Section 15: Termination Payments to Mps Ceasing to Hold Office.
Summary
1.Section 15 amends section 291(2)(a) of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA). The amendment ensures that the first £30,000 of a resettlement payment to an MP who ceases to be a member of the House of Commons is exempt from tax.
Details of the Section
2.Subsection (1) amends section 291 of ITEPA by substituting a new section 291(2)(a).
3.New section 291(2)(a) exempts from the charge to income tax on earnings resettlement payments made under section 5(1) of the Parliamentary Standards Act 2009 (PSA 2009) in connection with a person’s ceasing to be a member of the House of Commons.
4.Subsection (2) provides that the amendment has retrospective effect and applies in relation to payments made on or after 1 April 2012.
Background Note
5.Prior to the enactment of the PSA 2009 and the establishment of IPSA, resettlement grants were payable to any Member of the House of Commons who failed to be re-elected or who did not stand at a General Election in accordance with a resolution of the House of Commons.
6.From 1 April 2012 the Fourth Edition of the MPs’ Scheme of Business Costs and Expenses makes provision for a resettlement payment to be made to any MP who leaves office involuntarily following a General Election. As a consequence, tax legislation needs amending in order for existing tax exemptions to continue to apply to such payments made by IPSA.
7.Section 291(2)(a) of ITEPA exempts from the charge to income tax on earnings resettlement grants made to MPs when they cease to be members of the House of Commons when parliament is dissolved, where the grants are made in accordance with a resolution of the House of Commons.
8.As currently worded, the legislation does not apply to similar payments made by IPSA because they are not made under a resolution of the House of Commons.
9.The proposed amendment to section 291(2)(a) will allow the exemption to apply to payments made by IPSA to any MP who ceases to be a member of the House of Commons.
