A peerage? I'd rather give it back and cut my tax bill

Andy McSmith
Sunday 23 October 2011 05:01

For some people, to be granted a peerage is the peak of a lifetime's ambition, a hard-earned entry to the most exclusive club in London. There is the honour of a title, the intellectual stimulus of debating with colleagues more knowledgeable and more polite than the MPs next door, the fun of dressing up, and the perks. With membership goes access to free parking bang in the centre of London, subsidised bars and dining rooms, and an immense library.

But for a handful, there is something more important than the perks and prestige: their bank balances. In the past few days, four peers have formally renounced their membership of the House of Lords, because if they had stayed they would have to pay UK tax on all their income. The four are "non-dom" for tax purposes, but a new rule that comes into force today, under Labour's Constitutional Reform and Governance Act, says there is no such thing as a "non-dom" peer or MP. His lordship might claim that his main home is in Timbuktu, or on the planet Zog – it makes no difference; when the taxman comes to call, being a member of either of the Houses of Parliament makes him liable to pay his full whack as if he were a UK resident.

When the law was introduced by the former justice secretary Jack Straw, it was widely seen as being aimed at Lord Ashcroft, the man who bankrolled the Conservative Party during the lean years after 1997, and masterminded its election strategy in marginal seats in the last election from an office close to David Cameron's at Conservative HQ. After years of speculation about whether he is a UK resident, Lord Ashcroft revealed just before the election that he has been a "non-dom" for years, saving himself vast sums that he would otherwise have had to pay in UK taxes.

But his place in the Lords means so much to him that he is prepared to stay and be taxed as a UK citizen.

Just before the general election he informed the Lords authorities that he was no longer chief executive of BCB Holdings, which runs the principal bank in the former British colony of Belize.

Lord Paul, a wealthy Labour peer, has also indicated that he would rather surrender the tax advantage he gets from being a "non-dom" than give up his seat. But three Tory peers and one crossbencher have other priorities.

One is Lord Laidlaw of Rothiemay, who has lived in Monaco for years. He filled the tabloid press two years ago when he sought treatment for "sex addiction" after details had emerged of a party he had hosted in a Monte Carlo hotel with male and female prostitutes. He gave £3.48m to the Conservatives in 2007, the largest individual gift to any political party that year.

Alistair McAlpine, a member of the family that owns the construction firm, served as treasurer of the Conservative Party for the entire 15 years that Margaret Thatcher was Tory leader, but quit the party after her downfall to join the Referendum Party. He has since rejoined.

A crossbench peer, Baroness Dunn, who comes from a wealthy Hong Kong family, will also resign. She was a member of the Hong Kong executive council for 13 years, when it was still a British colony, preparing for the handover of power to China. She was awarded a peerage by John Major in 1990.

Raj Kumar Bagri, 79, a Tory peer, was celebrated as one of the country's most successful Asian businessmen during the nine years when he was chairman of the London Metal Exchange. Yesterday, he became the fourth peer to announce that he would quit.

So, for those four peers, it is goodbye to the ermine, goodbye to the most exclusive club in Britain, but at least their fat bank balances will not suffer.

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