Jeremy John Hosking v The Commissioners for HMRC

Introduction

1. This is an appeal by the Appellant (“Mr Hosking”) under section 222 of the Inheritance Tax Act 1984 (“ IHTA 1984 ”) against a determination dated 1 November 2022 charging him inheritance tax (“IHT”) in the amount of £349,309 on certain donations made by him during the period March 2011 to October 2016 as set out in paragraph ‎9 below (“the Gifts”). The total amount of the Gifts is £1,737,236. Facts

2. The documents to which I was referred were included in a documents bundle of 207 pages, a further documents bundle of 53 pages, a supplementary witness statement of 7 pages and an amended authorities bundle of 1,836 pages. Mr Hosking provided two witness statements, gave oral evidence at the hearing and was cross-examined by Mr Stone. I also had the benefit of written skeleton arguments from both parties.

3. From all of the above I make the following findings of fact.

4. Mr Hosking has for many years earned a substantial income from investment-related activities, significantly in excess of his personal living needs and those of his family. Mr Hosking has used some of his surplus income to support what he considers to be good causes, by making donations to organisations, both charitable and political, that support those causes.

5. From the 2015/16 tax year to the 2022/23 tax year Mr Hosking made approximately £10.8 million of charitable donations and £11.9million of political donations. In total Mr Hosking contributed approximately £47.5million in that period to what he considered to be good causes, including charitable stocks and investment in Gravetye Manor and Gardens (see paragraph [‎19] below).

6. Mr Hosking’s charitable and political donations fluctuate significantly year to year and are responsive to the needs of the relevant organisations he supports, and subject to his available cash resources rather than the level of his surplus income.

7. Mr Hosking does not have any contemporaneous records or correspondence explaining the amounts he donated on each occasion or the reasons for donating to a particular organisation at a particular time. In oral evidence Mr Hosking repeatedly stated that he did not recall why he chose the specific amounts donated at the particular time that he donated them. Some of the donations reported as “non-cash” in his records represent direct payments made by him to suppliers on behalf of the relevant organisation.

8. It is normal for Mr Hosking to attend fundraising events and make donations as a result. If Mr Hosking commits to a particular cause or project he will support it as funds are required and his available cash resources allow.

9. The Gifts that are the subject of this appeal are set out below:

10. All of these organisations (save for No Campaign Limited (“the 2011 Donation”), see paragraph [17] below) campaigned for the UK to leave the EU (“Leave”). The date of the Referendum was announced on 20 February 2016. Official campaigning for the Referendum took place from 15 April 2016 until 23 June 2016. The Referendum was held on 23 June 2016.

11. Mr Hosking formed and funded Brexit Express as an independent campaigning group for Brexit. It was registered with the Electoral Commission on 31 May 2016. Brexit Express was incorporated and became a registered political party somewhere between late 2018 and March 2019. Brexit Express was renamed the Reclaim Party in 2020.

12. Mr Hosking made subsequent payments to the recipients of the Gifts as follows: (1) two further donations made to Vote Leave Limited, £100,000 on 23rd July 2018 and £60,000 on 17th May 2019; (2) a further 70 donations totalling £4,218,948.77 to Brexit Express (renamed Reclaim in 2020) made between 14th March 2019 to 9th May 2025; (3) a further 40 donations made to Labour Leave Limited totalling £225,000, in the period from 9th April 2018 to 9th March 2021.

13. Mr Hosking’s purpose in making the Gifts (except for the 2011 Donation, see paragraph [17] below) was to support the campaign for Leave, which he supported because he believed that leaving the EU would protect the sovereign independence of the UK’s democracy which would in turn support the UK’s cultural values and national identity.

14. Mr Hosking has held strongly Eurosceptic views since the mid-1990s and started making donations to organisations campaigning for Leave, such as the Bruges Group, in 1995. Those donations increased after the Conservative Party won the general election in 2015, because the Conservatives had made a manifesto commitment to hold a referendum on leaving the EU.

15. Between 2009 and 2025 Mr Hosking made donations to the Conservative Party, to certain political candidates, Vote Leave Limited, Labour Leave Limited, Brexit Central, Brexit Express, Reclaim, the Institute of Economic Affairs, Standpoint Magazine, Stand up for Brexit, Leave means Leave, Brexit Watch, The Taxpayers’ Alliance and the New Culture Forum. All of these donations had the purpose of advancing the Leave campaign.

16. The Gifts are therefore only a “snap shot” of Mr Hosking’s political donations in support of Leave, more specifically for the purposes of securing the Referendum, campaigning in the Referendum and implementing the result of the Referendum from 1995 onwards.

17. With respect to the 2011 Donation, in oral evidence Mr Hosking said that he could not recall the purpose of that donation and had probably not considered it since. He accepted that it was not related to Leave, acknowledging that the Leave campaign may well have benefitted at that time from the alternative vote that the No Campaign Limited was campaigning against.

18. In addition to the political donations, Mr Hosking also made a large number of donations to non-political organisations, for what he described in his witness statement as: “the promotion and protection of British way of life, by which I mean British values such as our culture, heritage, traditions, sovereignty and national identity” which included: (1) Expenditure on Gravetye Manor, a hotel; (2) Donations to Steam Locomotives and Heritage Railways; (3) Contributions to the rescue of Crystal Palace Football Club and donations to its youth club and associated charity; (4) Acquisition and funding of The Critic magazine; (5) Donations to the Kings Trust (formerly the Prince’s Trust) and Julian Baring Scholarship Fund.

19. Mr Hosking acquired the lease of Gravetye Manor in February 2010, in order to restore the hotel to its former glory. This is a commercial enterprise, but his purpose in investing is restoration, not profit. He has personally funded in excess of £17million of expenditure in acquiring and restoring the hotel, and to date it has not made a profit.

