Page last updated at 16:26 GMT, Monday, 14 December 2009

Q&A: MPs, peers and taxes

Conservative leader David Cameron is proposing to tighten up the law on MPs and peers paying UK taxes. Here is BBC political correspondent Iain Watson's guide to the issue:

What has David Cameron proposed?

He says if the Conservatives win the next election he will pass a law to ensure that MPs and peers would have to be UK taxpayers. They "would have to demonstrate that they are, or are treated as, a full UK taxpayer and, if they couldn't do that, then they'd have to stand down".

Why did he do that?

As well as trying to restore trust in politics after the expenses scandal, Mr Cameron had some bad publicity recently when it was revealed that one of his parliamentary candidates, Zac Goldsmith, was a non-dom - someone not domiciled in the UK for tax purposes. Mr Goldsmith said he had inherited this status from his late father, the tycoon Jimmy Goldsmith, and would renounce this before the election. Mr Cameron said he had not been aware of Mr Goldsmith's tax status until it was revealed by a newspaper.

What exactly is a non-dom?

Someone who is resident in Britain but not domiciled here for tax purposes. Though they will pay some tax in Britain, if they have interests overseas they will not be fully taxed in this country on those interests. Many of the estimated 116,000 non-doms, such as steel magnate Lakshmi Mittal, were born overseas, but British residents can also apply for non-dom status.

So will David Cameron clean up the system?

Well, not until at least after an election win for the Conservatives. Labour says it is addressing the issue in current legislation and the Lib Dems say there is no need for Mr Cameron to wait until after the election to ensure his representatives in either the Lords or Commons pay tax in Britain and make the UK their principal home for tax purposes. Lib Dem peer Lord Oakeshott put forward a private members' bill on the subject, which did not get Conservative support. The Conservatives say it was badly drafted. The Lib Dems now intend to put down an amendment on the issue to the Constitutional Renewal Bill and challenge the Conservatives - and Labour - to vote for it this side of the election.

So is Mr Cameron's proposal backfiring?

Yes and no. It had the effect of highlighting that Lord Paul, a big Labour donor elevated to the Privy Council by Gordon Brown, is a non-dom too. But it has also reopened questions about the tax status of the Conservatives' deputy chairman - and former treasurer- Lord Ashcroft, who grew up in Belize and has extensive business interests there. He has donated around £5m to the Conservatives in recent years and the Electoral Commission is currently investigating whether the company through which most of his donations are channelled, Bearwood Corporate Services, is, as required by law, genuinely trading in the UK. The Conservatives say no rules on donations have been broken and are confident the Electoral Commission will give Lord Ashcroft a clean bill of health.

So is Lord Ashcroft a non-dom?

We do not know. It is perfectly in order for non-doms to sit in the Lords and, as the law stands, an individual's tax affairs are a confidential matter between him, or her, and Revenue and Customs. It was thought that, when the then Conservative leader William Hague proposed to elevate then then Sir Michael Ashcroft to the peerage in 2000, Mr Ashcroft gave assurances that he would be resident in Britain for tax purposes but there is no hard evidence as to what these assurances were. The shadow chief secretary to the Treasury, Philip Hammond, said he did not know what Lord Ashcroft's tax status was or what assurances had been given when he became a peer.

So is that the end of the matter?

No. Labour MP Denis MacShane has indicated that he intends he to put William Hague on the spot in the Commons on Wednesday to tell us what he knows of Lord Ashcroft's tax status - but the Conservatives are likely to try to throw more light on non-dom supporters of Labour.

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Reuters UK Conservatives to outlaw non-dom MPs - 29 hrs ago
Financial TimesCameron in tax pledge on legislators - 36 hrs ago
The Scotsman Tories insist MPs and peers will pay UK tax - 39 hrs ago
Channel 4 News Party leaders vie for pre-election limelight - 44 hrs ago
Sky News Cameron: 'We'll Make All Peers Pay UK Tax' - 52 hrs ago
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