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Millionaire Brexit-backing businessman Arron Banks has lost his Court of Appeal fight over a six-figure inheritance tax bill on his donations to UKIP.
HM Revenue & Customs (HMRC) assessed Mr Banks – one of the self-styled ‘Bad Boys of Brexit‘ – as owing more than £160,000 on almost £1 million in donations to UKIP between October 2014 and March 2015.
Donations to political parties which had two MPs elected at the last general election, or one MP elected and a total of 150,000 votes, are exempt from inheritance tax.
While UKIP received 919,471 votes across the UK in the 2010 general election, the party did not return a single MP to the House of Commons, prompting HMRC to bill Mr Banks for £162,945.34.
HM Revenue & Customs (HMRC) assessed millionaire Arron Banks (pictured) – one of the self-styled ‘Bad Boys of Brexit’ – as owing more than £160,000 on almost £1 million in donations to UKIP between October 2014 and March 2015
However, Mr Banks challenged the decision at two tribunals, arguing that the law on political donations being exempt from inheritance tax breached his human rights and EU law.
He claimed 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.
After both the first-tier tribunal (FTT) and the upper tribunal dismissed his claim, Mr Banks brought a Court of Appeal challenge in May.
However, in a judgment handed down on Wednesday, three judges found that he had failed to establish a breach of his human rights and dismissed the appeal.
Lord Justice Henderson, sitting with Sir Julian Flaux and Lady Justice Nicola Davies, 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.
Protesters hold up placards and Union flags as they attend a pro-Brexit demonstration promoted by UKIP in central London in 2018
However, 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 later 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’.
However, the judge concluded that he had ‘no hesitation’ in finding that HMRC had justified the difference in treatment, meaning it was still lawful.
What are the rules on donating to political parties?
Anyone can donate to a political party and there is no limit on how much can be given as long as it is from a permissible source.
It is the political party’s responsibility to check whether the donation can be accepted or not.
Gifts to charities and political parties are exempt from inheritance tax (IHT) – but the organisation must fall under the definition of a charity or political party.
Under section 24 of the IHT Act 1984, only donations to a political party that, at the last election preceding the transfer of value, had at least two MPs or one seat and 150,000 votes will be exempt.
The UK Independence Party (UKIP) did not fulfil this condition.
Permissible sources in Britain include;
- Individuals registered on a UK electoral register, including overseas electors and those leaving bequests;
- Most UK-registered companies;
- Great Britain registered political parties;
- UK-registered trade unions;
- UK-registered building societies;
- UK-registered limited liability partnerships (LLP) that carry on business in the UK;
- UK-registered friendly societies;
- UK-based unincorporated associations that carry on business or other activities in the UK;
- And some types of trust and certain public funds.
Source: Daily Mail