20. In 2010 Mr Hosking, as 25% of a consortium, acquired Crystal Palace Football Club to prevent it from going into liquidation. This was not undertaken as a commercial venture. The investment did in fact produce a return when he sold his interest in the club but this was not his intention when he invested in it. Grounds of Appeal

21. Mr Hosking asserts that the Gifts were exempt transfers and therefore not subject to IHT because: (1) They were part of his normal expenditure paid out of his income and therefore exempt under section 21 of IHTA 1984 ; or (2) They were political donations and therefore exempt under section 24 of IHTA 1984 , when construed so as to conform with the European Convention on Human Rights (“ECHR”), as required by section 3 of the Human Rights Act 1998 (“ HRA 1998 ”). Section 21 Exemption - Normal expenditure The Legislation

22. Unless otherwise stated, all references to sections in this decision are to sections of IHTA 1984 .

23. Section 1 provides: “ Charge on transfers Inheritance tax shall be charged on the value transferred by a chargeable transfer.”

24. Section 2 provides: “ Chargeable transfers and exempt transfers (1) A chargeable transfer is a transfer of value which is made by an individual but is not (by virtue of Part II of this Act or any other enactment) an exempt transfer.”

25. Section 3 provides: “ Transfers of value (1) Subject to the following provisions of this Part of this Act , a transfer of value is a disposition made by a person (the transferor) as a result of which the value of his estate immediately after the disposition is less than it would be but for the disposition; and the amount by which it is less is the value transferred by the transfer.”

26. As referenced in section 2 above, Part II of IHTA 1984 defines exempt transfers. An exempt transfer is not a chargeable transfer and is not therefore subject to IHT under section 1.

27. Section 21 is in Part II of IHTA 1984 as follows: “ 21 Normal expenditure out of income . (1) A transfer of value is an exempt transfer if, or to the extent that, it is shown— (a) that it was made as part of the normal expenditure of the transferor, and (b) that (taking one year with another) it was made out of his income, and (c) that, after allowing for all transfers of value forming part of his normal expenditure, the transferor was left with sufficient income to maintain his usual standard of living. ….”

28. HMRC accept that condition (b) and (c) of section 21 are met. The only issue for the Tribunal to determine with respect to section 21 therefore, is whether the Gifts were made as part of Mr Hosking’s ‘normal expenditure’. Case Law

29. The leading authority on the meaning of ‘normal expenditure’ for the purpose of section 21 is the High Court decision of Lightman J in Bennett and others v IRC [1995] STC 54 (“ Bennett ”). Lightman J states at 58g to 59e of his decision: “In my view, in the context of s 21 of the 1984 Act , the term 'normal expenditure' connotes expenditure which at the time it took place accorded with the settled pattern of expenditure adopted by the transferor. The existence of the settled pattern may be established in two ways. First, an examination of the expenditure by the transferor over a period of time may throw into relief a pattern, eg a payment each year of 10% of all income to charity or members of the individual's family or a payment of a fixed sum or a sum rising with inflation as a pension to a former employee. Second, the individual may be shown to have assumed a commitment, or adopted a firm resolution, regarding his future expenditure and thereafter complied with it. The commitment may be legal (eg a deed of covenant), religious (eg a vow to give all earnings beyond the sum needed for subsistence to those in need) or moral (e g to support aged parents or invalid relatives). The commitment or resolution need have none of these characteristics, but none the less be likewise effective as establishing a pattern, eg to pay the annual premiums on a life assurance qualifying policy gifted to a third party or to give a predetermined part of his income to his children. For an expenditure to be 'normal' there is no fixed minimum period during which the expenditure shall have occurred. All that is necessary is that on the totality of evidence the pattern of actual or intended regular payments shall have been established and that the item in question conforms with that pattern. If the prior commitment or resolution can be shown, a single payment implementing the commitment or resolution may be sufficient. On the other hand, if no such commitment or resolution can be shown, a series of payments may be required before the existence of the necessary pattern will emerge. The pattern need not be immutable; it must, however, be established that the pattern was intended to remain in place for more than a nominal period and indeed for a sufficient period (barring unforeseen circumstances) in order for any payment fairly to be regarded as a regular feature of the transferor's annual expenditure. Thus a 'death bed' resolution to make periodic payments 'for life' and a payment made in accordance with such a determination will not suffice. The amount of the expenditure need not be fixed in amount nor need the individual recipient be the same. As regards quantum, it is sufficient that a formula or standard has been adopted by application of which the payment (which may be of a fluctuating amount) can be quantified eg 10% of any earnings whatever they may be or the costs of a sick or elderly dependant's residence at a nursing home. As regards the payees, it is sufficient that their general character or the qualification for benefit is established, eg members of the family or needy friends. … What is necessary and sufficient is that the evidence should manifest the substantial conformity of each payment with an established pattern of expenditure by the individual concerned—a pattern established by proof of the existence of a prior commitment or resolution or by reference only to a sequence of payments.”

30. I was referred to two further cases that applied the principles established in Bennett .

31. In the Special Commissioners decision in Nadin v Inland Revenue Commissioners [1997] STC (SCD) 107 the deceased had made nine payments of varying amounts ranging from £1,000 to £13,000 on diverse days between 1988 and 1993 to three members of her family which met the criteria in section 21(1) (b) and (c). The Special Commissioners held that it was not relevant that she made gifts to three different relatives but went on to find at 111h: “Unfortunately, I am unable to discern any pattern established by the series of gifts which she made. Their very irregularity both in point of time and in amount point to a lack of pattern.”

32. In the Special Commissioners decision in McDowall and ors (exors of McDowall, dec’d) v IRC [2004] STC (SCD) 22 (“ McDowall ”) Mr McDowall (“WCM”) had become incapable of managing his financial affairs, which were taken over by his attorney, Mr McNeill. The actions that Mr McNeill took are summarised at 27b as follows: “Mr McNeill, as attorney, made a commitment regarding future expenditure, namely to distribute a substantial part of the excess of WCM’s income over the amount required for his maintenance (making due allowance for unforeseen circumstances) equally among WCM’s five children. Between about January 1997 and March 1997 a payment of £12,000 was made by Mr McNeill by a cheque drawn on the current account, to each of WCM’s five children.…..The payments of £12,000 to each of the five children in 1997 demonstrated that the commitment was being implemented.”

