Peers' expenses will remain tax free when they move to a £300 daily attendance allowance in October, Lords Leader Lord Strathclyde assured the House today.
He said: "Tax is not paid on the current expenses system, on the basis that membership of the House is neither an employment nor an office.
"Any change to this position would require primary legislation and would require reconsideration of the level, £300, at which the attendance allowance is set.
"The Government currently has no plans to legislate to change the tax status of the scheme that is on the table today."
Lord Strathclyde, who was asking the House to agree a cut from a maximum daily expenses limit of £335.50, added: "If and when there is full reform of the House, the whole business of financial support would need to be reviewed."
Tory ex-Cabinet minister Lord Wakeham, who led an ad hoc group that reviewed the Lords' expenses regime, said he welcomed and agreed with Lord Strathclyde's remarks on tax.
He said: "The Review Body on Senior Salaries suggested that in principle fees for attending the House of Lords should be taxable and that, until legislation is amended to bring the House into the tax system, the fee should be set at a lower level."
This was, Lord Wakeham said, "to make an approximate allowance for the absence of tax".
He added that Lords officials had met HM Revenue and Customs officials and confirmed "it was their (HMRC's) view that, in the absence of legislation, the fee or allowance would not be subject to tax".
Lord Wakeham noted: "I don't think the Inland Revenue have the slightest desire to get involved in the complications of (peers') tax at all. They don't think they're losing a penny piece by these present arrangements."
The new regime, if agreed by the House later tonight, would replace a day subsistence allowance of up to £86.50, an office costs allowance of up to £75, and, for peers whose main home is outside London, an overnight allowance of up to £174.
There has been controversy over the existing scheme, with two former Tory peers - Lord Hanningfield and Lord Taylor of Warwick - facing prosecution on charges of false accounting. Other peers' claims have been investigated by the House authorities.
The new regime would also allow peers who attend for less than a full sitting day to claim a lower daily allowance of £150. Lord Strathclyde said it would be up to each member to decide whether to claim the full or the reduced rate.
Labour's Lord Tomlinson, a dissenting member of Lord Wakeham's group, disputed the claim that the changes would be "cost-neutral".
He told peers: "It adds to the cost on my estimation - and I have checked it with people in the finance department - possibly £1.5 million."
People who believed that peers claiming the reduced rate of £150 would enable the £1.5 million to be recouped were "living in cuckoo land", he said.
And he said the flat-rate system, which takes no account of the actual expenses incurred by members, would not be fair to those who lived outside London.
He told peers: "It is not a demonstration of equity to say you treat everyone the same when the cost of attending the House is vastly different.
"Someone who lives round the corner and can walk to this House is being treated in exactly the same way as a lord who lives in the furthest reaches of the country.
"He is forced, has no option whatsoever, to get accommodation in London in order to attend the House.
"That is not equity, it makes a mockery of the word. And it produces a potential threat to the regional balance of this House."
Liberal Democrat Baroness Harris of Richmond put forward an amendment that would instruct a Lords committee to produce proposals for a scheme allowing members living more than a 90-minute train journey from Westminster to claim first-class rail fares.
The system set to be agreed by peers today would allow members to be reimbursed for train travel up to the cost of a standard open ticket regardless of what class they actually travel.
Lady Harris, 66, said: "For those of us old enough to use a senior rail card, it is possible to purchase a first-class flexible ticket for just below the cost of a walk-on standard fare.
"However, for those younger members of this House who live in the far reaches of this country and do not have the advantage of age, the difference between the cost of the two tickets is enormous.
"This is, I believe, unfair, ageist and takes no account of those younger members who might have disabilities, and therefore I believe is discriminatory."
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