was regularly flouted by Saddam). As to Dr Kelly being murdered by foreign agents, that sounds a trifle far-fetched.
The Lib Dems are not exactly squeaky clean when it comes to donations – didn’t you get a large wedge from a geezer who went on the run?
I must congratulate the Liberal Democrats on this excellent website, where there is plenty of sensible discussion and it is mainly conducted in a polite manner.
Labour Home has, to all intents and purposes, been destroyed by a handful of Tory trolls and malcontents who attack virtually every posting from Labour posters (often with foul language) in order to drive them away. The editor, Alex Hilton, is a really nice chap, but his libertarian instincts have been abused and the site now resembles a graveyard, with many of the blogs attracting no responses at all.
Don’t let troublemakers spoil this site, please!
I think the important point, which doesn’t seem to be registering enough, is that this is just what happens when you are in Government. It may not be pretty, fair, reasonable, healthy, often related to fact, conducive to good government or nice. It is however the way it is. It should have been factored into the price of joining the coalition in such dificult circumstances but I get the impression a lot of people are really rattled less than 3 weeks in. The criticism so far is still at Homeopathgic levels compared to what’s coming over the spending cuts.
The other factor is the very deliberate strategy of going on expenses in the election as a plus point for the party means loads of people will enjoy every little or even large infraction. I don’t see any alternative to putting up with it.
David – Maybe we do all need to grow thicker skins but taken with the mean-spirited attack on David Laws yesterday, the spurious article in the Mail about Lynne and now this frankly libelous nonsense against Danny Alexander it really does look like the Mail and Telegraph are determined to do what Tory MPs now can’t publicly do – sling mud and rip chunks out of our party.
These are not random events. This is co-ordinated.
Either the Conservatives are carrying out a war by proxy or the Tory press are now operating like General Ripper in Dr Strangelove – without instructions in what they perceive is their party’s best interest. We’re getting nuked regardless.
If Cameron cannot keep his troops in line then there will come a time when it is better for us and for the country to pull out and let him carry on alone.
“Who governs?” as Ted Heath might have said.
Benjamin,
You are quite right – this is coordinated and because of the early successes it may well intensify quite quickly. You are also right to implicitly correct me when I said we had no alternative but to put up with it. We could of course pull out though that its self would have shattering consequences in terms of media credibility if it was perceived that we just couldn’t hack it.
The great strength and the great weakness of the coalition architecture is it has burned all our boats. The super majority for disolution, the extraordinarily intimate iconography used between Clegg/Cameron at the coalition launch and the scale of Lib Dem ministers embedding in the government structures.
Burning your boats in an incredibily powerful psychological strategy its just that if you do end up being pushed back to the seaby war, famine, disease and the indigenious population then you get wiped out.
Come on LibDems, what are you playing at, The coalition isn’t going to make it past July at this rate.
And Labour wont have a leader until September so get your bloody act together. The trouble with your MPs is that they think nice MR Cameron represents the Tories, he doesn’t , and you are going to be ripped apart by this unholy union.
Does anyone fancy a trip to the Channel Islands to pay a visit to the Barclay brothers (non dom owners of the Telegraph) to ask for our taxes back?
Tony Blair made quite a good speech about the damaging effects of a rapacious media struggling to with the changes foisted upon it, in a news culture where motive was attacked rather than judgement: dismissed by many as sour grapes. Not wrong, thought, was he?
Mr Alexander has shown elementary financial competence is his conduct of his private affairs. I find this encouraging in a Chief Secretary to the Treasury – in the national interest, even.
@ Paul “Can’t believe that lots of posters on this site still believe that the DT is anything other than out to tell us all how to run the country with only their own vested interests at stake.”
I can believe there are Lib Dems on here that cannot see it right now, but if the Telegraph keeps this up for just a bit longer, it is going to get so obvious that surely everyone except the blind fools who actually worship the Telegraph will be able to see it.
It is quite obvious to me, after apparently getting away with it over David Laws, the Telegraph now thinks that it can tell the British public what the truth is. Look at it from the Telegraph’s point of view – they have no reason to believe they need facts, and no reason to worry that people will think rationally or critically about their stories.
