Bournemouth MP avoided tax on £600,000 gain

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Bournemouth West MP, John Butterfill did not pay capital gains tax after making £600,000 profit on the sale of his taxpayer funded house which he told the parliamentary authorities was his designated second home.

Sir John submitted regular claims forthe running of his six bedroom country house over five years under the second home allowance. The house had a swimming pool and extensive grounds. He claimed £17,000 on servants quarters alone.

He designated a small flat in his Bournemouth constituency bought for £56,000, as his "main home." 

When he sold the property for £1.2 million in 2005 he informed HM Revenue & Customs that it was his "primary residence", resulting in an exemption from capital gains tax.

According to the Telegraph The house in Woking, Surrey, 80 miles from his constituency, doubled in value while the taxpayer was contributing up to £1,778 a month towards mortgage interest. Sir John was also reimbursed for council tax for the "staff annexe", where his housekeeper and odd job man lived.

The national newspaper claims he was able to avoid capital gains tax of 40% by making contradictory declarations to Parliament and HM Revenue & Customs. The declaration did not break the law.

The MP confirmed that he used part of the sale proceeds to pay for a £880,000 London town house. He told the Telegraph that he had spent £500,000 of his own money transforming his former home from a wreck and that his profit on the house is closer to £100,000 and not £600,000.

The MP is now expected to pay £40,000 in capital gains tax and to refund the £20,000 in claims made for his staff annexe and repairs on the Bournemouth flat, making his total repayments the highest of any MP to date.

The MP told Newsnight last night that the Telegraph story was  "a gross misrepresentation of what I said to the young lady."

Sir John has been an MP since 1983 and was knighted in 2003 for services to Parliament. He is also treasurer of the 1922 committee of backbench MP's.