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


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