Arron Banks, one of UKIP’s major donors, has lost his case at the Court of Appeal (CoA) regarding inheritance tax (IHT).  Generally, donations to political parties are exempt from IHT if the political party has two MP in the House of Commons or one MP in the House of Commons and at least 150,000 votes, both measured at the previous general election.  At the time when Mr Banks made certain donations to UKIP it didn’t have any MPs in the House of Commons so did not qualify for the exemption, in a similar manner to the Green Party at the time as it also had no MPs in the House of Commons.

HMRC had reviewed the donations that Mr Banks made in the tax year 2014/15 and raised a notice of determination for 20%-25% of the transfers as UKIP didn’t qualify for the exemption for political parties and treated them as chargeable lifetime transfers of value, similar in manner to transferring funds to trusts.

Mr Banks challenged this determination holding that he had been discriminating against in contravention of his rights under the European Convention of Human Rights.  The lower tribunals had both rejected his appeals and the case was to be decided at the CoA.

The CoA reviewed recent cases, in particular a case that had been recently decided by the Supreme Court (SC) in relation to child tax credit.  The judgement for this case was only issued in July this year and reviewed whether the fact that child tax credit was limited to the first two children discriminated against households with more than two children.  The SC held in this case that in matters of social and economic policy the government have a wide margin of appreciation when drafting policy and as there was no noticeable discrimination against the normal statuses (race, gender, sex) that any possible discrimination alleged was justifiable.  The SC also held as social policy is political matter the courts should be reluctant to interfere.  While the facts were different in the Banks case, as this was an IHT case as opposed to a benefits case, the underlying human rights issues were very similar.

The CoA followed the ruling set by the SC and dismissed Mr Banks’ appeal.

The decision can be found at: Banks v Revenue And Customs [2021] EWCA Civ 1439 (06 October 2021) (bailii.org)

Please contact us if you have any questions on inheritance tax matters or planning for transferring assets to loved ones.  We are experienced with these issues.