Tax allowances granted for the use of an accountant when preparing a tax return or other similar document for HM Revenue & Customs

James Martin made this Freedom of Information request to HM Revenue and Customs

The request was partially successful.

From: James Martin

4 June 2009

Dear Sir or Madam,

Please tell me what are the current HM Revenue & Custom's
regulations in relation to individuals claiming a tax allowance for
the cost of an accountant (or other such suitably recognised
person)and how such a claim could reduce such a persons tax
liability (if at all) when such a person is:

a) A self employed person

OR

b) An employed person (On a PAYE scheme)

Further please confirm:

If a Member of Parliament defined as an employed person

or a self employed person?

And finally confirm to what special tax dispensations or allowances
(if any) do Members of Parliament enjoy or receive compared to
either a self employed person or an employed person?

Yours faithfully,

James Martin

Link to this

From: Howe, Lucy (LG Corporate Governance)
HM Revenue and Customs

5 June 2009

Attachment FOI 1652 J Martin.doc
52K Download View as HTML

Message sent on behalf of Michael Armstrong
Regards
L Howe
Freedom of Information Team

The information in this e-mail and any attachments is confidential and may
be subject to legal professional privilege. Unless you are the intended
recipient or his/her representative you are not authorised to, and must
not, read, copy, distribute, use or retain this message or any part of it.
If you are not the intended recipient, please notify the sender
immediately.

HM Revenue & Customs computer systems will be monitored and communications
carried on them recorded, to secure the effective operation of the system
and for lawful purposes.

The Commissioners for HM Revenue and Customs are not liable for any
personal views of the sender.

This e-mail may have been intercepted and its information altered.

show quoted sections

Communications via the GSi may be automatically logged, monitored and/or
recorded for legal purposes.

Link to this

From: Callan, Aidan (G&S)
HM Revenue and Customs

2 July 2009

Attachment 090702 FOI 1652 09 Martin.pdf
40K Download View as HTML

Mr Martin

I am attaching HMRC's response to your recent FOI request.

Thanks

Aidan Callan
Freedom of Information Team
Room 4/52, 100 Parliament St., London SW1A 2BQ
[email address]

The information in this e-mail and any attachments is confidential and may be subject to legal professional privilege. Unless you are the intended recipient or his/her representative you are not authorised to, and must not, read, copy, distribute, use or retain this message or any part of it. If you are not the intended recipient, please notify the sender immediately.

HM Revenue & Customs computer systems will be monitored and communications carried on them recorded, to secure the effective operation of the system and for lawful purposes.

The Commissioners for HM Revenue and Customs are not liable for any personal views of the sender.

This e-mail may have been intercepted and its information altered.

show quoted sections

Link to this

James Martin left an annotation ( 2 July 2009)

Aidan Callan
Freedom of Information Team
HM Revenue & Customs
100 Parliament St

London SW1A 2BQ

Mr James Martin

Tel

(sent by email to:

request-12840-a76aca3e@whatdotheyknow.com)
Fax

Email aidan.callan@hmrc.gsi.gov.uk

Date
2 July 2009
www.hmrc.gov.uk

Our Ref
FOI 1652/09

Your Ref

________

Dear Mr Martin

Freedom of Information (FOI) request

I refer to your Freedom of Information (FOI) request on 4 June 2009 for the following
information:

“(1) Please tell me what are the current HM Revenue & Custom's regulations in
relation to individuals claiming a tax allowance for the cost of an accountant (or other
such suitably recognised person)and how such a claim could reduce such a persons
tax liability (if at all) when such a person is:

a) a self employed person

OR

b) an employed person (On a PAYE scheme)

(2) Further please confirm if a Member of Parliament is defined as an employed
person or a self employed person?

(3) And finally confirm to what special tax dispensations or allowances (if any) do
Members of Parliament enjoy or receive compared to either a self employed person
or an employed person?”

1. Tax treatment of costs incurred for accountancy fees

Self employed persons

Information is available in large print, audio tape and Braille formats.
Type Talk service prefix number – 18001

A self employed person can claim expenses in computing the profits of their trade,
profession or vocation provided the expense is incurred wholly and exclusively for the
purposes of the trade, profession or vocation and is not specifically excluded from deduction
by legislation (e.g. capital expenditure). The relevant legislation is at sections 33 and 34 of
the Income Tax (Trading and Other Income) Act 2005.

