Another minister criticised over CGT on second homes
The new Chief Secretary to the Treasury, Danny
Alexander, has been immediately embarrassed by a Daily Telegraph
revelation that he avoided capital gains tax on the June 2007 sale
of his London flat.
Alexander succeeded David Laws as Treasury
secretary last week, when the latter resigned over questionable
expenses claims for rent paid to his cohabitee (which was also
exposed by the Telegraph).
Alexander's CGT avoidance technique was in no
way illegal. When he sold his south London flat in 2007 for
GBP300,000, he relied on final period relief, which exempts a
property from CGT for 36 months after it has become a second home
instead of the owner's principal residence (since 2006 Alexander's
principal residence has been in his Scottish constituency).
However, he also claimed more than GBP37,000
for the London property in parliamentary second home allowances
while it was still attracting principal residence relief from CGT,
says the newspaper.
The same procedure - which is not illegal
either - was followed by several MPs in the previous parliament,
including some Labour ministers.
Alexander is not expected to quit, but the
affair is embarrassing because he is a Liberal Democrat and the
party has previously criticised final period relief as open to
abuse.
It was introduced as an exemption for people
who are unable to sell their former home after moving to
another.
The affair could result in the relief being
scrapped or limited in the Emergency Budget, as the Lib Dems
proposed last year.
Accountants Grant Thornton said: "It is
expected that the new Chancellor will look to tighten up the
definition of a 'main residence' and reduce the opportunities to
allow those with more than one property to vary what counts as
their main residence, therefore exposing them to a greater chance
of a CGT charge".
Sources
Daily Telegraph
Daily Telegraph (2)
The Scotsman
The Scotsman (2)
Grant Thornton