Who is CH Ingoldby anyway? Any other blog / forum would describe him/ her as a troll. And what does (s)he mean naive, about Sesenco?? Who is (s)he trying to deceive in terms of the balance of the media in this country? What utter rubbish! The vast majority of the print media in this country is Tory / right wing orientated. This of course has also infected TV and other broadcast media – just having seen the interview on BBC with Andrew Pearce of the Mail (formerly Telegraph), it was clear that Susanna Reid found herself constrained not to ask the question screaming to be asked – “Is this a right wing press agenda, Mr Pearce?” So they try to undermine anything which does not carry that agenda. Hence attacks on the coalition and Lib Dem members of it. Freedom of the press should not imply freedom to print rubbish.
@trurojoe – Yes. More scrutiny of the Telegrapgh owners tax affairs would be welcome.
If the best that rag can do is to print ‘There is no suggestion that Mr Alexander has broken any tax laws.’ perhaps they’ve run out of ammunition? What they haven’t taken into account is that the public are not stupid, and they like gratuitous mud-slinging by the press about as much as they like corrupt politics. The mud splatters back on those who sling it. It’s a dirty business but really, they’ve gone so far now it’s becoming an absurd mud-pie throwing farce.
Doh! Telegraph owners’ tax affairs, of course.
Wouldn’t it be great to – somehow – get hold of the tax affairs of the Telegraph owners, editor and senior staff? If any newspaper did, it surely could use the “public interest” defence as it’s important to see that those making accusations about others are entirely beyond reproach themselves.
Alternatively, the Barclay brothers et al could just decide to be open and transparent and publish, in full and without “redactions”, their financial position, so that we can see they are holding themselves to the same standards to which they expect others to behave.
This does seem a non-story to me.
I assume that – in line with Nick Clegg’s pledge last year – a Lib Dem MP in a similar situation now would pay some CGT voluntarily. But Danny Alexander couldn’t have been expected to foresee that four years ago.
Again, I cannot believe the blinkered view here from the Lib Dem apologists. He exploited loopholes in the Tax system and the expenses system for personal gain.
He avoided CGT on his ‘second’ home by using the 36 month loophole to tell HM Customs and Excise it was his primary residence; whilst at the same time claiming expenses on it as his second home. On the sale of his second home he clearly made a profit at the expense of the taxpayer both by avoiding CGT and from the maintenance and repair carried out, which he claimed as expenses.
This is another Lib Dem MP who has exploited the system for personal advantage. No amount of whinging about a Telygraph or Labour conspiracy is going to change that.
Nick Clegg now needs to do three things. Firstly apologise for being so sanctimonious about Lib Dems and expenses and admit there is a problem in the party. Secondly say that he will not stand for these abuses and will take action. Thirdly get the affairs of all his MPs properly audited.
OF course Kitty Ussher resigned as a Treasury Minister when she was found to have done the same thing. http://en.wikipedia.org/wiki/Kitty_Ussher
Perhaps someone who understands how LibDem principles differ from those which apply to mere mortals could explain the difference in Danny Alexander’s case. The only difference I can see is that Kitty Ussher as a trained economist had some qualifications for the job.
@ CH Ingolby and Toryboysnever grow up –
Elspeth Road was the only residence he owned until 2006. It was sold in 2007.
HMRC rules state that the final three years always qualify for relief from CGT – even if the person was not living at the property – as long as it has been their only or main home at some point during the time they owned it.
This is the application of the law, not abuse of expenses. It’s The Torygraph attempting to tear the Government apart.
“I assume that – in line with Nick Clegg’s pledge last year – a Lib Dem MP in a similar situation now would pay some CGT voluntarily”
Actually, I assume that a Lib Dem MP would pay not “some CGT” on the gain, but the amount of the capital gain over the period s/he was an MP. I believe that is the pledge.
Grammar Police
The argument isn’t one of legality but of morality. I’m perfectly aware that CGT law allows someone to nominate any of their residences as the main home on which they receive the exemption from CGT. But is it moral that the CGT main home should be different from that which is used for parlimentary expense purposes? Kitty Ussher clearly felt, in almost the same circumstances that it wasn’t – she also siad that she hadn’t done anything illegal. Danny Alexander was in the meantime in Clegg’s office presumably helping Nick issue proclamations about flipping etc. I’ll let others decide who behaved proiperly and who didn’t.
“But is it moral that the CGT main home should be different from that which is used for parlimentary expense purposes?”
Unless I’m misunderstanding, that wasn’t the case with Danny Alexander. He is quoted above as saying “I have always listed London as my second home on the basis set out in the parliamentary rules as I spent more time in Scotland than I did in London.” I assume “always” means from the time of his election in 2005 onwards.
