Banks v Revenue and Customs Commissioners

[2021] EWCA Civ 1439, [2021] STC 2199

Court of Appeal: Sir Julian Flaux C, Henderson and Nicola Davies LJJ, [2021] EWCA Civ 1439, [2021] STC 2199, 6 October 2021

The Court of Appeal considered a challenge brought by Arron Banks in respect of a finding of the Revenue and Customs Commissioners that donations of almost £1 million made by him to the UK Independence Party (“UKIP”) were ineligible to be exempted from the inheritance tax liability attaching to his estate by reason of being gifts to political parties because UKIP at the material time failed to meet the threshold established in the Inheritance Tax Act 1984 (s24) of having at least two members in the House of Commons or one member plus at least 150,000 votes in the relevant election.” The claimant sought to rely on Article 14 of the ECHR read with Article 1 of the First Protocol to the ECHR, Article 10 and/or or Article 11 (freedom of assembly) of the ECHR and/or on Articles 10 and/or 11. The Upper Tribunal had overturned a decision by the First-tier Tribunal that  Mr Banks had been discriminated against on grounds of his political opinion contrary to Article 14 (though no remedy had be granted to him as it was not possible to construe s24 of the 1984 Act in a Convention-compliant manner and it was not open to the tribunal to make a declaration of incompatibility under s4 HRA).  The appellant appealed on the grounds, inter alia, that the Upper Tribunal erred in law in failing to hold that s24 directly or indirectly discriminated against him on the grounds of his political opinion in breach of Article 14 taken with A1P1, also that it erred in dismissing his claim that he was discriminated against on the grounds of being a supporter of a party which did not have any MPs following the 2010 General Election, alternatively that he was a victim of discrimination against UKIP on the grounds that it had no MPs following the 2010 General Election. He also claimed that the UT had erred in concluding that any discrimination (which it had not accepted had occurred) was justified. The Court (Henderson LJ with whom the Chancellor and Davies LJ agreed) dismissed his appeal.

At §31-34 the Court rejected the argument that the long-standing nature of the exemption (which had been in place for 45 years) had the effect that it should be more ready to find that it infringed the claimant’s rights (§31), relying on the unanimous decision of the Supreme Court in R (SC) v Secretary of State for Work and Pensions [2021] UKSC 26, [2021] 3 WLR 428 (see associated blog), §§163 to 185 at which Lord Reed emphasised at §172 that the intention of Parliament/ the object or aim of legislation “is an essentially legal construct, rather than something which can be discovered by an empirical investigation”; that the absence of “cogent justification in the course of parliamentary debate is not a matter which ‘counts against’ the legislation on issues of proportionality” and that the same was true of an absence of recent Parliamentary scrutiny. It approved of the UT’s characterisation of the aim of s24 as providing tax relief on donations to political parties that are participating in Parliamentary democracy by being represented in the House of Commons (§37).

As to the claimant’s grounds of appeal, the Court of Appeal cited the judgment of Lord Reed in SC, in particular his reference at §47 to the statement of the ECtHR in Guberina v Croatia [2016] 66 EHRR 11 at §69 that “Generally, in order for an issue to arise under article 14 there must be a difference in the treatment of persons in analogous, or relevantly similar, situations.” The Court went on to state at §51, relying on Lady Hale in Essop v Home Office [2017] UKSC 27, [2017] 1 WLR 1343 and the Grand Chamber in Biao v Denmark (Application no. 38590/10) [2017] 64 EHRR 1 §89, that “There must be a causal link between the protected characteristic (in the present case, freedom of political opinion) and the difference in treatment complained of” (this by contrast with indirect discrimination). It concluded that there was “no causal link between Mr Banks’ political views, manifested in his support for UKIP and the substantial donations which he made to that party, and the failure of the donations to qualify for exemption under section 24” because (§53) “The reason for the non-exemption of the donations made in the 2014/15 tax year had nothing to do with Mr Banks’ political opinions… The political views of the donor are completely irrelevant to the question whether or not the donation qualifies for relief under the section. Nor can it be said that the qualifying conditions are in any way a proxy for discrimination against Mr Banks on the grounds of his political opinions”. Further (§54, citing the Upper Tribunal at §74), “there is also no indissociable link between the criteria in the legislation and Mr Banks’ status as the holder of a particular political opinion or a supporter of UKIP. It was possible for a donation to any political party to meet the conditions at any time, as donations to UKIP would have done if made after the 2015 general election (and before the following general election in 2017), since UKIP had two MPs elected at the 2015 general election.”  The Upper Tribunal relied on this to distinguish the case from James v Eastleigh BC [1990] 2 AC 751 in which there was a direct and indissociable connection between sex and its proxy, pension age.

