All you MPs out there, read this very carefully. It was your ilk who passed it into law. I know politicians have a very short attention span quite unsuited to parliament, but please try to listen and stop thhinking that you can reduce this matter to sound bites, but I will try to keep this simple and explain that you are not entitled to claim the cost of tax advice against your taxable income.
First of all everybody knows that any allowances received by an MP to cover the cost of staying away from home are tax free (whereas such allowances would normally be taxable to the average tax payer but subject to tax relief for the expense), so let's look at that piece of legislation (s200 ICTA 2008):
200. Expenses of Members of Parliament.
(1) An allowance-
(a) which is paid to a Member of the House of Commons; and
(b) for which provision is made by resolution of that House, and (c) which is expressed to be in respect of additional expenses necessarily incurred by the Member in staying overnight away from his only or main residence for the purpose of performing his parliamentary duties, either in the London area, as defined in such a resolution, or in his constituency,
shall not be regarded as income for any purpose of the Income Tax Acts.
This isn't the whole section. I left out the rest because it isn't relevant. You don't need to worry about it, because I know you MPs aren't too hot on legislation.
But going back to the legislation, is it clear? You get your accomodation and overnight food paid for tax free but this section of the tax statutes says nothing about other expenses. So if you want to get tax relief for the cost of your personal tax returns you have to look for another provision. Sadly, at least for you, there isn't ione. Just like everybody else the cost of paying someone to complete your personal tax reurn is a personal expense and is not an expense associated with your profession. It is not incurred for the purposes of your profession, trade or vocation, but for your personal benefit to allow you to comply with your personal obligations as a tax payer. In this regard you are no different from any other tax payer.
But then let us look a little further at whether these expenses may be claimed under the Additional Costs Allowances. "Oh yes they may", says an unnamed Labour Party spin doctor with obviously limited grasp of the multi-level conditions often found in legislation and other rules, "the Green Book says MPs can claim for the cost of accountants and other advisers".
Well, the Green Book does indeed say that an MP may claim for "Professional advice, for example from accountants or solicitors" under the Staffing Expenditure allowance, but the Staffing Expenditure allowance is available to meet the costs incurred in the provision of staff to help MP's perform their parliamentary duties. The same distinction applies between MPs professional purposes and their personal expenditure as above. In other words, the completion of your personal tax return is nothing to do with your parliamentary duties, so you should not be claiming it back under the Staffing Allowance.
Of all the Labour MPs who have been running this fiddle, special mention must go to James Purnell and Meg Munn. Ms Munn distinguished herseld by paying her husband to complete here tax return and illegally reclaiming the cost from the tax payer, and fraudulently omitting to include the value of the benefit from her self-assessment.
Mr Purnell also paid an advisor to complete his tax return and claimed the cost of doing so, omitting to declare the value of the benefit on his tax return, but better still, he took advice on a tax avoidance scheme and charged the cost of the advice to the tax payer, again failing to declare the benefit.
But the prize for sheer ignorance of the law must go to David Miliband, or perhaps it was his spokesman, who suggested that because Mr Miliband had paid accountancy fees "out of his taxed income", before receiving the money back from the Commons authorities, "there was no liablility".
Um, no, Mr Miliband. You clearly do not understand how tax works. There was a classic piece of light entertainment in the reported case of Albon v Hinwood (HMIT), the tax law equivalent of Arbroath 36 Bon Accord 0, where the good Dr Albon argued fruitlessly that he shouldn't have to pay UK tax on a US pension because he had made pension contributions in the US out of income that had been taxed in the USA. Just like Mr Miliband's argument, this had no basis in tax law, but to the ignorant tax payer, seemed to be a justification. But that isn't how it works.
So let me explain. Mr Miliband paid for his tax advice out of his cash resources. Whether that is taxed or untaxed income or capuital or whatever is irrelevent. It was a cash payment and an expense in the relevant financial year, but unfortunately not an allowable expense. The reimbursement of the expense is an income item, presumable falling in the same year, but again unfortunately for Mr Miliband, not an item of income for which there is any exemption under UK statutes.
Hence Mr Miliband should have included the expense reimbursement in his tax return, although, of course, he should not have received any reimbursement in any event.