The case of Kitty Ussher seems to be quite different. If I understand correctly, she had been designating her constituency home as her main residence for parliamentary purposes, but her London home as her main residence for tax purposes. She redesignated her constituency home as her main residence for tax purposes just a month before selling it in 2007.
@ Steve D
“He avoided CGT on his ’second’ home by using the 36 month loophole to tell HM Customs and Excise it was his primary residence; whilst at the same time claiming expenses on it as his second home. On the sale of his second home he clearly made a profit at the expense of the taxpayer both by avoiding CGT and from the maintenance and repair carried out, which he claimed as expenses.”
He didn’t tell HM Customs and Excise anything as they went out of existence in April 2005.
Until 2006 it was the only property he owned. He owned two properties from 2006 with the Scottish one becoming his main residence for tax and parliamentary claims expenses. According to HRMC rules his second home in London would not become liable for CGT until 2009. He sold it in 2007.
As to describing the final period relief on CGT as a loophole, a quick google search shows the only matches where the term loophole is used are for this Telegraph article and stories related to it.
I also believe that Steve D failed to pay income tax on his first £6,475 of income in the last tax year due to a tax personal allowance loophole. Can you confirm that you used this loophole?
Am I the only one who finds C H Ingoldby unintentionally hilarious?
“The history books tell me that it was the Liberal Lloyd George who started the practice of selling peerages and it has, in effect, continued ever since.”
Given that everyone who was in the Liberal party at that time is long dead I don’t think this is exactly a good basis to be criticising the current Lib Dem party, you could point out that perhaps the history isn’t as illustrious as is painted by historically-minded LDs but I don’t think you can use it to criticise the current party. I don’t criticise the Tories today for the Corn Laws 😛
“The Lib Dems are not exactly squeaky clean when it comes to donations – didn’t you get a large wedge from a geezer who went on the run?”
A large wedge from a geezer who went on the run three years after the donations and of whom there was no suspicion until over a year after the donations. The Electoral Commission seems to think it was all above board based on the information available at the time: http://www.electoralcommission.org.uk/news-and-media/news-releases/electoral-commission-media-centre/news-releases-donations/donations-by-5th-avenue-partners-limited-to-the-liberal-democrats-statementreindex1 http://www.electoralcommission.org.uk/news-and-media/news-releases/electoral-commission-media-centre/news-releases-donations/statement-on-fifth-avenue-27.10.06
“He avoided CGT on his ’second’ home by using the 36 month loophole to tell HM Customs and Excise it was his primary residence; whilst at the same time claiming expenses on it as his second home. On the sale of his second home he clearly made a profit at the expense of the taxpayer both by avoiding CGT and from the maintenance and repair carried out, which he claimed as expenses.”
The 36 month cooling down period applies if it has ever been the primary residence – it doesn’t have to be the primary residence at the time. It is a specific exemption deliberately written into the law – it’s not a loophole for the same reason that not paying VAT on an item which does not have VAT applied to it is not a loophole.
@toryboysnevergrowup
“I’m perfectly aware that CGT law allows someone to nominate any of their residences as the main home on which they receive the exemption from CGT.”
He only owned one property until 2006 and therefore under HMRC rules that’s automatically the property that’s exempt from CGT.
I’ll repeat again:
HMRC rules state that the final three years always qualify for relief from CGT – even if the person was not living at the property – as long as it has been their *only* or *main* home at *some point during the time they owned it*.
I’ve highlighted the relevant bits. When did Danny Alexander become an MP again?
“Unless I’m misunderstanding, that wasn’t the case with Danny Alexander”
Not true – main home Parlimentary expenses – Aviemore
Main home CGT – London
Yes they were reversed for Kitty Ussher – but that does not make a difference when it comes to moral principles I’m afraid. In both cases they led to a reduction in the amount of CGT paid.
The only time you designate homes for CGT purposes is when you sell them – there is no process for prior designation with HMRC.
@ Mark – I think that’s an important point. The Telegraph are trying to make out there’s some level of “designation” – telling Parliament one thing and HMRC another – however, there isn’t. From 2005 he designated the property as his second home for parliamentary purposes. However, from 1999 to 2006 it was the only property he owned and therefore qualifies from the relief from CGT as long as sold within 36 months.
Steve D: you say that Danny Alexander was “at the same time” saying one home was his primary residence for CGT purposes and another for expenses. But he wasn’t. He was saying one home was his primary home for expense purposes and a different home had been his main home at some point in the previous three years (which is what the CGT rules apply to). Given that he’d owned just the one home for two of those previous three years, that’s not exploiting a loophole – it’s stating the obvious truth.
@toryboysnevergrowup
“In both cases they led to a reduction in the amount of CGT paid.”
What action could Danny Alexander have taken which would have given rise to a CGT liability?
Mark Inskip
See the extract below from the HMRC leaflet on private residence relief – I have capitalised the relevant reference. Alexander could easily have reduced the proportion of the gain eligible for relief by ignoring the last 2 years plus when the property was not his main residence, on the basis that it was appropriate to do so. But being the greedy little piggy that he was it looks that he cliamed 100% relief doesn’t it??? As I said legal but not moral.
If the dwelling house has not always been your only or main residence, you
will need to split the gain. When calculating the proportion of the gain
eligible for relief, you multiply the gain by a fraction equal to the periods of
occupation (including the final 36 months where APPROPRIATE) divided by the
period of ownership (both periods starting at 31 March 1982 if the house
was owned before that date). You do not introduce valuations of the
properties at the dates of changes of use.
Of course I should have said above that Kitty Ussher redesignated her constituency home as her main residence for _parliamentary_ purposes a month before selling it.
No, sorry – I had it right the first time. She reportedly re-designated her constituency home as her main residence for _tax_ purposes a month before selling it.
http://news.bbc.co.uk/1/hi/uk_politics/8106193.stm
“The only time you designate homes for CGT purposes is when you sell them – there is no process for prior designation with HMRC.”
That’s not correct. See the HMRC website:
“If you live in – not just own – more than one property you can write to your Tax Office to tell them which one you want to choose – or ‘nominate as’ – your main home. See the link below if you’re not sure where your Tax Office is.
If you wish to make a choice – or ‘nomination’ – it must be made within two years of changing the number of properties you live in. You should make a new nomination whenever the number of homes you live in changes.
For example, you buy a second home in May 2009, you can nominate either this or your usual home as your main home, but you must do so by May 2011.
If you don’t tell your Tax Office which property you want them to treat as your main home, the one that’s treated as your main home will be decided on the facts. This may affect the amount of Capital Gains Tax you have to pay.
If you’re married or in a civil partnership and own two or more homes between you, any nomination must be made jointly and be signed by both of you. You’re only entitled to Private Residence Relief on one home between you.”
http://www.hmrc.gov.uk/cgt/property/sell-own-home.htm#5
Okay folks – here are a few thoughts about CGT…
Given that CGT is an ‘elective’ tax then anyone can avoid paying it by not selling assets at a profit… That could very well mean that every MP is avoiding CGT…
WOW – They are all be preventing the taxman from collecting £millions – what a scandal…
Also all those MPs should be disbarred from making any decisions in parliament as they clearly have personal financial interests.
Nonsense isn’t it, but this is the ‘logic’ being applied by the DT in the name of investigative journalism – they are a disgrace to their profession – I had to check the date but no its not 1st April.
At the very least an apology of some weight is called for, personally I think the Editor should resign.
And of course lets not forget the little matter of the £37,000 in expenses Danny Alexander claimed on his main residence (for CGT purposes) which no doubt enhanced its value and the tax free gain pocketed by Mr Alexander on its eventual sale. Could we have Mr Laws back as his behaviour in moral terms, although perhaps not in terms of complying with the rules, was certainly better than that of Mr Alexander.
“Not true – main home Parlimentary expenses – Aviemore
Main home CGT – London
Yes they were reversed for Kitty Ussher – but that does not make a difference when it comes to moral principles I’m afraid. In both cases they led to a reduction in the amount of CGT paid.”
The point you’re still not getting is that his London home _wasn’t_ his main residence for CGT purposes after he was elected. It was exempt from CGT because it had previously been not just his main residence, but his only residence.
Anthony
Yes you are right – I should I have said there was no requirement to designate your main home. However, what you have said does raise the interesting question as to whether Alexander exefcised his discretion to make such a nomination in advance of the sale so as to make clear his intention to dispose of the property – my guess if that he had done so we would have heard about it by now.
“The point you’re still not getting is that his London home _wasn’t_ his main residence for CGT purposes after he was elected.”