33. The Special Commissioners found at 28b that Mr McNeill: “gave a great deal of thought to the matter and formed the view that the gifts he made were made out of income and that he was reinstituting the pattern of making gifts which WCM had adopted before he granted the Power of Attorney… with reference to the five payments of £12,000 that he intended these to be the last large gifts; and that thereafter there would be small gifts at birthdays and Christmas….. In cross, he accepted that, in the past, the larger gifts made by WCM had been sporadic and for a particular purpose.”

34. On these facts the Special Commissioners concluded at 34b, based on the guidance given by Lightman J in Bennett , that : “In our view, the pattern of payment of small gifts at birthdays and Christmas is readily distinguishable from the larger payments of £12,000 and can provide no support for establishing a pattern of payment of larger sums; nor did we consider the deceased's habit of making gifts, including those disguised as loans, on sporadic occasions of need can help the appellants. However, we consider that the evidence is just sufficient to enable us to conclude that Mr McNeill, as attorney, made a commitment regarding future expenditure, namely to distribute a substantial part of the excess of WCM's income over the amount required for his maintenance (making due allowance for unforeseen circumstances) equally among WCM's five children. The payments of £12,000 to each of the five children in 1997 demonstrated that the commitment was being implemented, and we are satisfied from his evidence that, but for WCM's death, Mr McNeil would have continued to make similar, even if much smaller, payments.... The settled pattern referred to by Lightman J has been established by the prior commitment. There may not have been a clear formula, as Lightman J suggested, but in Bennett itself the arrangement was no more formally prescribed than to pay out the surplus of income over expenditure, as Mr McNeil intended here.” Mr Hosking’s Submissions

35. In summary Ms Murray submits for Mr Hosking that: (1) Mr Hosking’s Gifts satisfy both the tests of a settled pattern in Bennett because he decided to make donations to support Leave and then he made a sequence of donations in support of Leave. (2) Even if the Gifts are viewed in isolation, they formed a sequence of fifteen payments all of which were political donations to support Leave. Fourteen of the payments were made around the time of the Referendum for the purpose of campaigning for Leave in the Referendum. The 2011 Donation is not an outlier as it too was for the purpose of Leave and extends the period of the Gifts to 5 years. (3) The donations do not have to be paid to the same recipient. The recipients are of the same class, namely organisations campaigning for Leave, in the same way as “children of the donor” are of the same class. (4) Realistically, the Gifts should not be viewed in isolation, but instead must be seen together with the further donations which the Appellant subsequently made to all of these recipients (see paragraph [‎12] above) to support Leave. (5) Even viewing each recipient on its own, there is still a pattern, whether looking only at the Gifts or also looking at the donations subsequently made to each recipient as well. (6) The Gifts were also made in the context of donations made for the purpose of securing a Referendum which began many years earlier, continued throughout the Referendum and was followed by further donations to implement Brexit following the result of the Referendum. (7) Even more broadly the Gifts and Mr Hosking’s other donations in support of Leave must be viewed in the context of a wider pattern of donations made to, what Mr Hosking considered to be, good causes in furtherance of the UK’s cultural values and national identity. (8) The pattern of expenditure does not need to be of a prescribed kind, such as being expenditure constituting the same percentage of the transferor’s income, or the same amounts, or made at the same times or frequency or to the same recipient. “All that is necessary is that on the totality of evidence the pattern of actual or intended regular payments shall have been established and that the item in question conforms with that pattern.” ( Bennett 58j) HMRC’s Submissions

36. In summary Mr Stone KC and Ms Defriend submit for HMRC as follows: (1) Mr Hosking has failed to demonstrate that he entered into any commitment or adopted any firm resolution to support the UK leaving the EU, organisations that promote British values or any particular organisation because: (a) Mr Hosking has adduced no evidence to demonstrate that he entered into any commitment or adopted any firm resolution as regards his future expenditure. In his written statement he states; “If I have committed to a particular cause or project then I will support it as funds are required, considering my available cash resources”. This is too vague to constitute a commitment or firm resolution. (b) Mr Hosking’s evidence is that he was committed to funding the “Brexit cause” but the evidence demonstrates that the Appellant simply made contributions to that cause as and when he was asked to do so, on a purely discretionary and sporadic basis. (2) Absent a commitment Mr Hosking must show a settled pattern but he cannot, on any of the “types” of donations that he seeks to rely on, explain a decision making process that points to a pattern. No pattern exists at any level of generality. (3) Further whichever payments you include: (a) the quantum of the donations varied wildly from small to extremely large donations. Bennett provides that although the amount of the payment need not be fixed, where it is not fixed, there must be a: “formula or standard … by application of which the payment (which may be a fluctuating amount) can be quantified” (at 59b-c). Mr Hosking has offered no formula or standard to explain the amounts. (b) the donations were sporadic rather than regular so cannot show any regularity or pattern of which the Gifts are a part. (4) Whether the Gifts are considered in isolation or in the context of broader donations they do not create a settled pattern over time because: (a) Donations to good causes - the recipients do not have the same general character. They varied hugely, including a hotel project, football club rescue, heritage rail, magazine, charity and political bodies. Bennett provides that although the recipient of the payments need not be identical, “their general character or the qualification for benefit” must be the same in order to establish a settled pattern (at 59c); (b) The Gifts – the 2011 Donation is clearly an outlier. The remainder of the Gifts were concentrated within a short time period of less than 9 months, which is a “nominal period”, too short to “be regarded as a regular feature of the transferor’s annual expenditure” ( Bennett at 59a). Instead the Gifts were made for the Referendum, a one off, time limited event. Even if the later payments to the Leave organisations are taken into account, there was a long gap between the Gifts and the subsequent payments, which does not demonstrate a pattern. Discussion and My View

37. My task is to apply the statutory words of section 21(1) (a), interpreted purposively to the facts as I have found them.

38. Mr Hosking has clearly made significant donations (both in number and value) to what he considers to be good causes over very many years. It is not out of character or abnormal for Mr Hosking to make donations to charities and political organisations and to make investments in commercial enterprises because he believes in them and with no expectation of a return on his investment. In that context, one can see that the Gifts were not out of character or abnormal and in that sense were ‘normal expenditure’.