It was argued on the claimant’s behalf that the question of discrimination had to be assessed at the time the donations were made, this being dismissed at §56 on the basis that “the criteria for exemption have nothing to do with the political views of the donor, except in the trivial ‘but for’ sense that, in the absence of a donation to a political party by a donor … no question of exemption could arise”. This would have been the same (§57) had the parties excluded from the exemption been listed from time to time in a schedule to the 1984 Act”: “some donations to political parties of any complexion will qualify for exemption, while others will not. That is a form of discrimination, but it is not discrimination based on the political views of the donors”. Nor did the Court accept that the rule amounted to unlawful indirect discrimination as recently articulated by Lord Reed in the SC case §§49-50, ruling at §62 that the claim that Mr Banks, as a UKIP supporter, was excluded from the exemption whereas many of those with other political opinions were not was flawed in the same way as the direct discrimination claim by the “absence of any causal link between the terms of s24 …and the particular disadvantage suffered by Mr Banks, either alone or in conjunction with other donors to UKIP”. Henderson LJ referred to the Lady Hale’s statement in Essop at §25 that indirect discrimination required “a causal link between the PCP and the particular disadvantage suffered by the group and the individual”, applied in the Article 14 context by the Court of Appeal in R (Delve) v Secretary of State for Work and Pensions [2020] EWCA Civ 1199,  [2021] ICR 236, §71 (see previous post).

“63.     In my view, it cannot be inferred, as a matter of common sense or otherwise, that the requirements of section 24 had any particular disproportionate effect on supporters of UKIP in general, or Mr Banks in particular, as compared with their impact on supporters of any other political party which did not qualify for exemption at the material time. There is nothing about UKIP or its supporters which places them in a different category from all other supporters of political parties who are denied exemption for their gifts by the criteria of section 24. If a case were to be made that there is something special about UKIP or its supporters which would justify placing them in a separate category, then it would have been necessary for Mr Banks to adduce specific evidence directed to the point. It is certainly not something that can be assumed as a matter of common sense.”

Henderson LJ went on at §§65-66 to quote with approval the statement of the UT that “the only relevant differential impact is between supporters of parties which met the conditions for exemption as set out in s.24 IHTA at the time the relevant donations were made and those who did not”; that “any disproportionately prejudicial effect was on all of those who were supporters of parties that did not meet the conditions at the relevant time” and that “[t]here was no evidence before the FTT to suggest that UKIP supporters were particularly adversely affected as a group.”

The Court of Appeal similarly rejected the appellant’s appeal that he was discriminated against under Article 14 and A1P1 on grounds of “an other status”, that is, being a supporter of a party which did not have any MPs elected to the House of Commons following the 2010 General Election, and that he was a victim of discrimination on the same ground against UKIP. The Court of Appeal accepted at §81 that the “other status” did not fall foul of the “independent existence criterion” set down by the Supreme Court, per Lord Hughes in R v Docherty [2016] UKSC 62, [2017] 1 WLR 181, whose continued existence had been confirmed by the Court of Appeal in Haringey LBC v Simawi [2019] EWCA Civ 1770, [2020] 2 All ER 701 notwithstanding (obiter) criticism by Lady Black, Lady Hale and Lord Mance in R (Stott) v Secretary of State for Justice [2018] UKSC 59; [2020] AC 51 (and see the Supreme Court’s refusal to overrule Docherty in A & B v Criminal Injuries Compensation Authority & Anor Supreme Court, [2021] UKSC 27, [2021] 1 WLR 3746 discussed in an earlier blog). Henderson LJ concluded at §79, as Lord Lloyd-Jones had done in A & B, that the criterion “must … be narrowly confined to cases where the status is “defined entirely by the alleged discrimination” (citing Simawi, at §41), and did not prevent apply here. He went on to find, however, that the ground of discrimination was not to be regarded as ”suspect” (in which case it would have attracted increased scrutiny) (§94) and that the discrimination was justified taking into account the wide margin of discretionary judgment applicable in view of the fact that it represented the will of Parliament and concerned taxation and the funding of political parties (§§101-102, 105).


Claimant: Jason Coppel QC and Imran Afzal, instructed by Kingsley Napley LLP

Defendant: James Eadie QC and Christopher Stone, instructed by the Solicitor for Revenue and Customs

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