Tax tribunal rules that Arron Banks suffered political discrimination

14 November 2018 by

Ukipsm.svgBanks v Revenue and Customs Commissioners [2018] UKFTT 617 (TC) – read judgment

Donations made by Arron Banks to the United Kingdom Independence Party (‘UKIP’) are subject to a tax regime which discriminates against the donor on grounds of his political opinion, the First-Tier Tribunal (Tax Chamber) has found.



Mr Banks and companies controlled by him donated £976,781.38 to UKIP between 7th October 2014 and 31st March 2015.

As the donations constituted ‘transfers of value’ within s.3 of the Inheritance Tax Act 1984 (‘IHTA’), they attract a payment of inheritance tax unless a relevant exemption applies.

Section 24 of the IHTA provides for an exemption for gifts to political parties where at the last general election preceding the transfer of value in the following circumstances:

(2) …

(a) Two members of that party were elected to the House of Commons, or

(b) One members of that party was elected to the House of Commons and not less than 150,000 votes were given to candidates who were members of that party.

The fact that UKIP failed to have any MPs elected from its ranks on 6th May 2010 meant that, on the face of s.24, Mr Banks’s donations could not fall within the exemption.


Article 14

Mr Banks contended that this was discriminatory.

The Judge accepted as a starting point the well-known five-stage approach as set out by Lord Steyn in R (S) v Chief Constable of South Yorkshire Police [2004] UKHL 39 at [42]:

(1) Do the facts fall within the ambit of one or more of the Convention rights?

(2) Was there a difference in treatment in respect of that right between the complainant and others put forward for comparison?

(3) If so, was the difference in treatment on one or more of the proscribed grounds under article 14?

(4) Were those others in an analogous situation?

(5) Was the difference in treatment objectively justifiable in the sense that it had a legitimate aim and bore a reasonable relationship of proportionality to that aim?

As to (1) and (2), it was agreed that the provision fell within the ambit of Article 1 of the First Protocol (the right to protection of property), and that there was differential treatment.


Was the difference in treatment on a proscribed ground?

Mr Banks had to demonstrate that this differential treatment fell within a proscribed ground of Article 14, which relevantly states:

The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as … political or other opinion, … or other status.

HMRC contended that Mr Banks’s case did not fall within ‘political opinion’. It was said his donation, not opinion, led to differential treatment.

The Judge disagreed. The aim of the ECHR is “to guarantee not rights that are theoretical and illusory but rights that are practical and effective” (Clift v UK Application No 72205/07 at [60]). A donation to UKIP is presumably a direct consequence of political support of UKIP, and it was a natural expression of political opinion to make a political donation. Mr Banks’s differential treatment fell within the proscribed ground of political opinion.

The Judge went on to hold that if Mr Banks did not fall within the ground of ‘political opinion’, then he had no other relevant status for the purposes of Article 14. This was so because Mr Banks’s status derived from the differential treatment itself. The only distinction between him and a donor to a party that would qualify for the exemption is that they fall on different sides of the test under s.24.

Therefore, the characteristic in respect of which differential treatment was applied to Mr Banks does not exist independently of the discrimination about which he complains. While the Judge acknowledged that this may go against the grain of case law from the European Court of Human Rights on this issue, the tribunal was bound by the House of Lords case of Clift v Secretary of State for the Home Department [2006] UKHL 54 and so could only find against Mr Banks on this issue.


A proportionate means of achieving a legitimate aim

The judgment contains a broad discussion about the correct approach to this question and is rewarding reading for those with an interest in discrimination law.

Mr Banks contended that HMRC had not demonstrated a legitimate aim of the legislation at the relevant time, which is when the differential treatment took place. Developments in the law since 1975 meant that if there ever were a requirement for s.24 to prevent abuse of such tax relief, it could not be said that it remained.

HMRC’s response relied in essence on the opportunity afforded by Lord Nicholls’ dictum in Wilson v First County Trust Ltd (No. 2) [2004] 1 AC 816 at [63] to take the legislation at face value: “the facts will often speak for themselves”. The tribunal is entitled to determine a policy objective from the face of the legislation. Tax relief is a form of public funding of political activity, and it is not irrational to direct that funding towards those parties who participate in Parliamentary democracy.

While the Judge agreed that such legitimate aims exist, the more difficult question for HMRC in this case was the proportionality of the means employed to further them.

The main point on this issue in the Judge’s mind was whether the provision – that political parties should be able to show a minimum level of public support before qualifying for tax relief – is proportionate in the context of the differential treatment it for which it provides.

The Judge found that it was not. A balance needs to be struck between achieving that legitimate aim and the impact on Mr Banks’s rights. While public support is not an irrational measure, seats obtained in the previous election is not a reliable barometer of public support. As such, the test prejudices supporters of new parties, even where they may enjoy a significant degree of support from the public.


Looking ahead

Mr Banks won on the issues, but he is left without a remedy.

Under s.3 of the Human Rights Act a tribunal can be required to interpret legislation in a way which is consistent with ECHR rights, and a number of suggestions were put forward by Mr Banks for the judge to do so.

But the problem for him was the clarity of the fundamental feature of the legislation, namely to restrict tax relief to those political parties with a certain number of MPs. The Judge recalled the limits set out by Lord Nicholls in Ghaidan v Godin-Mendoza [2004] UKHL 30 at [53]:

Parliament, however, cannot have intended that in the discharge of this extended interpretative function the courts should adopt a meaning inconsistent with a fundamental feature of legislation. That would be to cross the constitutional boundary section 3 seeks to demarcate and preserve.

However, Mr Banks was also denied a declaration of incompatibility (by which the tribunal declares that the legislative provision is contrary to the ECHR), as Parliament has not given the First-tier Tribunal the power to make such a declaration under s.4 HRA.

Time will tell whether the challenge to the regime is sustained by way of appeal or judicial review. For now, Mr Banks’s case serves as a useful reminder of two interrelated points. First, that in significant areas of discrimination law the thrust of domestic courts’ decisions run against the grain of those of the European Court of Human Rights. Second, and perhaps more aptly in this case, that the ECHR can be somewhat of a blunt instrument in the face of clear provisions of primary legislation.


Thomas Beamont is a pupil barrister at One Crown Office Row.

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