39. However if that were sufficient to meet the requirements of section 21 , without more, it would be too broad, covering anything a person who has sufficient surplus income and has a history of making donations, chooses to donate to. This cannot have been the intention of Parliament in enacting section 21 , as it would effectively remove the need for many of the exemptions in Part II of IHTA.

40. Further the High Court in Bennett has provided guidance of what is meant by ‘normal expenditure’ in the context of section 21 and how to determine whether particular payments are ‘normal expenditure’ for the purpose of section 21 . I must therefore apply the following points of principle from the High Court decision in Bennett to determine whether the Gifts were made as part of Mr Hosking’s ‘normal expenditure’ for the purpose of section 21 . (1) The Gifts must have accorded with “a settled pattern of expenditure” adopted by Mr Hosking; (2) A settled pattern may be established in two ways: (a) By examining Mr Hosking’s expenditure over a period of time; or (b) Mr Hosking must have assumed a commitment or adopted a firm resolution regarding his future expenditure and thereafter complied with it; (3) There is no fixed minimum period required for the Gifts to be “normal”, provided that “on the totality of evidence” the pattern of expenditure is established and the Gifts conform with that pattern; (4) The pattern must have been, “intended to remain in place for more than a nominal period and indeed for a sufficient period (barring unforeseen circumstances) in order for the payment fairly to be regarded as a regular feature of the transferor’s annual expenditure”; (5) It is not necessary that the amount of the Gifts be fixed, it is, “sufficient that a formula or standard has been adopted by application of which the payment (which may be of a fluctuating amount) can be quantified”; (6) It is not necessary that the recipient of the Gifts is the same. It is, “sufficient that their general character or the qualification for benefit is established eg members of the family or needy friends”. Commitment

41. Mr Hosking stated in his witness statement: “For that reason, from 1995 onwards I made regular donations to organisations (such as the Bruges Group) which were campaigning for us to leave the EU. My donations increased after the Conservative Party won the general election in 2015, when they promised that there would be an in/out referendum."

42. Ms Murray submits that “the Appellant made the payments pursuant to a decision to make a series of payments of the same type and kind”. However, it is not clear from this submission, when this decision was made, whether it was made in the mid 90s, 2015 or sometime in between.

43. Even if Mr Hosking made a conscious decision at some point to provide financial assistance to support Leave campaigns, it would need to have been documented or at least communicated in order for it to be a “firm resolution” or “commitment” as required by Bennett .

44. Mr Hosking provided no documentary or corroborating evidence nor any detail of this decision nor whether or to whom he communicated it that would support his submission that any decision he made amounted to a “firm resolution” or “commitment”.

45. On the balance of probabilities therefore, I find that Mr Hosking did not assume a commitment or adopt a firm resolution to support the UK’s exit from the EU which he subsequently complied with. Expenditure over a period of time

46. It is necessary therefore to examine Mr Hosking’s expenditure over a period of time to establish whether there is a settled pattern for the purpose of section 21 .

47. Ms Murray put forward various periods of time and types of recipient that I should consider. The Gifts as part of donations to good causes generally

48. Ms Murray’s primary submission on this point is, as I understood it, to consider the Gifts and Mr Hosking’s other donations in support of Leave (which Ms Murray submits includes donations to the Conservative Party since 2009 to achieve the Referendum and implementing Brexit after the Referendum which included further donations to the Conservative Party and Conservative Party candidates from 2017 to 2019 and donations to Vote Leave, Labour Leave and Brexit Express from 2018 onwards) together with the large number of donations Mr Hosking made to causes protecting and promoting British culture, heritage, traditions, sovereignty and national identity.

49. The main difficulty with establishing a settled pattern based on these recipients is that they do not have a discernible common general character or qualification for benefit. If a common general character could be established by reference to what the donor considers to be a good cause, it would be too broad as it would cover anything a person chooses to donate to. What a person considers to be good causes is far broader than “members of the family or needy friends” ( Bennett 59c). The Gifts and other donations in support of Leave

50. The Gifts (other than the 2011 Donation), the subsequent payments to the Leave organisations and the payments to the Conservative Party candidates in the lead up to the 2017 election are conceivably all in support of Leave and therefore do have a definable common general character or qualification for benefit, namely the advancement of the UK’s exit from the EU.

51. These donations covered a period from 2016 to 2025 which is not a nominal period and is indeed a sufficient period to demonstrate a settled pattern.

52. The position is the same if I separately consider the donations to each recipient of the Gifts. In that case the donations are to the same recipient and cover a period in the case of Vote Leave Limited from February 2016 to May 2019, Labour Leave Limited from May 2016 to March 2021, Brexit Express/Reclaim from June 2016 to May 2025. These are not nominal periods and are sufficient time periods to demonstrate a settled pattern.

53. If I were to consider the Gifts in isolation, ignoring any earlier or later payments to Leave organisations, these only cover a period of less than 9 months, excluding the 2011 Donation which is not a Leave related donation. This is not sufficient time to establish a settled pattern. However it would be artificial to consider the Gifts in isolation of the earlier and later Leave related donations. Formula or Standard

54. The donations do not need to be of a fixed amount, but where they are not of a fixed amount it must be shown that a: “formula or standard has been adopted by application of which the payment (which may be of a fluctuating amount) can be quantified” ( Bennett 59b)

55. Whichever type of payment we are considering, from the widest group of good causes to the smallest of considering each individual recipient of the Gifts individually, Mr Hosking’s evidence is that he did not have a formula or standard, he gave when asked to, and he often gave the amount he was asked for. Mr Hosking could not explain why he gave the amount he did at any given time. He often attended charity functions and gave donations while there. He could not himself quantify the amount of each donation or the totality of donations in a year by reference to any formula or standard.

56. Lightman J states in Bennett : “All that is necessary is that on the totality of evidence the pattern of actual or intended regular payments shall have been established and that the item in question conforms with that pattern.”( Bennett 58j)

57. However, a pattern requires a level of predictability or recurrence which is entirely lacking in Mr Hosking’s donations and Mr Hosking did not provide any basis on which a pattern could be discerned from his donations, other than that he had for many years been making donations of varying amounts and at varying times to organisations that supported Leave and what he considered to be good causes.

