Page last updated at 22:53 GMT, Thursday, 21 May 2009 23:53 UK

Brown defends ministers over tax

James Purnell and Geoff Hoon
James Purnell and Geoff Hoon say they were advised they need not pay tax

Gordon Brown has defended two cabinet ministers who did not pay capital gains tax on home sales as the expenses row cast doubt on the future of more MPs.

A No 10 spokesman said James Purnell and Geoff Hoon acted within the letter and spirit of the law while Mr Brown again gave his backing to Hazel Blears.

Ms Blears repaid £13,000 in tax despite not apparently breaking any rules.

One Labour MP has said he will stand down over expenses claims while a second has offered to do the same.

Ben Chapman became the first Labour MP to say he would not contest the next general election following allegations that he was reimbursed for a loan that had been paid off. Mr Chapman insists he has done nothing wrong.

Dr Ian Gibson, the Labour MP for Norwich North, has also said he will stand down if his constituents think his conduct over his second home allowance went "one step too far".

He faces allegations in Friday's Daily Telegraph, which has obtained details of all MPs expenses, that while he was claiming for his second home in London, his partner and her daughter were living there rent-free.

The paper also says he subsequently sold it to them for less than he bought it and well below the market value.

Dr Gibson has insisted he acted within the rules and "made nothing on the house whatsoever".

Three Conservatives, Anthony Steen, Douglas Hogg and Sir Peter Viggers, have also announced their intention to step down after they were criticised for their expenses claims.

Cabinet ministers continue to come under scrutiny with Work and Pensions Secretary James Purnell accused of not paying capital gains tax (CGT) on his designated "second home" - and claiming expenses for "tax advice" on the sale.

The Telegraph also said Transport Secretary Geoff Hoon sold a property on which he did not claim expenses but designated his main home for CGT purposes, when he had been living in a "grace and favour" flat and renting it out.

Both said they were not liable for CGT and had had their claims checked over by accountants and Revenue and Customs.

As far as I know there is no problem that needs to be dealt with
Gordon Brown

Mr Brown, who has said Hazel Blears's failure to pay CGT on her second home was "totally unacceptable", said he did not believe Mr Purnell or Mr Hoon should repay any money.

''I think it's important that they have made statements, they have said... what they have done," Mr Brown said.

"There is an inquiry going on in Parliament. People will look back on the expenses of the last four years. They will make a judgement, but as far as I know there is no problem that needs to be dealt with.''

Ms Blears repaid £13,332 in respect of capital gains tax on the sale of a flat she had designated her "second home" for expenses purposes.

Rebuild trust

She also said she had never broken any rules - guidance to MPs states that their "second home" can still be designated as their "principal residence" to HM Revenue and Customs for capital gains tax.

But she said she had been hurt by reaction to the story in her Salford constituency and said she wanted to try to rebuild trust.

Mr Brown said her behaviour had been "unacceptable" but she had repaid the money and retained his full confidence as communities secretary.

BBC political correspondent Gary O'Donoghue said it was difficult to see what Ms Blears had done differently from Mr Purnell and Mr Hoon, and Downing Street was not offering a "straightforward answer".

I did acknowledge that people were very angry - which is why I sent my cheque off to the taxman
Hazel Blears

Asked if she felt she had been treated differently, Ms Blears told reporters: "I'm not going to get into a debate with you, in the media, about any colleague of mine, or about the prime minister."

She added: "I have abided by the tax rules, I have abided by the rules of the House of Commons but I did acknowledge that people were very angry - which is why I sent my cheque off to the taxman."

Under tax rules, sellers can claim a property is a main residence for CGT purposes, as long as they lived there less than three years before the sale.

Mr Purnell's spokesman said the allegations against the minister were "completely untrue" as he had bought his constituency home at a time he was trying to sell his London flat.

"The sale of his London flat fell through, but it was sold within the period that HM Revenue and Customs continue to treat it as not being liable for CGT," he said.

He said he now rents his "second home" so would not make any capital gains on it and had double checked with HMRC, which had confirmed he was not liable.

"No one pays CGT when they sell the only house they own and James was not liable for capital gains tax on his London flat."

'Consistent'

Mr Hoon said he had moved into the grace and favour flat for security reasons - which was cheaper for the taxpayer than staying where he was and paying for extra security - and had fully declared to the Inland Revenue that his property had been rented out. There had been no liability for CGT, he said.

Mr Hoon said: "I reject any suggestion of any wrongdoing in relation to my declarations to the House of Commons authorities and HMRC.

"I have been consistent in my declarations to both parties and I have been assiduous in ensuring that I have met my reporting obligations and my tax liabilities."

Among other MPs coming under scrutiny, the Telegraph said Tory MP Peter Luff claimed for £17,000 on furnishings over four years, including nearly £1,000 for two separate china sets as well as a request for a £1,583 dining room table which was rejected.

Mr Luff told the newspaper he believed he had acted within the "letter and spirit of the rules" but would repay any money if his judgement was proved to be wrong.

Meanwhile there have been some concerns that cabinet ministers are not being punished to the same extent as backbenchers.

MPs Elliot Morley and David Chaytor have been suspended from the Parliamentary Labour Party after questions were raised about their claims.

Peter Kenyon, a member of Labour's ruling national executive committee, told BBC Radio 4's The World at One he had received "numerous representations" on the issue.

"The perception out there in the CLPs (constituency Labour parties) is that government members are being treated differently from backbenchers," he said.

"That is going to have to be dealt with and dealt with quickly."



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