Court of Appeal rejects Arron Banks’ inheritance tax appeal
The Court of Appeal has dismissed the appeal of Arron Banks against a decision of the Upper Tribunal which upheld an assessment to inheritance tax (IHT). Mr Banks made donations to UKIP in 2014 and 2015 totalling around £1m, sourced from his personal funds and through a company that he controlled. It was common ground that the donations would be subject to the IHT charge unless they came within the exemption for donations to political parties (s.24 IHTA 1984). At the relevant time, donations to UKIP did not qualify for the exemption because UKIP did not have an MP who had been elected in the previous general election.
Relying on rights conferred on him by the European Convention of Human Rights (ECHR) and the law of the European Union, Mr Banks claimed to be entitled to the exemption anyway. The EU law arguments had been rejected by the FTT and Upper Tribunal and were not pursued in the Court of Appeal.
At first instance, the FTT had found that, in breach of Article 14 ECHR taken with Article 1 Protocol 1, the s.24 criteria indirectly discriminated against Mr Banks because of his political opinion, and that the discrimination could not be justified. However, it concluded that it was not possible to interpret the legislation so as to avoid the discrimination and dismissed the appeal.
Mr Banks appealed to the Upper Tribunal. Challenging the FTT’s conclusions by Respondents’ Notice, HMRC contended that there was no discrimination and that in any event any difference in treatment was justified. The Upper Tribunal (Falk J and UT Judge Herrington) agreed with HMRC on all points. That decision was challenged on appeal to the Court of Appeal.
Henderson LJ (with whom the Chancellor and Nicola Davies LJ agreed) found that the Upper Tribunal had been right to conclude that the legislation did not discriminate against Mr Banks because of his political opinion, either directly or indirectly. Following recent authority that suggests a liberal approach to ‘other status’ for the purposes of Article 14, the Court found that Mr Banks did have a status of “supporting a party that did not have any MPs elected to the House of Commons following the 2010 general election” and that s. 24 did discriminate against him on the basis of that status. However, it found that the difference in treatment was justified and that there was accordingly no breach of Article 14.
Henderson LJ’s discussion of the justification issue is a valuable explanation and application in the tax context of the recent unanimous decision of the Supreme Court in R (SC) v Secretary of State for Work and Pensions and others [2021] UKSC 26.
A copy of the judgment can be found here.
Chris Stone represented HMRC, led by Sir James Eadie QC.
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