58. There is also no regularity to his donations. The amounts he has donated varied hugely year on year as did the number and frequency of donations, both within the year and year on year.

59. The Special Commissioners held in McDowall that applying the guidance of Bennett did not require a clear formula, accepting as Lightman J had done in Bennett that a commitment to “pay the surplus income over expenditure” was sufficient to establish a settled pattern. However, Mr Hosking never came close to spending his surplus income on donations in any given year, nor did he suggest any other ‘formula or standard’ that he used to determine how much he would donate in a year and to whom.

60. Instead, Mr Hosking’s donations are akin to the series of gifts in Nadin whose, “.. very irregularity both in point of time and in amount point to a lack of pattern.” ( Nadin 111h)

61. Examining the donations made by Mr Hosking to organisations in support of Leave does not “throw into relief a pattern” ( Bennett 58g) as required by Bennett but simply demonstrates that he made significant donations over many years to organisations in support of Leave, as and when he chose to and his cash resources allowed. There is a lack of any predictability in Mr Hosking’s donations, even in hindsight and they do not therefore constitute a pattern.

62. For all the reasons above I find that on the totality of the evidence, no discernible pattern of actual payments has been established with which the Gifts conform. It follows that the Gifts were not part of Mr Hosking’s ‘normal expenditure’ within the meaning of section 21 . Section 24 Exemption – gifts to political parties Legislation

63. Section 24 grants IHT relief on donations to qualifying political parties as follows: 24 Gifts to political parties. (1) Transfers of value are exempt to the extent that the values transferred by them— (a) are attributable to property which becomes the property of a political party qualifying for exemption under this section; ….. (2) A political party qualifies for exemption under this section if, at the last general election preceding the transfer of value,— (a) two members of that party were elected to the House of Commons, or (b) one member 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.”

64. Ms Murray asserts that sections 1 , 2 and 3 of the HRA 1998 , Articles 10 and 14 of the ECHR and Article 1 of the First Protocol (“A1P1”) are relevant to the second ground of appeal.

65. Sections 1 to 3 of the HRA 1998 provide as follows: “ 1 The Convention Rights. (1) In this Act “the Convention rights” means the rights and fundamental freedoms set out in— (a) Articles 2 to 12 and 14 of the Convention, (b) Articles 1 to 3 of the First Protocol, and (c) Article 1 of the Thirteenth Protocol, as read with Articles 16 to 18 of the Convention. (2) Those Articles are to have effect for the purposes of this Act subject to any designated derogation or reservation (as to which see sections 14 and 15). (3) The Articles are set out in Schedule 1. (4) The Secretary of State may by order make such amendments to this Act as he considers appropriate to reflect the effect, in relation to the United Kingdom, of a protocol. (5) In subsection (4) “protocol” means a protocol to the Convention— (a) which the United Kingdom has ratified; or (b) which the United Kingdom has signed with a view to ratification. (6) No amendment may be made by an order under subsection (4) so as to come into force before the protocol concerned is in force in relation to the United Kingdom. 2 Interpretation of Convention rights. (1) A court or tribunal determining a question which has arisen in connection with a Convention right must take into account any— (a) judgment, decision, declaration or advisory opinion of the European Court of Human Rights, (b) opinion of the Commission given in a report adopted under Article 31 of the Convention, (c) decision of the Commission in connection with Article 26 or 27(2) of the Convention, or (d) decision of the Committee of Ministers taken under Article 46 of the Convention, whenever made or given, so far as, in the opinion of the court or tribunal, it is relevant to the proceedings in which that question has arisen. (2) Evidence of any judgment, decision, declaration or opinion of which account may have to be taken under this section is to be given in proceedings before any court or tribunal in such manner as may be provided by rules. (3) In this section “rules” means rules of court or, in the case of proceedings before a tribunal, rules made for the purposes of this section— (a) by the Lord Chancellor or the Secretary of State, in relation to any proceedings outside Scotland; .... 3 Interpretation of legislation. (1) So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights. (2) This section— (a) applies to primary legislation and subordinate legislation whenever enacted; (b) does not affect the validity, continuing operation or enforcement of any incompatible primary legislation; and (c) does not affect the validity, continuing operation or enforcement of any incompatible subordinate legislation if (disregarding any possibility of revocation) primary legislation prevents removal of the incompatibility.”

66. Article 14 can only be considered in conjunction with the enjoyment of one or more of the substantive rights or freedoms set out in the ECHR: “ Article 14 Prohibition of discrimination The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.”

67. A1P1 provides: “ Article 1 Protection of property Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

68. Article 10 provides as follows: “ Article 10 Freedom of expression 1 Everyone has the right to freedom of expression. This right shall include freedom to hold opinions and to receive and impart information and ideas without interference by public authority and regardless of frontiers. This Article shall not prevent States from requiring the licensing of broadcasting, television or cinema enterprises. 2 The exercise of these freedoms, since it carries with it duties and responsibilities, may be subject to such formalities, conditions, restrictions or penalties as are prescribed by law and are necessary in a democratic society, in the interests of national security, territorial integrity or public safety, for the prevention of disorder or crime, for the protection of health or morals, for the protection of the reputation or rights of others, for preventing the disclosure of information received in confidence, or for maintaining the authority and impartiality of the judiciary. Case Law

69. The purpose of section 24 was set out in the Court of Appeal decision in Banks v HMRC [2021] EWCA Civ 1439 (“ Banks”) by Henderson LJ who stated: “[35] …In my judgement, the only purpose which can safely be inferred from the terms of section 24 is the provision of a fiscal incentive for the funding of political parties which have achieved a specified minimum level of representation in the UK Parliament at Westminster, and thereby to promote the functioning of Parliamentary democracy in the UK….. [36] ….the qualifying conditions were deliberately intended to limit the availability of the exemption to cases where the party has an established presence in the House of Commons, measured in one or other of the ways specified, and thus in the functioning of Parliamentary democracy in the UK through the Westminster Parliament.”