Fees incurred for preparing accounts for commercial reasons and for many other
accountancy services will meet the wholly and exclusively requirements of ITTOIA 2005 s34.
Also allowable are the normal recurring legal and accountancy fees incurred in preparing
accounts and agreeing the tax liability in respect of the trade profits. This includes the
preparation of a tax computation. This adjusts the profit in commercial accounts to give a
figure of profit for tax purposes which does not include any expenditure disallowed by the tax
legislation.

The costs of completing an individual’s tax return would not be allowable costs in computing
trading profits as such costs would not be incurred wholly and exclusively for the purposes of
the trade.

Employed persons

The tax rules governing allowable employment expenses are well established and tightly
drawn. It is a basic principle of the UK tax system that only expenses incurred in actually
earning income from a particular source are deductible in calculating the tax payable on that
income. Relief is available only if the expenses are incurred “wholly, exclusively and
necessarily in the performance of” the duties of the job. The relevant legislation is at section
336 Income Tax (Earnings and Pensions) Act 2003.

This rule applies to employees across the board. To qualify for relief a very direct connection
between expenses incurred and the actual execution of the duties has to be demonstrated.
Accountancy fees for the preparation of an individual’s tax return enable the individual to
meet their personal obligations as a taxpayer and tax relief is therefore not available.

2. Employment status of MPs

Members of Parliament are office-holders in relation to their position as an MP and are
therefore taxed as employed persons.

3. Special exemptions/dispensations applying to MPs

MPs are taxable on the earnings from their position as MP. Certain expenses that they
claim, in particular the expense allowance for the costs of overnight accommodation away
from their home to enable them to carry out their Parliamentary duties, are specifically
exempt from tax. But other expenses, including accountancy fees, are taxed according to
the usual rules on the taxation of employment income. A deduction can then be claimed,
again according to the usual tax rules, for general expenses which MPs incur wholly,
exclusively and necessarily whilst performing their duties as an MP, or for travel expenses
which they have to incur on travelling whilst performing those duties.

If you are not happy with this reply you may request a review by writing to HMRC FOI Team,
Room 4/52, 100 Parliament Street London SWIA 2BQ. You must request a review within 2
months of the date of this letter. It would assist our review if you set out which aspects of the
reply concern you and why you are dissatisfied.

If you are not content with the outcome of an internal review, you may apply directly to the
Information Commissioner for a decision. The Information Commissioner will not usually
consider a case unless you have exhausted the internal review procedure provided by
HMRC. He can be contacted at The Information Commissioner’s Office, Wycliffe House,
Water Lane, Wilmslow, Cheshire SK9 5AF.

Yours sincerely

Aidan Callan

Link to this

From: James Martin

3 July 2009

Dear Aidan,

Thank you for your response to my FOI request.

It was both thorough and informative.

Given that you confirmed that a Member of Parliament(MP)is treated
an an 'employee' and ineligible to reclaim professional fees
incurred from an accountant in preparation of their tax return(s)
could you please explain to me:

1) The process required for reporting to HMRC a person who has
claimed (and received) tax free expenses in the course of their
employment when they were not entitled to such tax fee payments.

And

2) Confirm to me if the HMRC are currently investigating the tax
returns of any Members of Parliament who have claimed for
Professional Accountancy fees even though they are deemed as an
employed person and therefore not entitled to receive tax free
payments for such services?

I provide one example of the Rt Hon Alistair Darling MP who has
claimed £1400.00 from his parliamentary allowance but I am aware of
a sizeable number of other MPs who have done the same.

I do of course not wish HMRC to comment or provide information on
any individual undergoing investigation but merely to confirm if
such investigations have commenced or will commence shortly and the
number of such investigations.

You may treat this email as a new FOI request from todays date.

Many thanks

Yours sincerely,

James Martin

Link to this

From: Sharpe, John (G&S)
HM Revenue and Customs

29 July 2009

Dear Mr Martin.

