The Government has tabled an amendment in the House of Commons to the Constitutional Reform and Governance Bill that will provide that MPs and Lords Temporal are to be deemed to be resident and domiciled in the UK for the purposes of Income Tax, Capital Gains Tax and Inheritance Tax.  Assuming the amendment and the Bill itself is passed, members of both Houses will be liable to pay these taxes on their worldwide income, gains and assets.

This will stop the extraordinary anomaly whereby MPs and Peers can sit and vote in the UK Parliament but not properly pay UK taxation.

These new rules will come into effect for MPs after the General Election as soon as an MP takes the oath in Parliament.  In the House of Lords, all Peers appointed to the House after the Bill has received Royal Assent will have the new tax rules applied as soon as they take their seats. 

For existing members of the House of Lords, they will have three months from the date the Bill receives the Royal Assent to – in effect – resign their membership of the House if they do not wish to be deemed resident and domiciled in the UK for tax purposes.

The only exception will be the twenty-six Bishops and Archbishops of the Church of England.  This is because their membership of the House of Lords is inextricably linked to the posts they hold in the Church – I assume in practice all of them will be resident and domiciled in the UK.

Finally, the provisions will apply for the whole of the 2010-11 tax year, irrespective of the date of the General Election.

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