ANDY BURNHAM, the culture secretary, has apparently avoided thousands of pounds in capital gains tax by channelling a £16,600 property windfall through the parliamentary expenses system.

Burnham was given the money by a property developer to persuade him to move out of a flat he rented in Dolphin Square, a desirable apartment block near the Palace of Westminster. Tax experts say he would normally have been liable for a tax bill of up to £6,665 on the windfall.

The Commons authorities instead agreed to bend their own rules, and added the windfall to his second home allowance, which is exempt from tax. The special deal meant he was able to claim more than £32,000 on his second home allowance for a single year - far beyond the maximum £21,643 then permitted under the Commons rules. It is believed to be the highest amount ever claimed.

Martin Bell, the antisleaze campaigner and former MP, said: “Both he [Burnham] and the fees office have made very serious errors. He should explain himself to the Labour party’s star chamber. They cannot overlook this case just because he’s a minister.” Burnham was also given permission to claim expenses for the Dolphin Square apartment and a new flat in Lambeth at the same time.

Parliamentary rules state an MP can claim against only one property, but the arrangement was approved by the fees office. Burnham’s Dutch wife, Marie-France van Heel, handled most of the claims.

Other MPs refused to accept the money when they moved out. Tom Harris, the former Labour transport minister, was offered £10,000 by Dolphin Square but turned it down.

The disclosures raise fresh questions about the apparent double standards operated by Gordon Brown, who last week refused to censure James Purnell, the work and pensions secretary, and Geoff Hoon, the transport secretary, for their failure to pay capital gains tax. He previously said a similar move by Hazel Blears was “totally unacceptable”.

Burnham moved into Dolphin Square after entering parliament in 2001. He designated the flat as his second home and over the next five years claimed more than £90,000 in parliamentary allowances for rent and bills.

The 1930s block has a swimming pool, a Gary Rhodes restaurant and four-star hotel, and previous tenants have included Harold Wilson, the former Labour prime minister.

In 2005 the square was bought by Westbrook Associates, a US private equity investor, which offered tenants cash to move out or accept higher rental payments. Burnham accepted £18,230.

Because the flat had been funded by the taxpayer, Burnham sought the advice of Commons authorities about the windfall. Officials said he could add it to his second home allowance, provided that it was used solely to fund his new flat.

By claiming the windfall as a parliamentary expense, Burnham escaped capital gains tax at 40%, which would have cost him between £2,592 and £6,665, depending on whether he had used up his allowances for the year. His spokeswoman confirmed: “Because Andy used it as additional cost allowance he didn’t [pay capital gains tax].”

In September 2005 he and his wife paid £215,000 for a small flat in Lambeth and embarked on extensive refurbishments. He remained at Dolphin Square until January 2006 while renovations were carried out.

They spent a total of £16,664, including £6,290 on a new Ikea kitchen and £1,807 on furniture. Just £1,500 of the Dolphin Square windfall remained unspent, and this was kept by the fees office. He claimed a further £16,147 to pay rent and bills on the Dolphin Square flat, bringing his total second-home claim for 2005-06 to £32,811.

Burnham argues that the complex deal saved the taxpayer money over a two-year period because, leaving aside the Dolphin Square windfall, he claimed less than his maximum allowance in 2005-6 and 2006-7. However, if the windfall is included, the allowance is exceeded.

Burnham said in a statement: “It is complete nonsense to suggest that I set out to avoid capital gains tax. My file shows I made arrangements to pay over this money in full to the fees office, and all arrangements were signed off by them. At no stage did I make any personal profit on this transaction.”

He said he “processed this payment through the ACA [additional costs allowance] system for full transparency. It meant private funds - and not the taxpayer - met the costs of my move. I did not profit; the surplus went back to the public purse.

“I acted at all times on advice from the fees office. I have since sought further clarification, and am discussing the technicalities with the fees office and HMRC [HM Revenue & Customs], but there are no outstanding tax issues.

“I have acted in good faith throughout, seeking maximum transparency and minimum cost to the taxpayer. In each of the last five years, my ACA claims have been well below the maximum.”

Mike Warburton, senior tax partner at the accountants Grant Thornton, speaking on the principle of the Dolphin Square windfall, said: “In my view the receipt of a capital sum in these circumstances would be subject to capital gains tax. I have looked into the position on Dolphin Square in other cases.”

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