I refer to your email dated 3 July and your request for information as
follows:

"Given that you confirmed that a Member of Parliament (MP)is treated
as an 'employee' and ineligible to reclaim professional fees incurred
from an accountant in preparation of their tax return(s) could you
please explain to me:

1) The process required for reporting to HMRC a person who has
claimed (and received) tax free expenses in the course of their
employment when they were not entitled to such tax fee payments.

and

2) Confirm to me if the HMRC are currently investigating the tax
returns of any Members of Parliament who have claimed for
Professional Accountancy fees even though they are deemed as an
employed person and therefore not entitled to receive tax free
payments for such services?

I provide one example of the Rt Hon Alistair Darling MP who
has claimed £1400.00 from his parliamentary allowance but I am
aware of a sizeable number of other MPs who have done the same.

I do of course not wish HMRC to comment or provide information on any
individual undergoing investigation but merely to confirm if such
investigations have commenced or will commence shortly and the number
of such investigations."

Under section 21 of the Act, we are not required to provide information in
response to a request if it is already reasonably accessible to you. The
information you have requested at (1) can be accessed from the HMRC
website. HMRC has a number of routes available to the public and business
community to report allegations of suspected wrongdoing, such as the Tax
Evasion and Customs Confidential hotlines, and freepost addresses. The
public can also write directly to their local office or provide
information in person at any of our enquiry centres. Information on the
ways to report suspected tax evasion is available at
[1]www.hmrc.gov.uk.

In relation to (2) I hope you will appreciate that MPs are entitled to the
same taxpayer confidentiality as any other taxpayer or groups of taxpayers
and on that basis the information you have requested is exempt from
disclosure. This is because of section 44(1)(a) of the FOI Act, which
exempts information if its disclosure is prohibited by any enactment. In
this instance, the relevant enactment is the Commissioners for Revenue and
Customs Act (CRCA) 2005. The effect of section 23 of CRCA is that
information we hold in connection with one of our functions, and which
identifies a person or enables their identity to be deduced, is exempt
from disclosure under FOI. In this context a "person" includes both
natural and legal persons, and, for example, employers.

As for any other taxpayer, MPs tax returns may give rise to an enquiry and
the same considerations apply to the selection of cases. You may be
interested to note that the subject of enquiries into the tax returns of
MPs in the light of the media revelations about MPs' expenses was raised
when Dave Hartnett, HMRC Permanent Secretary for Tax, gave evidence before
the Committee for Standards in Public Life at a Review of MP's Expenses
hearing on 7 July. You may wish to refer to the transcript of the 7 July
Hearing which is available from the CSPL website at

[2]www.public-standards.gov.uk/Library/Committee_on_Standards_in_Public_Life_07_07_09.doc

If you are not happy with this reply you may request a review by writing
to HMRC FOI Team, Room 4/52, 100 Parliament Street London SWIA 2BQ. You
must request a review within 2 months of the date of this letter. It would
assist our review if you set out which aspects of the reply concern you
and why you are dissatisfied.

If you are not content with the outcome of an internal review, you may
apply directly to the Information Commissioner for a decision. The
Information Commissioner will not usually consider a case unless you have
exhausted the internal review procedure provided by HMRC. He can be
contacted at The Information Commissioner's Office, Wycliffe House, Water
Lane, Wilmslow, Cheshire SK9 5AF.

Yours sincerely

John Sharpe

Governance & Security

HM Revenue & Customs

Room 4/52

100 Parliament Street

London

SW1A 2BG

 

Fax 020 7147 0666

[3][email address]

The information in this e-mail and any attachments is confidential and may
be subject to legal professional privilege. Unless you are the intended
recipient or his/her representative you are not authorised to, and must
not, read, copy, distribute, use or retain this message or any part of it.
If you are not the intended recipient, please notify the sender
immediately.

HM Revenue & Customs computer systems will be monitored and communications
carried on them recorded, to secure the effective operation of the system
and for lawful purposes.

The Commissioners for HM Revenue and Customs are not liable for any
personal views of the sender.

This e-mail may have been intercepted and its information altered.

show quoted sections

Communications via the GSi may be automatically logged, monitored and/or
recorded for legal purposes.

References

Visible links
1. http://www.hmrc.gov.uk/
2. http://www.public-standards.gov.uk/Libra...
3. mailto:[email address]

Link to this

Things to do with this request

Anyone:
HM Revenue and Customs only: