Court of Appeal denies IHT relief on political donation

Arron Banks, the millionaire UKIP supporter has lost an appeal case to exempt £1 million in political donations from inheritance tax (IHT).

Mr Banks challenged HMRC’s assessment that he owed just over £160,000 on almost £1 million in donations to UKIP between October 2014 and March 2015, at tribunal hearings earlier in the year.

While donations to political parties that have either two MPs elected at the last general election, or one MP elected and a total of 150,000 votes, are exempt from the tax, HMRC found that because UKIP did not return a single MP to the House of Commons Mr Banks was liable for a payment of £162,945.34.

Mr Banks argued that the provisions of the Inheritance Tax Act were unlawfully discriminatory under the European Convention on Human Rights (ECHR), as well as breaching his, and UKIP’s, right to freedom of expression and freedom of assembly under the ECHR. But at appeal, in Arron Banks v HMRC [2021] EWCA Civ 1439, three judges found that he had failed to establish a breach of his human rights and dismissed the appeal.

The Court of Appeal ruled that Banks’ donations to UKIP were not eligible for IHT relief and explained that although there was discrimination under EU law, HMRC had proved that this was justifiable and relief must be denied.

Lord Justice Henderson said:

“There is nothing about UKIP or its supporters which places them in a different category from all other supporters of political parties who are denied exemption for their gifts.”

The Court of Appeal heard that, while UKIP did not win any seats in the 2010 general election, it did obtain two MPs in by-elections in 2014, but Lord Justice Henderson ruled:

“The requirement that the party should have at least one MP at Westminster cannot possibly be stigmatised as irrational.

Similarly, the exclusion of MPs elected at by-elections or who defect from other parties reflects the different, and possibly more volatile, political circumstances in which a party may acquire such MPs.”

Lord Justice Henderson accepted that the law did discriminate against Mr Banks directly “on the basis that he was a supporter of a party that had secured no seats in the House of Commons at the 2010 general election”. But concluded that HMRC had justified the difference in treatment, meaning it was still lawful, and so dismissed the appeal.

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