Oh yes it was – he took the option to treat it as such until it was disposed of – as noted above he could have reduced the chargeable gain fraction to reflect that it wasn’t appropriate to treat it as his main residence during part of the last 36 months, especially as he was claiming Parlimentary expenses to do it up before it was sold.
“However, what you have said does raise the interesting question as to whether Alexander exefcised his discretion to make such a nomination in advance of the sale so as to make clear his intention to dispose of the property – my guess if that he had done so we would have heard about it by now.”
The problem is that the author of the Telegraph article either doesn’t understand the rules about CGT or is deliberately confusing the issue. Early on the article says he “described it [his London home] to HM Revenue and Customs as his main home”. But in the more detailed part it says “Mr Alexander took advantage of a tax loophole that allows people to continue to tell the tax authorities for three years that a property is their main home even if they have bought another house – in Mr Alexander’s case in Scotland – which has become their “principal residence”.”
Quite clearly that is not the situation. You do _not_ “continue to tell the tax authorities for three years that a property is [your] main home”. The situation is that if it _has_ been your main home it is exempt for the final 36 months before you sell it.
On the basis of Danny Alexander’s statement, it appears he did not designate the London home as his main residence. If he had done, the 36 months relief period would not have come into it.
“he could have reduced the chargeable gain fraction to reflect that it wasn’t appropriate to treat it as his main residence during part of the last 36 months”
You seem to be misunderstanding the rules in the same way as the Telegraph journalist.
There is no implication that it was his main residence during this period. The period was exempt because it _had_ been his main residence previously.
@toryboysnevergrowup
“Oh yes it was – he took the option to treat it as such until it was disposed of – as noted above he could have reduced the chargeable gain fraction to reflect that it wasn’t appropriate to treat it as his main residence during part of the last 36 months”
Not correct – read the detailed HMRC regulations. The last 36 months is the 36 months after the property stopped being the main residence. Prior to 2006 he only owned one property which he lived in and therefore for CGT purposes this is automatically his main residence. You only have to consider designating which is your main residence for CGT purposes once you own a second property.
The first time there would be any consideration of CGT would be 36 months after he acquired his second property, i.e. in 2011.
Surely the key point is the Danny didn’t change the designation of any property as primary residence – that contrasts with the practice of flipping.
What he did discover on selling his secondary residence was that CGT rules allowed it to be treated as a primary residence and hence no CGT was payable.
In fact at that time he owned two houses, neither of which would attract a CGT liability if sold.
Mark Inskip
You ignore the fact that you do not automatically have to claim the 36 month period when you claim private residence relief. You don’t have to and many people don’t because they want the relief to apply to their new property rather than the old one. I am perfectly aware what the regulations say – I have never said that Alexander was in breach of the regulations. It is moral behaviour which I believe was in inappropriate – and the HMRC regulations did not stop him in behaving in a moral fashion by submitting the last two years of gains on his London property (funder in part through expenses) to CGT.
David Laws – moral but broke the rules. Danny Alexander – stayed within the rules but immoral. What a choice!
@Hwyel
“In fact at that time he owned two houses, neither of which would attract a CGT liability if sold.”
Exactly!
@toryboysnevergrowup
“You ignore the fact that you do not automatically have to claim the 36 month period when you claim private residence relief.”
Don’t be daft, its part of the rules laid down for calculating CGT liability.
The analogy on income tax is stating that you do not automatically have to claim your personal allowance.
“You don’t have to and many people don’t because they want the relief to apply to their new property rather than the old one.”
The rules say that the relief applies to the last 36 months for _any_ property that’s been your main or only residence. Where do you see anything about having to choose which of two properties it applies to?
Fine, the Telegraph and the Mail are picking a fight which they might regret. Liberal philosophy, often stated by Orange Book figures such as Nick Clegg, is to break up damaging concentrations of power. Press reform is long overdue: our media outlets should only be owned by British nationals, resident for tax purposes and strict rules should govern the degree of concentration of media ownership by one person, family or company.
Bring it on, Barclay brothers, if you dare. Bring it on.
You’ll find out just how sharp Liberal Democrat fangs are, if you continue on this course.
@toryboysnevergrowup
See http://www.hmrc.gov.uk/cgt/property/sell-own-home.htm
“The final three years (36 months) always qualify for relief, even if you weren’t living there, as long as it’s been your only or main home at some point during the time that you’ve owned it.”
