Once trust has been lost it is difficult to regain it as MPs are discovering following the scandal over their expenses. Thus, the article by Ian Cowie writing in the Daily Telegraph of Friday 8th July questions why MPs should be exempt from a new law to block tax avoidance. He writes that after Budget promises to tackle tax avoidance, Parliament is passing legislation to block several loopholes ? but an obscure clause specifically exempts MPs from these new restrictions. According to HMRC this legislation is only there to prevent tax avoidance but Section 554E(8) of the Finance Bill (No 3) in question specifically exempts members of the House of Commons and the Independent Parliamentary Standards Authority (IPSA) from the new legislation in situations where they fall within its scope.
In response to an MP who asked for clarification on behalf of a concerned constituent, the Treasury has responded that there is no question of this legislation providing MPs with a special dispensation from the new anti-avoidance rules. The issue it seems is that the scope of this new legislation is so broad that in addressing the use of third parties to disguise rewards to employees, the legislation has had to include a number of exemptions for arrangements which are considered as not concerned with attempts to avoid tax. One of these exemptions as it happens is a specific exclusion for anything done by the IPSA in relation to a member of the House of Commons. This is necessary because there is a legal requirement for the IPSA to administer payments to MPs to cover the necessary expenses they incur in their work, while also providing the necessary oversight to ensure the expenses of MPs are properly paid and that the public can be reassured that this is so.
The problem with this response by the Treasury is that it still does not seem to address the question raised by Mr Cowie and indeed distrustful members of the public, as to why MPs cannot rely on the same arrangements that every other employer and employee in the country will have to rely on to comply with the requirements of this Finance Bill. Is it just to avoid a further bureaucratic load on the IPSA for new rules on disguised remuneration which are really only intended to catch complex arrangements designed to avoid income tax through loans made to executives, typically via offshore structures?