70. In R (SC) v Secretary of State for Work and Pensions and others [2021] UKSC 26 (“ R(SC) ”) Lord Reed described the established four-step approach to Article 14 adopted by the European Court of Human Rights as follows: "37. The general approach adopted to article 14 by the European court has been stated in similar terms on many occasions, and was summarised by the Grand Chamber in the case of Carson v United Kingdom (2010) 51 EHRR 13 , para 61 (" Carson "). For the sake of clarity, it is worth breaking down that paragraph into four propositions: (1) “The court has established in its case law that only differences in treatment based on an identifiable characteristic, or "status", are capable of amounting to discrimination within the meaning of article 14.” (2) “Moreover, 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." (3) "Such a difference of treatment is discriminatory if it has no objective and reasonable justification; in other words, if it does not pursue a legitimate aim or if there is not a reasonable relationship of proportionality between the means employed and the aim sought to be realised." (4) "The contracting state enjoys a margin of appreciation in assessing whether and to what extent differences in otherwise similar situations justify a different treatment. The scope of this margin will vary according to the circumstances, the subject matter and the background.""

71. At paragraph [47] of that decision Lord Reed referred to the European Court’s decision in Guberina v Croatia (2018) 66 EHRR 11 which set out at paragraph [69] what Lord Reed described as “an ordinary case of direct discrimination” as follows: “Generally, in order for an issue to arise under article 14 there must be a difference in the treatment of persons in analogous, or relatively similar, situations”.

72. In Banks it was held that there was no difference in the treatment of Mr Banks who supported UKIP and a person who supported any other party which did not meet the conditions in section 24 and therefore there was no direct discrimination within Article 14.

73. Lord Reed summarised what constitutes indirect discrimination at paragraph [53] of his decision in R(SC) as follows: “…it has to be shown by the claimant that a neutrally formulated measure affects a disproportionate number of members of a group of persons sharing a characteristic which is alleged to be the ground of discrimination, so as to give rise to a presumption of indirect discrimination.”

74. Lord Reed goes on in that paragraph to explain how a presumption of discrimination can be shown to not in fact be discriminatory as follows: “Once a prima facie case of indirect discrimination has been established, the burden shifts to the state to show that the indirect difference in treatment is not discriminatory. The state can discharge that burden by establishing that the difference in the impact of the measure in question is the result of objective factors unrelated to any discrimination on the ground alleged. This requires the state to demonstrate that the measure in question has an objective and reasonable justification: in other words, that it pursues a legitimate aim by proportionate means…”

75. In paragraph [142] Lord Reed summarised how the intensity of the court’s scrutiny is different where there is found to be a ‘suspect ground’ as follows: “The recent cases…, like many earlier cases, indicate the general need for strict scrutiny, focused on the requirement for very weighty reasons, where the difference in treatment is based on a suspect ground…”

76. Membership of a political party has been held to be a ‘suspect ground’. Lord Hoffman stated the following in R (Carson) v Secretary of State for Work and Pensions [2006] 1 AC 173 at [15]: “Whether cases are sufficiently different is partly a matter of values and partly a question of rationality. Article 14 expresses the Enlightenment value that every human being is entitled to equal respect and to be treated as an end and not a means. Characteristics such as race, caste, noble birth, membership of a political party and (here a change in values since the Enlightenment) gender, are seldom, if ever, acceptable grounds for differences in treatment. In some constitutions, the prohibition on discrimination is confined to grounds of this kind and I rather suspect that article 14 was also intended to be so limited. But the Strasbourg court has given it a wide interpretation, approaching that of the Fourteenth Amendment, and it is therefore necessary, as in the United States, to distinguish between those grounds of discrimination which prima facie appear to offend our notions of the respect due the individual and those which merely require some rational justification: Massuchusetts Board of Retirement v Murgia (1976) 427 US 307”

77. Lord Sumption summarises the test to be applied to determine proportionality in his judgment in the case of Bank Mellat v HMR Treasury (No 2) [2013] UKSC 39 , at [20] as follows: “the question depends on an exacting analysis of the factual case advanced in defence of the measure, in order to determine (i) whether its objective is sufficiently important to justify the limitation of a fundamental right; (ii) whether it is rationally connected to the objective; (iii) whether a less intrusive measure could have been used; and (iv) whether, having regard to these matters and to the severity of the consequences, a fair balance has been struck between the rights of the individual and the interests of the community. These four requirements are logically separate, but in practice they inevitably overlap because the same facts are likely to be relevant to more than one of them.”

78. In applying a conforming interpretation to legislation “as far as it is possible to do so” in accordance with section 3 of the HRA 1998 , the House of Lords held in Ghaidan v Godin Mendoza [2004] UKHL 30 that the Tribunal is not permitted to interpret the statute in such a way that goes against the grain of the legislation. Mr Hoskings submissions

79. In summary, Ms Murray submits for Mr Hosking that: (1) Mr Hosking is a supporter of the Conservative Party, which is a qualifying political party under section 24 . However, while all of the other qualifying parties campaigned in the Referendum, the Conservative Party did not because its official stance was neutral. (2) Mr Hosking’s identifiable characteristic is his political opinion, as a supporter of the Conservative Party and Leave; (3) There is a difference in treatment between members of the Conservative Party and other qualifying parties: (a) whatever their opinion; (b) campaigning for Leave; (c) campaigning for the UK to remain in the EU (“Remain”); (4) Mr Hosking is a supporter of the Conservative Party, a qualifying political party and so that is the relevant comparator. There is a difference in treatment between Conservative Party supporters with any stance in the Referendum and supporters of any other qualifying political party because it was not possible to express a political opinion on the Referendum through financial support of the Conservative Party. (5) In each of the above cases, there is the required causal link to establish direct discrimination on a prohibited ground, political opinion. (6) There is indirect discrimination against supporters of qualifying parties who supported Leave because more of the qualifying parties supported Remain than Leave and more of the expenditure of the qualifying parties went on the Remain campaign than on the Leave campaign. (7) The discrimination is based on political opinion, which is a ‘suspect ground’ and therefore the state must present very weighty reasons in order to justify the interference, and is not afforded the wide margin of appreciation usually given to questions of tax and A1P1. (8) There are no reasons given to justify the interference in this case, and it has a manifestly arbitrary effect on the donations by Leave campaigners who are members of qualifying parties compared to Remain campaigners who are members of qualifying parties. (9) There has also been a breach of Article 10 because Mr Hosking was prevented from supporting his stance on the Referendum by making exempt donations this should be taken into account when assessing whether there has been a breach of Article 14 and A1P1. (10) Section 3 HRA 1998 requires that the following words are read into the end of section 24(1) (a) in order to prevent discrimination against Mr Hosking as a member of a qualifying political party making donations in support of Leave: “or a permitted participant in the referendum defined in section 1 of the European Union Referendum Act 2015 , as defined by section 105(1) of the Political Parties, Elections and Referendums Act 2000 , amended and applied by Schedule 1, paragraph 2 of the EU Referendum Act 2015”. HMRC’s submissions