Mark
In future when you wish to interpret tax rules could I suggest you go and look at the actual legislation – what you say is the case only applies when the dwelling has been the individual’s only or main residence throughout the period of ownership. Alexander’s press release does not say this – only that it was the only property that he owned. What I would find interesting is how his London property was his only or main residence while he was spokesman for the Cairngorm National Park in 2004
223
Amount of relief .(1)
No part of a gain to which section 222 applies shall be a chargeable gain if the dwelling-house or part of a dwelling-house has been the individual’s only or main residence throughout the period of ownership, or throughout the period of ownership except for all or any part of the last 36 months of that period. .
(2)
Where subsection (1) above does not apply, a fraction of the gain shall not be a chargeable gain, and that fraction shall be— .
(a)
the length of the part or parts of the period of ownership during which the dwelling-house or the part of the dwelling-house was the individual’s only or main residence, but inclusive of the last 36 months of the period of ownership in any event, divided by .
(b)
the length of the period of ownership.
@toryboysnevergrowup
From what I’ve seen so far I’m somewhat more familiar with the ‘actual’ legislation. Straight from the HMRC CGT Manual;
“An individual must have an interest in a dwelling house used as his residence for it to be a residence within the meaning of TCGA92/S222. This is because relief is available on the disposal of, or of an interest in a dwelling house or part of a dwelling house. References to a residence in Section 222 should be interpreted on this basis. Therefore, when considering which of an individual’s residences is their main residence for the purpose of private residence relief, it is only necessary to consider those in which that individual has an interest.”
Danny Alexander’s statement says “Until the spring of 2006 this was the only property we owned”
In addition the Manual states;
“TCGA92/S222 (5)
Section 222(5) gives an individual the right to choose which of his or her two or more residences is to be treated as the main residence for private residence relief purposes. It therefore follows that a dwelling house must be in use as a residence of that individual before it can be validly nominated.
In certain circumstances the legislation treats a dwelling house which is not a residence of an individual as if it was their residence for a particular period. See CG64477. This may result in an individual having more than one residence within Section 222 and in these circumstances the right of nomination applies in the same way.
When nominating which residence is to be treated as the main residence, an individual is not obliged to nominate the residence which is factually his or her main residence; they may nominate whichever residence they choose.”
Mark
You know very well that you can have an interest in a dwelling can be established other than by ownership e.g. by a rental agreement or lease. Yes of course you can nominate whichever property you want – I did not claim Alexaander was acting illegally, that would have been plain stupid.
Strangely enough I don’t remember many LibDems referring to this ability to nominate the main residence irrespective of the facts during the last Parliament. Is this what is meant by the new politics?
I’m wondering whether the Telegraph hasn’t already shot its’ bolt.
It’s not like bank holiday weekends in the lead up to a world cup are the best time to make an impact in the wider population, but they’ve gone in hard and fast to satisfy the insistent urgings of their bosses and they’ll have to keep up the pace or suffer the backlash as the counter attacks gather pace.
So if this is all the ammunition they’ve got I almost pity the way they will curl up and whimper as their own weaknesses begin to be exposed.
Let’s see what happens when tax havens are abolished. Let’s see what happens as the corporate loopholes begin to be closed and the public gets behind the improvement in society this brings as we wake up that sections of the media are undermining their own businesses, the wider economy and our democracy. The media must get its house in order.
An example needs to be set. The Telegraph and Mail’s city pages are used on a daily basis by interested traders to manipulate the markets in blatant fashion, so I think the PCC should be forced to prove itself fit for purpose by launching a thoroughgoing investigation or face be reformed.
Serious journalists should take note: gossip is not legitimate journalism. The crowd are agitated and are getting impatient. I think I can see substitutes warming up on the sideline. There is a tasty atmosphere hanging over the arena. Heads are going to roll.
We don’t want fudge, we want blood.
@Oranjepan
“We don’t want fudge, we want blood.”
More than that, we want to see body parts ripped off and vital organs ripped out.
Press reform must come soon.
Oranjepan/Paul McKeown
Funny how you’ve just discovered the Press are abusing press freedom and you want press reform now that they attack a couple of LibDems in power. I wonder how long it will be before you start undertaking personal acts of sabotage?
You really should wait a little longer than three weeks before you jettison former liberal principles such as freedom of the press – they way things are going you won’t have many principles left by Xmas.
