Details of tax liability and NIC contributions made to HM Treasury on MP expenses

Request

On reading HMRC's tax guide for MPs, I was surprised to read that apparently IPSA are meeting the tax liability on some expense payments made to MPs.

I would be obliged if you could let me have details of the types of expense payments covered by this arrangement, the total tax (& NIC) liabilities paid to HMRC paid under this arrangement in recent tax years and what legal authority IPSA have to enter into such an arrangement.


Response

IPSA holds the information that you request.

For context, one of the fundamental principles of the MPs’ Scheme of Business Costs and Expenses is that MPs have the right to be reimbursed for unavoidable costs where they are incurred wholly, exclusively, and necessarily in the performance of their parliamentary functions, but not otherwise.  IPSA applies HM Revenues and Customers (HMRC) rules for the tax treatment of business expenses to the costs and expenses which MPs incur as a result of their parliamentary functions.

MPs’ costs and expenses are treated differently by HMRC depending on the type of expenditure.  Accommodation Expenditure, for instance, is exempt from tax by virtue of legislation.  The legislation recognises the binary nature of MPs’ working arrangements, which require them both to live and work in two locations.  Other costs, such as MPs’ Staffing Expenditure, are covered by a dispensation.  Dispensations ensure that MPs are not required to report expenditure to HMRC which are not subject to tax.

HMRC requires IPSA to report certain types of expenditure on MPs’ P11D forms.  MPs can then apply to HMRC for tax relief or capital allowances, depending on the cost or expense. 

HMRC does not provide dispensations for certain types of expenditure, and in a minority of cases MPs, their staff, or IPSA are liable for the tax.  As IPSA considers all of the expenditure covered in the Scheme as necessary in the continuance of parliamentary functions, we are paying the tax on this small number of business costs and expenses on behalf of MPs.  The mechanism for doing so is called a PAYE Settlement Agreement (PSA) between IPSA and MPs.  The current agreement covers the following business costs and expenses:

  • Newspapers/journals

  • Travel costs between the London home and constituency home for an MP’s dependent children

  • Hospitality costs (under the Rules, this is limited to light refreshments, e.g. tea and coffee)

  • Hotel stays where the MP has been working late (not after 1am, as this is exempt from tax)

  • Food and drink claimed by an MP where they were required to work late because the House was sitting beyond 7.30pm (only taxable if the food is bought off the parliamentary estate, food bought in Parliament is exempt from tax)

  • Taxis when an MP has been working late (only needed if the taxi was taken before 9pm, or if more than 60 taxis were taken by an MP in a year after 9pm, otherwise it’s exempt from tax)

  • Employers and Public Liability insurance

The taxable amounts, tax paid and NI paid for each are shown in Annex a.  Further details about PSAs can be found via this link to the HMRC website.

Annex A

2010/11 financial year

Expense typeTaxable amountTax paidNICs paid
Newspapers£33,944.67£22,629.78£7,241.53
Child travel£16,014.76£10,676.50£3,416.48
Hospitality£9,933.19£6,622.12£2,119.08
Hotels£1,166.50£777.66£248.85
Food and Drink off the parliamentary estate£4,643.67£3,095.78£990.65
Taxis000
Insurance£35,231.23£23,487.48£7,515.99

2011/12 financial year

Expense typeTaxable amountTax paidNICs paid
Newspapers£45,998.45£30,665.63£10,579.64
Child travel£42,896.81£28,597.87£9,866.27
Hospitality£15,761.29£10,507.52£3,625.10
Hotels£18,875.58£12,583.72£4,341.38
Food and Drink off the parliamentary estate£5,128.90£3,419.26£1,179.65
Taxis£6,654.00£4,436.00£1,530.42
Insurance£31,761.20£21,174.13£7,305.08

Ref:
FOI2012-A109
Disclosure:
December 17, 2012
Categories:
MPs' PAY AND PENSIONS
Exemptions Applied:
None