News & Info

Prescott 's Potential Tax Burden

May 2006

As If John Prescott didn't have enough troubles, there is now speculation that he may be facing a large tax bill now that he has lost his departmental duties, which means a change to the tax status of some of his perks.

If an employer provides you with a home or domestic staff you are taxed on that perk. To avoid tax on the value of a free home it must be:

1) needed for performance of the duties (like a boarding master at a school), or

2) normal for that sort of employment (like a groundsman at a sports ground) or

3) needed for special security reasons (like the Prime Minister).

Prescott has had 2homes lent to him - Dorneywood, a 21-room stately home in gardens of 214 acres is worth about £10 million. The famous flat he used in Admiralty House is probably worth £2 million. Staffing these could cost a further £250,000.

The tax is calculated on 5% of the property value. Staff are charged at cost. Mr Prescott pays 40% tax. So his tax bill (now he has lost his department) could be:

Dorneywood £10,000,000 x 5% x 40% tax = £200,000

Admiralty £2,000,000 x 5% x 40% tax = £40,000

Staffing both £250,000 x 40% tax = £100,000

Total extra tax per year = £340,000

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