I will just point out one part of Danny Alexander’s statement that gives cause for concern.
“I have already publicly declared that I will pay Capital Gains Tax if the time comes for me to sell my second home.”
As I understand it, Nick Clegg is supposed to have committed all his MPs to something much stronger than that – he has said they will repay all capital gains on their second homes. I have always been sceptical about the likelihood of that happening, and this makes me more so.
@Mark Pack
The issue is that he states himself that:
“I have always listed London as my second home on the basis set out in the parliamentary rules as I spent more time in Scotland than I did in London.”
So, he had a rented property in Aviemore until 2006, then a property that he purchased. During this time he was claiming expenses for Elspeth Road as his second home. At the point of sale he says:
“I sold the Elspeth Road flat in 2007 and moved to another flat but was advised that CGT was not payable because of the operation of final period relief, which exempts homes from CGT for 36 months after they stop being the main home. “
The issue therefore is clear, Elspeth Road was his main residence for tax purposes, but his ‘second’ home for parliamentary expenses. Further, at the point he purchased a residence in Aviemore in 2007 he would at some point have had to elect Elspeth Road as his main residence.
If you are happy for MPs to do one thing for a tax benefit and another for parliamentary expenses, then so be it.
“The issue therefore is clear, Elspeth Road was his main residence for tax purposes, but his ’second’ home for parliamentary expenses. Further, at the point he purchased a residence in Aviemore in 2007 he would at some point have had to elect Elspeth Road as his main residence.”
FFS – read the feckin tax rules. He wasn’t liable for CGT on the London property even though it was a secondary residence. He didn’t have to (re)designate as a primary residence.
@Mark Inskip
“He didn’t tell HM Customs and Excise anything as they went out of existence in April 2005.”
Thank you for correcting me, I knew it went out of existence but comments cannot be edited. I’m not sure it negates the point though.
“Until 2006 it was the only property he owned. He owned two properties from 2006 with the Scottish one becoming his main residence for tax and parliamentary claims expenses. According to HRMC rules his second home in London would not become liable for CGT until 2009. He sold it in 2007.”
Funnily enough I know that. It isn’t the point. The point is for the purpose of claiming parliamentary expenses Elspeth Road was his second home. It may not be a loophole (thank you for the English lesson btw), but it is certainly exploited by people to avoid CGT that would otherwise be paid.
As I said to Mark he would also have had to make the decision to elect Elspeth Road as his main residence, but was still happy to claim ‘second’ home expenses on it.
“I also believe that Steve D failed to pay income tax on his first £6,475 of income in the last tax year due to a tax personal allowance loophole. Can you confirm that you used this loophole?”
I have absolutely no idea what point you are trying to make.
@Hywel
FFS read the feckin rules yourself.
When he purchased a property in Aviemore in 2006 as he says in his own statement, at that point he had two properties. He does have to elect a property as his main residence, it’s in the rules that he must do so within a 2 year period.
http://www.thisismoney.co.uk/mortgages-and-homes/article.html?in_article_id=410130&in_page_id=8
This is just getting silly. Like, Monty Python silly.
One wonders exactly how Alexander was supposed to pay this tax when he wasn’t requested to do so. I also liked this quote, from earlier (Ctrl-F to find the original post)
“The argument isn’t one of legality but of morality. I’m perfectly aware that CGT law allows someone to nominate any of their residences as the main home on which they receive the exemption from CGT. But is it moral that the CGT main home should be different from that which is used for parlimentary expense purposes?”
Doesn’t the government of the time have something to answer for if something apparently amoral is allowed under law? I’m sure that someone was aware that this 3-year rule existed – after all, 13 years is a long time for that government in question to be in office. So if this is amoral, doesn’t this put the government of the time into serious question? I mean, they had such a long time to make this apparently amoral act illegal. It’s not as if they didn’t have time to make things illegal…
And, like most of the people on this website who are not acting like screaming infants in desperate need for Mother Attention, his London house was his main residence until 2006 and then he sold it in 2007 and as prior it had been his home, he was by law . This is called not paying tax you’re not supposed to pay. Laws is only slightly questionable, but considering the circumstances (being perfectly happy in the closet, see Articles 2 and 12 of the Universal Declaration of Human Rights at the very least) he too is forgivable.
