Husband and wife MPs claim expenses to dodge death tax
By SIMON WALTERS, GLEN OWEN, DENNIS RICE, BRENDAN CARLIN and JASON LEWIS
Last updated at 00:01 05 February 2008
Tory politicians Sir Nicholas and Ann Winterton switched their fashionable London apartment to a family trust and used their parliamentary allowances to avoid death duty.
Using a loophole in Commons rules, they claim more than £30,000 a year in "rent" from the public purse, which is paid to a family trust set up for their two children.
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The extraordinary arrangement has allowed them to benefit in two ways.
Their family has obtained £165,826 in "rent" for a home which they bought outright in 2002. And they stand to make a saving of up to £280,000 in their death-duty liability.
Sir Nicholas yesterday insisted he had done nothing wrong and that the "rent" payment and the family trust deal had been approved by the Commons authorities.
However, he said it was drawn up before checks on handouts for MPs' second homes were tightened up – and would probably not be allowed if it had been put forward now.
He said: "I am not dishonest. We don't own the flat, because once it is handed over, it becomes the property of the beneficiaries of the trust [his children].
"I see nothing unethical or wrong in it. It was agreed by the Commons Fees office – I happen to rent a property that I bought outright."
Sir Nicholas explained that the couple paid off their mortgage on their apartment in Rowan House, Greycoat Street, Westminster, in 2002 with the proceeds of a legacy and an insurance savings policy.
The latest disclosures about MPs' expenses come only days after Conservative MP Derek Conway was forced to step down for employing his sons as paid Commons aides while they were full-time students.
The revelations concerning the Wintertons are bound to provoke a wider debate about inheritance tax, as well as MPs' expenses.
The Conservatives' vote-winning pledge last October to raise the death-duty threshold to £1million forced Gordon Brown to call off a snap autumn Election.
As a result, the Prime Minister changed the existing threshold of £300,000 per person to £600,000 per couple.
Tax laws make it virtually impossible for most people to avoid death duty on their home – which is usually their biggest asset.
To do so, if they carry on living in the home, they must transfer ownership to their children and pay a full market rent.
For couples of retirement age and with little income – and certainly no expenses – it is generally unaffordable.
That means their children can be saddled with a 40 per cent tax bill on the property when their parents die.
However, the Wintertons, who are both in their 60s, were able to use their Commons Additional Costs Allowance (ACA) to reduce the inheritance tax on their London home to nil.
The arrangement is designed to remove the house completely from their estate for death-duty purposes.
Based on its estimated value of £700,000, the Wintertons' grown-up children, Sarah and Andrew, could save as much as £280,000 in inheritance tax.
Macclesfield MP Sir Nicholas and his wife, MP for Congleton, also own a £600,000 farmhouse in Cheshire, appropriately named Whitehall Farm, which has separate stables and borders their neighbouring constituencies.
Tax expert Maurice Fitzpatrick, of accountants Grant Thornton, said: "It is very difficult for a typical homeowner to hand their property on to their children free of inheritance tax because of the restrictive way in which death duty legislation works.
"I'm sure that many people would wish to be able to do so, but generally the inheritance-tax rules prevent them from doing so."
The Commons second-home allowance was originally designed to allow MPs to have bases in their constituency and also close to Parliament.
But strict rules to avoid the ACA being abused say: "You must avoid any arrangement which may give rise to an accusation that you are, or someone close to you is, obtaining an immediate benefit or subsidy from public funds.
"The ACA must not be used to meet the costs of a mortgage or for leasing accommodation from: yourself; a close business associate or any organisation or company in which you – or a partner or family member – have an interest."
MPs have to submit mortgage or rent bills to claim the money. The Wintertons would have been unable to do this when they paid off the mortgage on their Westminster home in February 2002.
They would have been restricted to claiming a modest sum to cover utility and other bills.
But they claim that by giving the home to a trust, they are no longer the owners and must pay a market rent to the trust, regardless of the fact that they are two of the three trustees.
The third trustee is Hugh Carslake, a lawyer who specialises in tax planning, trusts and estate planning for Martineau Johnson law firm of London and Birmingham.
Last night, Sir Nicholas, 69, said: "My arrangements are entirely in accordance with the rules of the House.
"It is very simple. I pay rent to the trust. I am entitled to claim for the costs of living in London."
He admitted the couple had spent some of the cash from the trust on kitchen and other repairs.
Land Registry documents dated August 1991 show that the couple owned the London home and had a £195,000 mortgage with the Cheshire Building Society.
They were paying £2,381 a month to service it.
Another Land Registry document, dated February 2002, shows that the property was transferred from the Wintertons to the trust for no money.
When The Mail on Sunday first approached Sir Nicholas as he emerged from his London home yesterday, he ran off to avoid answering questions.
Refusing to break stride, he said: "It's very simple, I pay rent on the property."
Asked to whom he was paying that rent, he replied: "To the trust. I am entitled to claim for the costs of living in London.'
Asked later in the day in his constituency if he had spent any of the money since the trust was set up in 2002, he said: "Yes, we have to meet the cost of council tax, utilities, new carpets and suchlike.
"The trust money can be spent on structural repairs to the flat – much like any landlord.
"The rent for the flat was set by an independent surveyor estate agent.
"It is the same that is paid by anyone else in the block.
"If we didn't live in that flat, we would be entitled to claim rent on somewhere else in London.
"We do not claim anything for our place here [in Cheshire], you know.
"What we are claiming in London is what we are entitled to.'
He added: "A lot of people claim more – I am in the bottom 40 of MPs who claim."
Asked who were the end beneficiaries of the trust, Sir Nicholas replied: "That is private."
Asked "Is it your children or is it you?", he said: "It is not ourselves. That is all I am prepared to say."
He claimed other MPs with second homes in London had made similar arrangements.
The third trustee of the couple's London flat, Hugh Carslake, confirmed that Sir Nicholas and Lady Winterton owned the property outright when they transferred it to the trust in 2002 after paying off their mortgage.
He maintained that the flat was now owned by the trust, not the Wintertons, which is why they paid rent to the trust.
When it was pointed out that the Wintertons were two of the three trustees (with Mr Carslake the third), he said: '"It is perfectly straightforward. They no longer own the house.
"If you own a property, there is nothing to stop you giving it away.
"They transferred it to a trust of which they are not the beneficiaries."
He refused to say who the beneficiaries were.
Mr Carslake added that the main purpose of setting up the trust was to enable the Wintertons to reduce their inheritance-tax liability so that they could hand over a bigger share of their wealth to their children.
When asked if the Wintertons had spent any of the trust money, Mr Carslake said that as far as he knew, they had not.
Both the Commons authorities and the Conservative Party declined to comment.
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