Arron Banks v The Commissioners for HM Revenue and Customs
| Jurisdiction | UK Non-devolved |
| Judge | Mrs Justice Falk,Judge Herrington |
| Neutral Citation | [2020] UKUT 0101 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Subject Matter | Tax,1 April 2020 |
| Date | 01 April 2020 |
| Published date | 06 April 2020 |
[2020] UKUT 0101 (TCC)
Appeal number:UT/2019/0024
INHERITANCE TAX – exemption for gifts to political parties – s 24 Inheritance
Tax Act 1984 – gift to UK Independence Party not within scope of exemption –
whether breach of European Convention on Human Rights – whether breach of
European Union law
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
ARRON BANKS
Appellant
- and -
THE COMMISSIONERS FOR HER
MAJESTY’S
Respondents
REVENUE & CUSTOMS
TRIBUNAL:
Mrs Justice Falk
Judge Timothy Herrington
Sitting in public at The Rolls Building, The Royal Courts of Justice, Fetter Lane,
London EC4 on 18, 19 and 20 February 2020
Imran Afzal, Counsel, for the Appellant
Christopher Stone, Counsel, instructed by the General Counsel and Solicitor to
HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2020
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DECISION
Introduction
1. The appellant (“Mr Banks”) appeals against a decision by the First-tier Tribunal
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(“FTT”) (Judge Ashley Greenbank) released on 15 October 2018 (the “Decision”). The
FTT refused the appeal of Mr Banks against a notice of determination dated 15
February 2017 issued by the respondents (“HMRC”) which assessed him to inheritance
tax (“IHT”) in the amount of £162,945.34 on donations that he or a company that he
controlled made to the UK Independence Party (“UKIP”) in the period from 7 October
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2014 to 31 March 2015.
2. It is common ground that the donations constituted “transfers of value” within s 3
Inheritance Tax Act 1984 (“IHTA”). The parties also agree that the transfers of value
comprising the donations made by a company controlled by Mr Banks can be treated
as having been made by him under s 94 IHTA.
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3. The only issue that arises on this appeal is whether or not the donations qualify for
exemption from IHT under s 24 IHTA (gifts to political parties). So far as relevant, s
24 IHTA provides as follows:
“(1) Transfers of value are exempt to the extent that the values transferred by them-
(a) are attributable to property which becomes the property of a political party
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qualifying for exemption under this section;
…
(2) A political party qualifies for exemption under this section if, at the last general
election preceding the transfer of value,-
(a) two members of that party were elected to the House of Commons, or
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(b) one member of that 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.…”
4. The definition of political parties that qualify for exemption is derived from a
private Member’s amendment to what became the Finance Act 1975, the Act which
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introduced capital transfer tax (“CTT”). It has remained unchanged since 1975.
5. The effect of UKIP’s failure to have any of its candidates elected as MPs at the
general election on 6 May 2010 – which was the general election preceding the date on
which the donations were made by Mr Banks – was that the donations did not meet the
conditions for exemption from IHT as set out in s 24.
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6. Mr Banks accepts that, on its strict terms, s 24 IHTA does not apply to the donations
made by him (or which are treated as having been made by him) because the conditions
for exemption as set out in s 24 were not met. However, Mr Banks contends that the
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application of s 24 IHTA in this way constitutes a breach of his human rights and a
breach of EU law.
7. In particular, Mr Banks contends that the application of s 24 IHTA in this way
involves:
(1) discrimination contrary to Article 14 of the European Convention on
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Human Rights (“ECHR”) together with Article 1 of the First Protocol to the
ECHR (“A1P1”) (protection of property);
(2) discrimination contrary to Article 14 ECHR together with either Article 10
ECHR (freedom of expression) or Article 11 ECHR (freedom of assembly);
(3) a breach of Mr Banks’s rights under Article 10 ECHR or under Article 11
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ECHR; and
(4) a breach of UKIP’s rights under the ECHR.
8. Insofar as the application of s 24 IHTA constitutes a breach of the ECHR, Mr Banks
says that, pursuant to s 3 of the Human Rights Act 1998 (“HRA”), the Tribunal must,
so far as it is possible to do so, read and give effect to s 24 IHTA in a way that is
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compatible with the ECHR rights, and that such a construction is possible in a way that
would extend the exemption to the donations Mr Banks made.
9. Mr Banks also argues that the imposition of a tax charge on the donations involved
a breach of the UK’s obligations pursuant to Article 4(3) of the Treaty on European
Union (“TEU”). Mr Banks contends that if there has been a breach of EU law, the
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Tribunal must either construe s 24 IHTA in a manner consistent with EU law or, if a
conforming construction is not possible, disapply the offending provisions.
10. It was common ground before the FTT that s 24 IHTA gave rise, in 2014, to a
difference in treatment between an individual who had donated to UKIP (which had not
secured a Member of the House of Commons (an “MP”) in the 2010 general election
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and so did not qualify under s 24 IHTA), as against an individual who had donated to a
political party which had secured at least one MP and the requisite number of votes in
the 2010 general election, and so did qualify. Against that background, the FTT
decided:
(1) The difference in treatment between Mr Banks and an individual who did
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receive an exemption under s 24 IHTA in 2014, amounted to discrimination on
the grounds of political opinion within Article 14 ECHR taken with A1P1.
(2) That difference in treatment was in pursuit of a legitimate aim, namely that
the exemption under s 24 IHTA should be limited to prevent abuse of the relief
by restricting donations to those political parties that play a meaningful role
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within national political debate.
(3) Nevertheless, the chosen means for addressing the legitimate aim was not
proportionate because the concentration in s 24(2) IHTA on MPs elected at the
previous general election under a first past the post system did not strike a fair
balance in the context of the provision of tax relief for the funding of political
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