I’m pretty sure that every single person on this website (unless you’re God, in which case please get on with all that holy buisness and not posting here!) has done actually “amoral” acts in the past. Not paying a tax you’re not supposed to pay is, er, not actually amoral according to any philosophical or theological definition I’ve ever heard of what morality is.
Please define amoral before you accuse others of being amoral. Please remember your human rights commitments before attacking people for attempting to lead their lives how they choose without persecution, ill thought or other consequences.
I was only half serious in the past when I suggested clubbing together and buying a media outlet of our own, but it seems the truth is only worth having if we can put it out on newsprint.
“Doesn’t the government of the time have something to answer for if something apparently amoral is allowed under law?”
You may want a state that can outlaw all amoral acts – but i don’t think you will find that many who believe in true liberal principles would share that belief. Perhaps you should ask yourself why if HAzel Blears was able to do the moral thing and find a way of paying her CGT when the error of her ways came to light – Danny Alexander isn’t able to follow the same moral course. I’m pretty sure that there are quite a number of ways that he could make amends.
“Not paying a tax you’re not supposed to pay is, er, not actually amoral according to any philosophical or theological definition I’ve ever heard of what morality is.” What do you think that “render to Caesar, that which belongs to Caesar ” actually means – there are also plenty of philosophers who have outlined a moral basis for taxation – and what taxation is fair and unfair.
As for defining morality – perhaps you need to address the other gaps in your education first, but needless to say I don’t think you will find many ordinary people who thing that it is right or moral to avoid different definition of main/prtimary residence for tax, parlimentary expenses and I daresay electoral purposes. Think about it? You lot did it for 13 years isn’t a very good answer I’m afraid.
BTW the more I think about the more it appears that the wrong LibDem has left the Government.
toryboysnevergrowup
Before you give us any more lectures in morality, I reckon you need to take an elementary course in basic truthfulness yourself.
And what have I said that is not true. I am more than happy to be corrected when presented with the facts. I’ll leave the cheap accusations to others – if you want to make accusations of lying at least have the guts to present your evidence, rather than indulging in smears.
I’m confused – Exactly how much CGT wasn’t Danny Alexander supposed to pay? I need answers.
toryboys…
Here’s a quick selection of untrue statements you’ve made on this thread. I hope this will be enough to be going on with for now:
(1) Kitty Ussher did the same thing
(2) The only time you designate homes for CGT purposes is when you sell them – there is no process for prior designation with HMRC
(3) he took the option to treat his London home as his main one for tax purposes as such until it was disposed of
(4) many people don’t claim the 36 month exemption because they want the relief to apply to their new property rather than the old one
(5) The final 36 months are exempt only when the dwelling has been the individual’s only or main residence throughout the period of ownership
Re (1) – I have already acknowledged that the mechanical facts were not the same, but that the impact was the same in both moral, financial and legal terms. Both remained within the law, both used parlimenary expenses to enhance and finance properties on which they make legal tax free capital gains. Is that enough sameness for you?
Re 2, 3 and 4 – I’m happy to acknowledge that I misunderstood some of the process – partly because I did not appreciate the changes to the nomiation process, it is still the case howver that if the person makes no nomination then the decisions as to what is then main residence and periods of occupation are made at the time of the disposal based upon the facts. I note that you have also become somewhat confused on the nomination process. I am also still not clear why the HMRC makes the reference to including the 36 month period “when appropiate” in one of its documents. As one commenter observed I th
Re 5 – no you are wrong – gains during the last 36 months are not exempt – look at how the calculation works – it takes the gain over the entire holding period (i.e including the last 36 months) and then multiplies it by the period of occupation (including the last 36 months regardless) divided by the total period of ownership. If there are periods when the property is not occupied – a proportion of the increase in the price of property during the last 36 months will be taxed
It is allowed for people to be mistaken and make errors – that is not the same as being untruthful (or lying as I prefer to call it), but I’m afraid that is line with your rather cheap style as others have also observed, If I wanted to lie on these matters I would have thought that the last place to do it would be here.
Having read the comments to date – I do still have a question as to whether or not DA had to reoccupy his main residence when returning from working in Scotland between Feb 2004 and May 2005 – since periods working away from home can only usually be treated as occupying the main residence if the main residence is returned to. If this is the case then DA would have treated his London property as his main residence for CGT purposes and his 2nd residence for expenses purposes. Perhaps DA needs to answer this point – as I dont’t think he has to date.