British Prime Minister Keir Starmer suffered a significant setback on Friday when his deputy Angela Rayner quit the government over incorrect tax payments on a property transaction.
She was found to have breached the ministerial code of ethics.
The government said Ms Rayner, who was deputy prime minister and housing minister, would leave her government and party posts.
Ms Rayner had claimed she made a mistake based on legal advice she received at the time. She said the advice was that she did not need to pay the higher stamp duty rate reserved for second home purchases when she bought a seaside flat on England's south coast.
She had said a conveyancer and two legal experts had all suggested the amount of the property purchase tax she paid on the home in Hove was correct. Following headlines about her tax affairs, she consulted a leading counsel, who found she was liable to pay a higher rate.
'Deeply regrettable'
Ms Rayner had referred herself to the government’s ethics adviser Sir Laurie Magnus who investigated the case and reported within 24 hours.
He stated that it was “deeply regrettable that the specific tax advice was not sought” and that she had breached the ministerial code.
Ms Rayner had failed to comply with the “overarching duty” on government ministers to “comply with the law and protect the integrity of public life”.
Sir Laurie said she had failed to meet the “highest possible standards of proper conduct”.
He said he believed she had acted in “good faith”, but that “the responsibility of any taxpayer for reporting their tax returns and settling their liabilities rests ultimately with themselves”.
In a letter published on Friday, Sir Laurie said: “She believed that she relied on the legal advice she had received, but unfortunately did not heed the caution contained within it, which acknowledged that it did not constitute expert tax advice and which suggested that expert advice be sought.”
It was with “deep regret”, he told the Prime Minister, that “I must advise you that in these circumstances, I consider the [ministerial] code to have been breached”.
In her resignation letter to Mr Starmer, Ms Rayner said she deeply regretted her “decision to not seek additional specialist tax advice” and took “full responsibility for this error”. She has also stepped down as deputy leader of the Labour Party.
She wrote: “I have long believed that people who serve the British public in government must always observe the highest standards, and while the independent adviser has concluded that I acted in good faith and with honesty and integrity throughout, I accept that I did not meet the highest standards in relation to my recent property purchase.
“I would like to take this opportunity to repeat that it was never my intention to do anything other than pay the right amount.”
Mr Starmer said Ms Rayner would “remain a major figure in our party” and “continue to fight for the causes you care so passionately about” despite her resignation.
Tory leader Kemi Badenoch criticised the Prime Minister for having waited for Ms Rayner’s resignation, saying her position had been “untenable for days”.
Reshuffle
It is understood a wider reshuffle of ministers will take now place. Losing the deputy prime minister is a major blow for Mr Starmer as he seeks to reset his government following a difficult summer dominated by criticism of the “small boats” immigration crisis and speculation about tax rises in the autumn budget.
Ms Rayner is popular among the Labour grassroots and is said to have played an important role in defusing the backbench revolt over proposed welfare cuts earlier this year.
She has been crucial to Mr Starmer's political project, overseeing the manifesto pledge to build 1.5 million homes as well as the flagship workers’ rights expansion, and being viewed as a bridge between No 10 and the wider party.
Scapegoat
Ms Rayner's attempts to defend herself had appeared to unravel when the conveyancing firm she used, Verrico and Associates, on Thursday said its lawyers “never” gave her tax advice and were being made “scapegoats”.
In a statement, managing director Joanna Verrico said: “We’re not qualified to give advice on trust and tax matters and we advise clients to seek expert advice on these.”
Experts said Ms Rayner's former marital home in Ashton-under-Lyne, Greater Manchester, was owned by a trust benefiting her disabled son.
The sale of her remaining 25 per cent stake did not cut all ties with the property in law. Thus she should have paid additional tax on the new property in Hove, as a second home.
Ian Dyall, head of estate planning at wealth management firm Evelyn Partners, said the tax treatment of property transferred into a trust depends on a range of factors and could remain part of a person's tax affairs.
“If the person who transfers the assets into trust continues to benefit from the use of the property, the property will remain part of their estate for inheritance tax,” he said.
