Analysis
The appellant taxpayer, Arron Banks, appealed against a notice of determination issued by HMRC. This notice assessed Mr Banks as owing inheritance tax of £162,945.34 on donations of £976,781.38 that he and companies that he controlled made to the UK Independence Party (UKIP) between October 2014 and March 2015 (the donations).
It was common ground that no UKIP MPs were elected at the 2010 UK General Election. UKIP did not therefore meet the statutory definition under s24(2) IHTA 1984 and so the Donations were not treated as exempt from VAT. The appellant argued that this differential treatment amounted to unlawful discrimination, contrary to Art 14 of the European Convention on Human Rights in conjunction with Art 1 of the First Protocol, and/or Art 10, and/or Art 11. The appellant further argued that the application of s24 IHTA 1984 in this way was a breach of the Lisbon Treaty. The Respondent, HMRC, disputed this.
In determining whether there had been unlawful discrimination, the Tribunal adopted the approach set out by Lord Steyn in R(S) v Chief Constable of South Yorkshire Police [2004] 1 WLR 2196.
Held:
- 1) In principle, tax provisions fell within A1P1 because they deprived the person concerned of a possession, namely the amount of money that had to be paid in tax.
- 2) There was a difference in treatment in respect of the tax treatment of a gift made by Mr Banks to UKIP and a gift to a political party which met the conditions in s24(2), such as the Labour Party.
- 3) The requirement imposed by s24(2) IHTA 1984, that a political party had to have had at least one MP elected at the general election preceding a donation for said donation to be exempt from inheritance tax, was discrimination on the basis of Mr Banks’ political opinion.
- 4) This requirement under s24(2) IHTA 1984 did not amount to discrimination on the basis of ‘other status’, as Mr Banks’s status derived from the differential treatment of which he complained.
- 5) Mr Banks was in an analogous position to others who were not taxed on their political gifts, such as individuals who made gifts to the Labour Party or the Conservative Party.
- 6) The legislation pursued a legitimate aim, namely to require a minimum level of public support to be demonstrated before donations to a political party qualify for exemption from IHT.
- 7) The chosen means for achieving the aim was disproportionate. The requirement for representation in the House of Commons did not strike a fair balance in the context of the provision of tax relief for the funding of political parties when other means of demonstrating significant public support were available which would not have a disproportionate effect on new political parties or those without representation in the House of Commons.
- 8) Section 24(2) could not be re-written under s3 of the Human Rights Act 1998 in order to remove any restriction on the availability of relief. That would cut against the legitimate purpose of the legislation, which was to limit relief to political parties that enjoyed a level of public support. It was potentially possible to re-write s24 to make it ECHR compliant, but that was a matter for Parliament and not for the First-Tier Tribunal.
- 9) The Tribunal did not have the power to make a declaration of incompatibility under s4 of the Human Rights Act 1998. Its powers were limited to determining whether the tax assessment should be upheld. Taking into account the limitations of the Tribunal’s powers, the appeal was dismissed.
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