HMRC talks tough on MPs' tax returns

Government ministers who used publicly funded expenses to pay accountants to fill in their self-assessment returns broke tax principles, HM Revenue & Customs signalled.

Joining the row over MPs' allowances, HMRC said ministers' claims for professional tax advice should have incurred the normal levy that most ordinary voters must pay.

The declaration of the official line, due to unsettle 40 ministers who put accountancy fees on expenses, raises the prospect of Alistair Darling being investigated by HMRC.

It was made to the Daily Telegraph's fresh allegation that the chancellor was just one of 42 members of the government to have recouped a total of £25,000 for accountants.

"This is frankly galling," said John Brazier, managing director of the Professional Contractors Group, condemning MPs who charged the public for personal tax advice.

The PCG reminded that, under HMRC, most people are prohibited from claiming the cost of employing an accountant to handle their self-assessment tax return.

But in the light of the revelations, it "seems to be one rule for cabinet ministers but another for the rest of us," Mr Brazier said, which would be "morally indefensible."

In a statement just before, aimed at tackling such criticism, HMRC told the Telegraph that MPs were not exempt from tax laws and that tax must be paid on some expenses.

It reportedly added: "It's a general principle of tax law that accountancy fees incurred in connection with the completion of a personal tax return are not deductible.

"This is because the costs of complying with the law are not an allowable expense against tax. This rule applies across the board."

Ministers have defended themselves, saying the accounting was necessary for their duties, in spite of their receipts apparently stating "personal" tax advice was given.

Moreover, on the specific issue of claiming for the cost of a tax return to be filled in, ministers were handed down guidance advising against such tax-free claims.

Issued in 2005, it states "accountancy fees incurred in the preparation of the self-assessment tax return or related expenses claims" are "not allowed" as tax expenses.

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