Brexit-backing millionaire Arron Banks sues HMRC over ‘discriminatory’ tax on political donations

Donations to political parties which had two MPs elected at the last general election, or one MP elected and a total of 150,000 votes, are exempt from inheritance tax.

While UKIP received 919,471 votes across the UK in the 2010 general election, the party did not return a single MP to the House of Commons, prompting HMRC to bill Banks for £162,945.34.

Banks previously challenged the decision at the first-tier tribunal (FTT) and the upper tribunal, arguing the law on political donations being exempt from inheritance tax breached his human rights and EU law.

He claimed the provisions of the Inheritance Tax Act were unlawfully discriminatory under the European Convention on Human Rights (ECHR), as well as breaching his – and UKIP’s – right to freedom of expression and freedom of assembly under the ECHR.

After both tribunals dismissed his challenge, Banks brought his case to the Court of Appeal on Wednesday.

Banks’ barrister Jason Coppel QC said: “Firstly, we say that the appellant has suffered discrimination on the basis of his political opinion as a supporter of UKIP, that is direct discrimination.

“Secondly, we say the appellant has suffered indirect discrimination on the basis of political opinion as a supporter of UKIP.

“And thirdly we say the appellant has suffered discrimination on the basis of the status of UKIP as a party without an elected MP.”

Coppel said the law encourages donations to other parties while discouraging donations to others.

“The common-sense position is that there is obviously a difference of treatment… Mr Banks was taxed because he gave to UKIP where he would not have been taxed had he given to the Conservative Party,” he said.

The court heard the law aims to allow donations to political parties while limiting abuse, but Coppel argued it had the impact of indirectly discriminating against UKIP supporters.

“It was a provision which was neutral on its face but had a particular prejudicial effect on supporters of Ukip who were taxed while others were not taxed,” he said.

Inheritance tax law allows for a tax-free allowance of £325,000, meaning only donations over this amount would be subject to the tax.

Coppel said: “The fact that this provision may not in practice disadvantage many UKIP supporters because not many of them have the resources Mr Banks does is of very little relevance.

“All the Conservative supporters in that pool, all the Labour supporters in that pool, all the Liberal Democrat supporters in that pool still benefit from it.”

He added: “This was an interference with freedom of expression… a £160,000-odd charge placed on an expression of political opinion.”

HMRC is disputing the claim, arguing the tribunals were correct in their decisions.

Sir James Eadie QC, for HMRC, said the alleged discrimination is not based on a personal characteristic and that Banks would have been eligible for the tax exemption if he donated to the Green Party rather than UKIP.

He said in written submissions: “That is not because the legislation treats the Green Party differently from UKIP, per se, but because the Green Party happened to achieve electoral success at a general election in 2010, whereas UKIP’s success at a general election was not until 2015.

“That is political happenstance; it does not demonstrate that the measure is discriminatory.”

He added: “It is not the appellant’s case that he chose to support parties without MPs, eg because of an interest in the plurality of democracy.

“Rather, he was a supporter of a party that happened, at the time of the relevant donations, not to have an MP. “

The case, being heard by Sir Julian Flaux, Lord Justice Henderson and Lady Justice Nicola Davies, is due to end on Thursday.