Not Barclays and HSBC, you understand; we mean Arron Banks – the well-known (former) bankroller of UKIP.
Giving money to political parties is potentially a “transfer of value” for the purposes of Inheritance Tax (“IHT”): and furthermore, one which may give rise to an immediate charge to tax if and to the extent that it exceeds the donor’s nil rate band. But there is a let-out: gifts are exempt if at the last general election preceding the donation the political party in question secured either the election of at least two MPs or 150,000 votes and the election of one MP.
At the time at which Mr Banks donated nearly £1m to UKIP in late 2014 and early 2015, the party failed to meet those criteria. Accordingly the donation created an IHT charge for Mr Banks of some £163,000.
Mr Banks thought that that was a bit unfair, having regard to the fact that at the relevant general election (in 2010) UKIP had secured pretty much as many votes as the SNP, Sinn Fein, Plaid Cymru and the SDLP (who between them secured 17 seats) put together and were the highest-polling party in the 2014 European Assembly election. He persuaded the First-tier Tribunal (“FTT”) that in those circumstances, denying him the same treatment as a supporter of, say, the Conservative Party, infringed his rights under European Convention on Human Rights (“ECHR”) – though, sadly for Mr Banks, the FTT did not think there was anything they could do about it. (And mildly ironic, some would say, in all the circumstances, that it was a European Convention that Mr Banks was invoking…)
The appeal has now been heard by the Upper Tribunal, where Mr Banks has been defeated on all counts. The Tribunal concluded inter alia that there had been no discrimination within the scope of the ECHR; that even if there had been, it would have been proportionate and so legitimate; and that even if it hadn’t been proportionate, the words of the legislation were clear and it would not have been possible to interpret them so as to be compliant with the ECHR.
The specific question (is there an IHT charge on making big donations to UKIP?) is perhaps unlikely to arise again. But the case is of wider interest.
The key point is this: giving property away to individuals doesn’t give rise to an immediate charge to IHT. By contrast, giving property away other than to individuals is in principle usually an immediately chargeable transfer giving rise to a charge to IHT at 20%.
In practice, this may not be a problem. For one thing, there are exemptions covering gifts to such worthy bodies as qualifying political parties, charities, community amateur sports clubs, the National Gallery and the Historic Churches Preservation Trust (to name but a few). For another, gifts may be covered by any available nil rate band or (if made regularly) by the rules relieving normal expenditure out of income. But the thing to grasp, if you are making sizeable gifts other than to individuals, is that it is unwise to assume that IHT can be ignored.
For more information, please get in touch with your usual BKL contact or use our enquiry form.
Above all, keep well.