80. In summary Mr Stone KC and Ms Defriend submit for HMRC that: (1) Parliament has granted a long standing tax exemption for funding political parties which have achieved a specified minimum level of representation in the UK Parliament at Westminster. The Gifts were not to political parties, but to campaigning bodies that do not come within the ambit of section 24 . (2) Mr Hosking says he was discriminated against because he was a member of the Conservative Party and was not able to express his support for Leave through donations to the Conservative Party at that time. However, the same is true for any person who held a view on a particular political issue which did not coincide with that person’s preferred qualifying political party’s position at any given time. This is not a case about discrimination but that Parliament did not grant tax exemptions on donations to campaigning organisations. (3) HMRC accept that this case falls within the ambit of A1P1. However there was no difference in treatment based on an identifiable characteristic or “other status” within the meaning of Article 14. (4) There is no direct discrimination based on Mr Hosking’s political opinion because section 24 applies in the same way to all political parties across the political spectrum. The political views of the donor are irrelevant to the question of whether a donation qualifies for relief therefore there is no causal link between the Appellant’s political opinion and his failure to qualify for relief under section 24 ( Banks at [53]). (5) There is no indirect discrimination because Mr Hosking has failed to show that the requirements of section 24 had any “particular disproportionate effect” on a Conservative member with a Leave stance or any stance, compared with supporters of any other political party ( Banks [63]). (6) Being a supporter of the Conservative Party with a Leave stance/any stance in the Referendum, is not a ‘personal characteristic’ capable of being an ‘other status’ because it is too narrow and defined purely by reference to the alleged discrimination at a particular point in time. (7) There is no difference in treatment to someone in an analogous/relevantly similar situation. The comparator group put forward by Mr Hosking is basically supporters of a qualifying political party who shared the same stance in the Referendum as their party, because such people who donated to their party of choice received the IHT exemption. However, that group was not in an analogous or relevantly similar situation to Mr Hosking because they donated to a political party, whereas he donated to non-party political organisations which are entirely different entities, with different functions and purpose. (8) It inevitably follows from the Court of Appeal decision in Banks that if there is any difference in treatment within the meaning of Article 14, it was justified as a proportionate means of achieving the legitimate aim of section 24 . The factors which led the Court of Appeal in Banks to conclude that the difference in treatment in that case was justified apply a fortiori in the present case, where the Gifts were not even to a political party. (9) A conforming construction which provided an exemption for donations to non-party political organisations would go against the grain of the legislation, the purpose of which is to encourage donations to political parties with an established presence in the House of Commons, and thereby in the functioning of Parliamentary democracy in the UK through the Westminster Parliament ( Banks [35]-[36]). (10) There is no breach of Article 10 because Mr Hosking was not prevented from expressing his political opinion by donating to Leave organisations, demonstrated by the fact that he donated £1.7million to such organisations. The UT decision in Banks ( [2020] STC 996 ) at [201]-[208] is authority for the proposition that simply being more expensive to express certain opinions is not a breach of Article 10. Discussion and My View

81. I begin by applying the four-step approach summarised in R(SC) to the facts of this case. Step 1

82. I find that Mr Hosking’s identifiable characteristic is that he is a Conservative Party Leave supporter. My analysis below is the same irrespective of whether this identifiable characteristic is characterised as a political opinion or an “other status”. Step 2

83. In order to establish whether there is a difference in the treatment of persons in analogous, or relevantly similar situations to Mr Hosking I must first establish what persons are in analogous, or relevantly similar situations. Mr Hosking asserts that the appropriate comparator to himself, a Conservative Party Leave supporter is any one of the following: (a) A supporter of any other qualifying political party, whatever that party’s position is on the Referendum because all the other qualifying parties took a stance in the Referendum, whereas the Conservative Party did not; (b) A supporter of a qualifying political party that campaigned for Leave; (c) A supporter of a qualifying political party that campaigned for Remain.

84. As HMRC have noted, there is significant overlap between these comparator groups, with (b) and (c) being subsets of (a). Direct Discrimination

85. As Henderson LJ held in Banks at paragraph [53], section 24 applies in the same way to donations made to all political parties across the political spectrum. It also limits the relief to political parties, and thereby excludes relief on donations to all non-party political organisations, irrespective of their political opinion. It follows that the political views of the donor are irrelevant to the question of whether a donation qualifies for relief.

86. Section 24 does discriminate between donations made to qualifying political parties and those made to non-party political organisations. But that is not a discrimination based on the political opinion of the donor. Donations made to the Conservative Party were exempt under section 24 , as were donations made to a qualifying political party that supported Leave. Mr Hosking could not make donations to a Conservative Party that supported Leave, but that was simply because no such party existed, not because section 24 directly discriminated against such a party. The necessary causal link between the discrimination complained of and section 24 does not exist and section 24 does not therefore directly discriminate against Mr Hosking as a Conservative Party Leave supporter. Indirect Discrimination

87. Qualifying political party supporters who had the same stance on the Referendum as their preferred qualifying political party, could donate to their preferred qualifying political party in support of their stance on the Referendum. Conservative Party supporters who had any stance on the Referendum could not benefit from the section 24 exemption by donating to their qualifying political party in support of their stance on the Referendum. Consequently Mr Hoskings asserts that he, as a Conservative Party Leave supporter, was disproportionately prejudiced as compared to supporters of any other qualifying political party because at least some of the latter could qualify for the section 24 exemption when they made Referendum related donations to their preferred qualifying political party, whereas no Conservative Party member could.

