A ‘property bonanza’ of second homes sales has given 160 MPs a windfall of £42 million, paid for in part by taxpayers. Until the expenses scandal ten years ago (remember Sir Peter Viggers’ £1,600 floating duckhouse) MPs were able to buy a home near the House of Commons to enable their full participation in government when their first home was in another area of the country. The politicians could then claim the mortgage interest payments and running costs of the properties.
Under the revised system, MPs can now claim up to £22,760 in rent for the use of a second home. However, those who had already purchased a second home were allowed to keep it – and are entitled to keep any financial gain (or loss) from reselling their homes. As with any second home, Capital Gains Tax is payable on the profits if the property was still designated a second home when it was sold.
Campaigners are now demanding that those who have profited from the taxpayer subsidies should be required to repay any gain made during the period they received mortgage interest expenses.
Among those who have gained from selling their homes, Environment Secretary, Michael Gove, has made £870,000 gross profit. He already owned a property in London that had been purchased for £430,000 but used his allowance by ‘flipping’ his second home allowance into a constituency property in Guildford. He sold the Guildford property for the same price he paid for it (thereby paying no CGT) but his London home was sold for £1.3 million.
Maria Miller made £1.23 million gross profit when she sold her home in Wimbledon. It had been purchased for £234,000 several years before she was elected to parliament and attracted attention when it was discovered she had allowed her parents to live in the house. A proportion of the mortgage interest payments was repaid as a result of the scandal, but the property was eventually sold for nearly £1.5 million.
Graham Brady made over £1 million when he sold the Westminster flat he had bought for £340,000 for £1,415,000.
Kitty Usher claimed mortgage interest expenses on a house she had already owned for five years, and claimed nearly £17,000 for a new kitchen as part of the ‘additional costs allowance’ that was capped at £24,000 a year. She resigned after the expenses scandal but sold her home for over £700,000 profit.
It is reassuring that at least one MP has some morals – when Nick Clegg sold his second home in 2011 he returned almost £40,000 to the Treasury.
If you’re thinking of buying property, whether it’s your first home or a London pied-à-terre, ask a Chartered Surveyor to check the condition and structural elements of your new property to help you safeguard your investment.