Page last updated at 13:05 GMT, Sunday, 31 May 2009 14:05 UK

Cameron orders MP to repay money

Eleanor Laing
Eleanor Laing says she followed MPs' guidance

A frontbench Tory MP accused of avoiding paying capital gains tax on the sale of her second home will have to repay money, David Cameron has said.

Shadow justice minister Eleanor Laing said she was obliged by law to name the property as her principal residence for tax purposes.

But Mr Cameron told BBC One's Politics Show the practice was unacceptable.

The Tory leader said any of his MPs guilty of it would be punished by the panel he has set up to examine claims.

"I don't think it is right to get money from the taxpayer for what you nominate as a second home and then to sell it and not pay capital gains tax," said Mr Cameron.

"I put a stop to that immediately, even before the House of Commons, with my MPs.

"That applies for the future. For the past we go through the scrutiny panel and if people have got it wrong then money will have to be paid back."

'Tough action'

He said another Tory MP, Sir John Butterfill, who has already agreed to repay £20,000 in tax and mortgage payments, much of which was claimed from public funds towards staff quarters at his home, was also under scrutiny over capital gains tax.

I want to very tough but I also want to be consistent and fair
David Cameron, Conservative leader

Sir John has denied avoiding tax on the £1.2m sale of a six-bedroom house.

He said he had spent nearly £500,000 renovating a virtually "derelict" property in Woking and therefore any capital gain he would have made when selling it in 2005 would have been "minimal" but he was prepared to re-examine the sale and repay an "appropriate amount".

Mr Cameron was asked on the Politics Show if Ms Laing would follow Andrew MacKay, who quit as his senior aide and agreed to step down as an MP at the next election, in being forced out over expense claims.

He said: "Where appropriate, others will be removed from the front bench if they do not behave appropriately. I want to very tough but I also want to be consistent and fair."

According to The Daily Telegraph, Epping Forest MP Ms Laing avoided a £180,000 bill on profit from selling the property - two adjacent flats in Westminster on which she was said to have claimed more than £80,000 in allowances.

She sold the flats last year for £1.8m, making at least £1m in profit, the newspaper said.

Cameron expenses

In a statement on the newspaper's allegations, Ms Laing said she had consulted solicitors at the time of the sale and guidance to MPs on the issue "which clearly states that the designation of Primary Residence for ACA (alternative costs allowance) purposes is not the same as the designation of Primary Residence for HMRC purposes.

"I realised, on investigating the rules, that it would be wrong in terms of HMRC under the Taxation of Chargeable Gains Act 1992 to pay Capital Gains Tax on my London flat because, although I had always regarded the flat as my second home, my main home being in my constituency, the definition of Principal Private Residence for Capital Gains Tax purposes is not a matter of choice but a matter of fact," she said.

"As a matter of fact, under HMRC rules, the London flat was my Principal Private Residence.

"I will, of course, be liable to Capital Gains Tax when eventually I sell my house in Theydon Bois as, under the HMRC rules, it is defined as my second home."

It comes as Mr Cameron was forced to defend his own expenses claims after stories suggested he could have saved taxpayers money by paying £75,000 off his second home mortgage.

He said he believed his claims had been "reasonable" but would face his party's scrutiny panel like other Tory MPs.

According to the Mail on Sunday, Mr Cameron paid off the remaining £75,000 of a mortgage on his London home using his own money in 2001, shortly after taking out a £350,000 mortgage on his constituency home in Witney, Oxfordshire.

He used the second homes allowance to pay the interest on the new mortgage. Mr Cameron did not break any rules and he told the BBC taxpayers had not lost any money as a result of his actions.

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