Inheritance tax payable on donations to UKIP

Case Reviews » November 9, 2018

inheritance tax payable on ukip donations

This is an industry-specific update on particular tax reviews or cases which may affect your clients. We hope the below is informative, clear and actionable.

IHT Payable on UKIP Donations

Transfers of value (gifts or donations) made to organisations and companies are chargeable to lifetime IHT unless the organisation is exempt.  Exempt organisations include charities and political parties.


Arron Banks was one of the largest donors to UKIP. In 2014/15 Banks, and companies he controlled, made donations totalling £976,781 to that organisation. HMRC raised an assessment on these donations for IHT of £162,945. This was on the basis that UKIP was not a political party as defined under IHTA 1984 s24 at the time the donations were made.

 The provisions only cover donations to a political party that, at the last election preceding the transfer of value had 

  • At least 2 MPs or
  • One seat and
  • 150,000 votes

UKIP was a registered political party under the Registration of Political Parties  Act 1998 and at the time of the donation was widely represented on local councils. But it did not meet the criteria set out above and as such no IHT relief was due. 

 The taxpayer appealed the IHT due saying that it was a breach of his European Human Rights and a breach of EU law – as it amounted to discrimination due to his political opinion. 

Who is affected 

This will affect anyone making donations to newly formed political parties and is a reminder to check the status of all exempt entities prior to transfers of values. 


Ahead of transfers to organisations ensure advice is sought on the availability of IHT relief if the organisation is newly set up. This includes charities who may not yet have registered as charities.

More Info
You can find the full case here

The taxation of trusts: a review

HMRC have launched a consultation setting out the principles the government believes should underpin the taxation of trusts 


HMRC are responding to the Autumn 17 budget to understand how to make the taxation of trusts simpler, fairer and more transparent.  At this stage the government is no making specific proposals for reform. They want to ensure that trust taxation does not produce unfair outcomes and that trust structures do no facilitate tax avoidance or evasion. Reading through the consultation it seems the focus is Non UK trusts being used Vs UK trusts. 

Who is affected

Most likely this will impact non Residents and non doms looking to hold UK assets via an offshore trust 


Be mindful of setting up any offshore trusts without caveating this review 


Clearly explain what the tax implications could be in the future. Ensure all reasons for setting up offshores trust are documented (eg to retain control of money/property etc).

 More Info  

You can find the government consultation here.

BPR Relief allowed on Livery Business

The Upper Tier Tax Tribunal have denied HMRCs appeal that BPR should be disallowed on a livery business 


Business Property Relief is one of the most valuable IHT reliefs. It applies to a business which is not an investment business. Any business consisting mainly of letting of land is considered an investment business.

This case involved Mrs Vigne who died in 2013. She owned 30 acres of land and ran a small livery business on the land. Horses could graze on the land for spring, summer & autumn (it was closed in winter as there were no stables on the land). Her executors claimed BPR on the land. HMRC denied the claim and said the business consisted of the letting of land. The executors appealed to the First Tier Tribunal (FTT). The FTT found in favour of the taxpayer and allowed BPR.

Looking at the business in the round, they concluded that the enhanced services, which were valuable to the horse owners, meant that the business was offering “significantly more than the mere right to occupy a particular parcel of land”.

  • Mrs Vigne was clearly running a business
  • She provided services such as daily horse health checks
  • She was not operating on making or holding of investments

HMRC appealed to the Upper Tier Tribunal (UTT).  They reviewed the case but did not allow the appeal. They said ‘there is no clear line between businesses which qualify for the relief and those that do not’.

Who is affected 

This is a win for the taxpayers and combined with the recent Graham Case (more next month) indicates that where there is a true service being provided that BPR will be allowed.


It is unknown whether HMRC will take this to Court of Appeal. If they do then this case could be overturned. Additionally this claim was originally made in 2013 and it is now 5 years later and it could still potentially be going through the courts.


If your clients own a land or property letting business and think BPR may be applicable for them ensure a tax adviser completes a review of the business. They should keep all diaries and evidence of all the services they are providing.

More Info 

You can find the full case here

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