In Arron Banks v HMRC [2018] TC06768 the First Tier tribunal (FTT) denied exemption from IHT for gifts to a political party: UKIP did not meet the criteria as their MPs were not appointed at a general election.
Certain gifts are exempt from IHT, they include lifetime gifts and gifts on death made to:
- Gifts to political parties (s24 IHTA 1984) where at the last general election preceding the Transfer of value:
- Two members of the party were elected to the House of Commons, or
- One member of the party was elected to the House of Commons and not less than 150,000 votes were given to candidates who were members of that party.
- Under s94 IHTA where a Close company makes a transfer of value this is apportioned to the participators in the company according to their interests in the company.
At the general election of 6 May 2010, UKIP failed to get any candidates elected as an MP.
- Mr Banks and companies he controlled made donations to UKIP or its affiliated youth organization of £976,781.38 between 7 October 2014 and 31 March 2015. At this time:
- UKIP was a registered political party under the relevant acts.
- There were UKIP MPs but they had been elected at by-elections.
- The parties agreed that these were transfers of value and that s94 applied to the amounts paid by the companies.
- In February 2017 HMRC assessed Mr Banks to IHT of £162,945.34 on the basis that s24 did not apply.
- Mr Banks challenged this strict application of s24 IHTA alleging it constituted a breach of his human rights under article 14 of the European Convention of Human Rights (ECHR) to the protection of property, freedom of expression and freedom from discrimination.
The FTT whilst agreeing with many of Mr Bank’s arguments, dismissed the appeal:
- Mr Banks had suffered discrimination due to his status as a UKIP supporter compared to if he had supported other political parties.
- The wording of S24 was disproportionate to its aim of ensuring that only donations to parties with a minimum level of public support are exempt from IHT.
- However, the tribunal cannot ignore or re-write UK law to set conditions which are compliant with ECHR rights. s24 must be applied as written and it did not apply to UKIP.
Mr Banks knew and accepted that UKIP did not meet the conditions of s24. What he perhaps did not realise is that the tribunal could not help him; only parliament can amend UK law.
Links to our guides:
IHT: Estate planning checklist
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