Human rights appeal on inheritance tax dismissed
The First Tier Tribunal (FTT) has dismissed an appeal by businessman Arron Banks that HMRC had breached his human rights by assessing him liable to inheritance tax (IHT) for donations made to UKIP in the period following the 2010 election
3 Dec 2018
Banks, represented by Imran Afzal of Field Court Tax Chambers, was appealing against a decision made by HMRC on 15 February 2017 that he was liable to IHT on funding that he, or companies controlled by him, donated to UKIP or its affiliate organisations in between 7 October 2014 and 31 March 2015.
In total the amount donated was £976,781.38 and HMRC assessed his outstanding IHT liability as £162,945. The donations in question were made following the UK general election, in which UKIP did not succeed in having any of its candidates elected to the House of Commons.
Both Banks and HMRC agreed that the donations constituted ‘transfers of value’ as given by s3 of the Inheritance Tax Act 1984 (IHTA 1984) and that, for the purposes of tax, ‘can be treated as having been made by him’ despite having in some cases been made by subsidiary companies.
However, Afzal contested that the contributions qualified for IHT exemption under s24 of IHTA 1984, which holds that ‘transfers of value are exempt to the extent that the values transferred by them...are attributable to property which becomes the property of a political party qualifying for exemption under this section’. In order to qualify, a party must see at least one candidate elected to the House of Commons, and all candidates must receive at least 150,000 votes in total.
As a consequence of the first-past-the-post electoral system, UKIP did receive substantial popular support - and secured a greater proportion of the popular vote at that election than other parties that did succeed in having candidates elected - did not send any candidates to parliament. Banks accepted the strict interpretation of s24 IHTA 1984. However, he challenged the implications of the clause made by HMRC and alleged that it constituted ‘a breach of his human rights and a breach of EU law’.
He argued that it was discrimination contrary to Articles 10, 11, and 14 of the European convention on human rights (ECHR), which confer protection of property, freedom of expression and freedom of assembly. Article 14 in particular grants the ‘peaceful enjoyment of property’ under which no person can be deprived of possessions ‘except in the public interest and subject to the conditions provided for by law’ and that a person cannot be discriminated against on grounds of status, such as political beliefs.
Afzal made the case that the application of the conditions of s24 IHTA 1984 ‘amounted to discrimination against Banks on the grounds of his “political opinion” contrary to Article 14’ and that, as a supporter of UKIP, he had been given a status that was ‘other’, contrary to the provisions of Article 14.
Hearing the case, Judge Ashley Greenbank concluded that this argument was substantially sound and agreed with it. ‘If the ECHR is intended to offer real protection against discrimination on certain grounds (in this case, a person’s political opinion) in respect of matters falling within the ambit of ECHR rights…that protection would become almost illusory if it does not also extend to discrimination in relation to those actions which a person would naturally take as an outward expression of that protected characteristic.
‘For this reason, in my view, the differential treatment of which Mr Banks complains - the taxation of his contributions to UKIP - is discrimination on the grounds of his political opinion within Article 14.’
However, he agreed with HMRC submission that ‘the discrimination in this case is indirect. This is a case where the relevant provision is not specifically targeted at persons with a given political opinion or who support a particular political party. The rule does, however, have a particular effect on new political parties with broad national support.’
Despite agreeing with the substance of Azfal’s argument, Greenbank ultimately dismissed the appeal, saying that insufficient evidence had been presented by Afzal showing that the interpretation of s24 IHTA 1984 would have ‘any effect on the achievement of the EU’s objective’ in promoting either democracy or human rights and that, therefore, there was not substantive cause for the FTT to re-write the legislation in a manner that makes it compliant with ECHR rights.
Report by James Bunney