88. Baroness Hale DPSC states at paragraph [25] of her decision in Essop v Home Office [2017] UKSC 27 that indirect discrimination: “.. requires a causal link between the PCP [“an apparently neutral provision, criterion or practice”] and the particular disadvantage suffered by the group and the individual. The reason for this is that the prohibition of direct discrimination aims to achieve equality of treatment. Indirect discrimination assumes equality of treatment - the PCP is applied indiscriminately to all - but aims to achieve a level playing field, where people sharing a particular protected characteristic are not subjected to requirements which many of them cannot meet but which cannot be shown to be justified. The prohibition of indirect discrimination thus aims to achieve equality of results in the absence of such justification. It is dealing with hidden barriers which are not easy to anticipate or to spot.”

89. Mr Hosking’s protected characteristic is his political opinion as a Conservative Party Leave supporter. There is nothing inherent about that political opinion that prevents him from qualifying for section 24 relief on his donations. The cause of Mr Hosking’s failure to qualify for relief under section 24 was not his political opinion, but that his political opinion was different to that of his preferred political party and that he did not wish to donate to another qualifying political party that took the same stance on the Referendum as he did. Anybody else who took a different stance on the Referendum to their preferred qualifying political party was in the same position. As is anybody who disagrees with the position taken by their preferred qualifying political party on any issue. It is of no practical relevance, particularly when considering the “equality of results”, that the Conservative Party took a neutral stance. Mr Hosking would have suffered the same disadvantage if the Conservative Party had taken a Remain stance. It follows in my view that the appropriate comparator is a supporter of a qualifying political party who takes a different stance on the Referendum to their preferred political party.

90. Henderson LJ states at paragraph [63] of his decision in Banks : “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 ….”

91. Applying this analysis to the facts of Mr Hosking’s appeal, there is nothing about a Conservative Party Leave supporter which places them in a different category to, for example, a Democratic Unionist Party (“DUP”) Remain supporter. Neither of them could support their position on the Referendum through donations to their preferred qualifying political party. The fact that the DUP supporter could have supported their position on the Referendum through donations to the DUP if they had a Remain stance in the Referendum is not relevant to the actual prejudice suffered by that person.

92. Donations to the Conservative Party would have qualified for the section 24 exemption, irrespective of the stance that the Conservative Party took on the Referendum. The cause of any prejudice suffered by Mr Hosking is not his identifiable characteristic as a Conservative Party Leave supporter. Had the Conservative Party taken a leave stance on the Referendum his donations to that party would have qualified. The cause of the disadvantage suffered by Mr Hosking is the Conservative Party’s stance on the Referendum, and his decision as a result of that stance to donate to non-party political organisations that supported his stance on the Referendum.

93. The lack of causal link between the prejudice complained of and section 24 means that there is also no indirect discrimination. Steps 3 and 4

94. I have found that Mr Hosking has suffered no direct or indirect discrimination when making donations to non-party political organisations during the Referendum and it is therefore unnecessary for me to consider whether any discrimination is justified.

95. However, for completeness, had I found that there was discrimination I would have found that it was justified for the same reasons as those relied upon by the Court of Appeal in Banks which Mr Stone and Ms Defriend helpfully summarised in their skeleton argument as follows: “a. Section 24 IHTA is contained in primary legislation of the UK Parliament, which had remained in materially the same form (save for the removal of an upper limit on the amount of the exemption) for over 45 years: at [101]; b. Taxation is an area in which a wide margin is usually allowed to the State (at [94]), and s. 24 IHTA forms an integral part of the structure of a major piece of tax legislation (at [102]). Therefore, domestic courts and tribunals should allow a correspondingly wide margin and respect the terms in which Parliament has enacted s. 24 : at [95]; c. The terms of s. 24 IHTA do not obviously engage any “suspect ground” of discrimination; the breach of Mr Banks’ rights under Article 14 and A1P1 were at the outer margin of the area of protection: at [102]; d. The choices made by Parliament about the funding of political parties (and, presumably, non-party political organisations) are quintessentially political rather than legal. To interfere in those choices would be to “cross the boundaries which need to be firmly maintained between legality and the political process”: at [103]; e. The choice that Parliament has made to provide an exemption from IHT for political parties meeting the definition in s. 24(2) is not irrational or structurally flawed: at [104]. That choice will necessarily impact on people who make donations to organisations that do not meet the criteria of s. 24 IHTA (including non-party political organisations as in the present case); the courts and tribunals should not interfere with that choice: at [105].” Articles 10

96. The submissions on Article 10 from both parties were relatively brief and I will express my view on the position briefly also.

97. I was not referred to any authority that supports Ms Murray’s submission that article 10 should be weighed in when considering whether there is an infringement of A1P1. Article 10 is freestanding and not in any way linked to A1P1.

98. There is no evidence that Mr Hosking was in fact deterred from expressing his opinion or making donations to non-party political organisations supporting Leave due to the IHT charge that such donations were subject to. Indeed Mr Hosking stated that he did not consider IHT charges when deciding which organisations to support. Further Mr Hosking did in fact express his opinions by making donations of £1.7million to the non-party political organisations supporting Leave that he wished to.

99. In those circumstances I find that there was no interference with Mr Hosking’s Article 10 rights. conclusion

100. I have been very much assisted by the submissions both written and oral from Rebecca Murray for Mr Hosking and Christopher Stone KC and Alice Defriend for HMRC. However, although I have considered all of the submissions, I have not found it necessary to refer to each and every argument advanced or all of the authorities cited in reaching my conclusions.

101. I find that the Gifts were not part of Mr Hosking’s normal expenditure within the meaning of section 21 and did not therefore qualify for exemption from IHT under that section.

102. I find that Mr Hosking has not established that section 24 breaches article 14 in the context of A1P1 or article 10. Consequently I am not required to read anything into section 24 pursuant to section 3 of the HRA 1998 to make it compatible with the Convention Rights that would have the effect of including Mr Hosking’s Gifts to non-party political organisations within the section 24 exemption.

103. For all the reasons above I dismiss the appeal. Right to apply for permission to appeal

104. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Release date: 18 March 2026