Christopher Harborne, a British-Thai billionaire, gave Nigel Farage \u00a35m in 2024. Genuine gifts are usually tax-free. However, Mr Farage has recently described the \u00a35m as a \u201creward\u201d for campaigning for Brexit. That raises some complex tax issues, and HMRC may investigate the circumstances of the payment. But, on the facts currently available, our conclusion is that the \u00a35m was probably not taxable.<\/p>\n
We would summarise the basic principles broadly like this:<\/p>\n
Gifts can be subject to inheritance tax, but only if the donor is UK domiciled (or, now, long term resident) or the gift is of an asset that was in the UK.<\/p>\n
A gift unconnected to your work is (as a general matter) otherwise not taxable in the UK.<\/p>\n
If there is a connection to your work (past, present or future), and it\u2019s strong enough, then you will be taxed on it in the same way as your work is taxed.<\/p>\n
If you create a document regarding the gift, then (if you are not careful) that document could make the gift taxable as a capital gain.<\/p>\n
Applying these to the currently-known facts of the gift to Mr Farage, in our view the gift is probably not taxable. It\u2019s connected to Mr Farage\u2019s historic and current political campaigning activity, and not to any trade, profession, employment or office that he carries on or holds. We say \u201cprobably\u201d because there are some judgment calls in the analysis. We would summarise the position like this:<\/p>\n
Basis for taxHurdle (legal or factual)Risk on current factsTip for past services
(e.g., MEP, Reform director)\u201cBrexit campaigning\u201d is not a taxable trade. There is no evidence Mr Farage provided professional services to Mr Harborne.LowInducement to stand for election
(Shilton v Wilmshurst)Timeline contradicts this (gift received before decision to stand). Legally, an election candidate is not an \u201coffice-holder\u201d.Very low on Mr Farage\u2019s stated facts; low otherwiseMiscellaneous income
(Casual quid pro quo)Requires a specific service or favour provided in return. Mere political alignment does not count. No evidence of a quid pro quo.Very lowDisguised remuneration
(Part 7A ITEPA)On current public facts, any connection with a directorship, former office or prospective office appears incidental\/peripheral.Very lowCompensation for lost earnings
(Replacing income)No evidence this was the rationale, and Mr Farage has maintained a high level of outside commercial income since his election.Very low on Mr Farage\u2019s stated facts; very low otherwiseTrading subsidy
(The Falkirk Ice Rink rule)Depends entirely on whether Mr Farage has claimed (or will claim) a tax deduction for the specific security costs funded by the \u00a35m.Very low if no deduction is claimed. Low-to-medium if deduction claimed and the \u00a35m was earmarked to fund them.Capital Gains Tax
(Chose in action)Requires the \u201cunconditional\u201d gift document to have been drafted poorly enough to accidentally create a taxable legal right. We don\u2019t know what the document says.Very low if properly drafted; potentially high if it accidentally created an enforceable right before payment.Onward gifting rules
(Offshore trusts)Requires the \u00a35m to derive from a relevant offshore trust payment\/benefit, with the statutory onward-gifting conditions satisfied. We don\u2019t know how the \u00a35m was funded.Nil if \u00a35m not funded from an offshore trust. Potentially high if funded from an offshore trust (rules are v complex). <\/p>\n
If our understanding of the facts is incorrect or incomplete, tax could arise. In particular:<\/p>\n
Prior services to the donor. If Mr Farage had previously provided services to Mr Harborne or to any entity or trust in which Mr Harborne is interested, the \u00a35m could be taxable as an employment, professional or trading receipt (in much the same way as a tip to a waiter is taxable). We are not aware of any evidence that Mr Farage in fact provided any such services.<\/p>\n
Quid pro quo. If Mr Farage provided services to Mr Harborne in connection with the receipt \u2013 or if there was any understanding that he would do, refrain from doing, or procure something for Mr Harborne \u2013 the payment could be taxable as miscellaneous income, or as a trading or professional receipt, or as employment-related earnings. A mere expectation that Mr Farage would take certain political positions would not be sufficient to make the payment taxable (after all, most political donations are made in the expectation the donee will take certain positions). We are not aware of any evidence that there were any such services, or that there was such an understanding (and Mr Farage has said there was not).<\/p>\n
Payment to subsidise the recipient\u2019s profession. The \u00a35m could in principle be taxable if it was a payment to enable Mr Farage to maintain the high level of income he received from his non-political career, on the basis that, as an MP, he would have less time to undertake other paid work. There is no evidence this was in fact the purpose, and the evidence we are aware of suggests that Mr Farage in fact maintained a high level of income even after his election.<\/p>\n
Security costs deducted as a professional expense. If Mr Farage has claimed (or claims in future) a tax deduction for the security costs funded by the \u00a35m, then the matching receipt might be taxable as a trading subsidy. We do not know if Mr Farage has or will claim such a tax deduction; but this is the most plausible basis for a tax charge given the facts as we know them today.<\/p>\n
Capital gains tax on a chose in action. If Mr Farage and Mr Harborne signed a document that created a legal right for Mr Farage to receive the \u00a35m, the subsequent payment might be treated as a capital sum derived from that right and trigger a capital gain in his hands.<\/p>\n
The rest of this article considers these and other potential arguments in detail.<\/p>\n
This article was written by seven UK tax specialists and reflects their collective view. It has benefited from subsequent review by a large number of other tax specialists. It addresses only the current UK tax position. We do not consider whether the gift ought to have been declared<\/a> under the Code of Conduct for Members of Parliament<\/a> \u2013 that is a matter for the Parliamentary Commissioner for Standards. Nor do we offer any view on politics or the ethics of the gift. Our expertise is limited to tax, and that is all this report covers.<\/p>\n Technical terms in this article<\/p>\n Gift<\/p>\n A voluntary transfer of money or property with no obligation to provide anything in return. In UK tax, a genuine gift is usually not income for the recipient.<\/p>\n Taxable source<\/p>\n For a receipt to be taxed as income, it usually has to come from a recognised source, such as employment, an office, a trade, a profession, property or a service.<\/p>\n Employment or office<\/p>\n An office is a formal position with an independent existence, such as a director or MP. Payments from an employment or office can be taxed as earnings if they are paid for holding or performing that role.<\/p>\n Trade or profession<\/p>\n A business or professional activity carried on for profit. Payments connected closely enough with that activity can be taxable even if they are voluntary or one-off.<\/p>\n Miscellaneous income<\/p>\n A residual income tax charge for income from a source not taxed elsewhere. It can apply to one-off or casual services, but does not tax pure windfalls or genuine gifts.<\/p>\n Tax deduction<\/p>\n An amount that can be set against taxable income or profits. If security costs are deducted as professional expenses, HMRC may argue that funding for those same costs is also professional income.<\/p>\n Trading receipt<\/p>\n Money received as part of, or closely connected with, a trade or profession. A voluntary payment can still be a trading receipt if it is made to support or subsidise the trade.<\/p>\n Inducement payment<\/p>\n A payment made to persuade someone to take up or continue an employment or office. If that is the real purpose, the payment can be taxable even if it comes from a third party.<\/p>\n Disguised remuneration<\/p>\n Rules designed to tax rewards for employment or office that are routed through someone else. The rules can apply where a third-party payment is strongly connected with an employment, former employment or prospective employment.<\/p>\n Shrink<\/p>\n The background<\/p>\n Christopher Harborne<\/a> gave Nigel Farage a \u00a35m gift<\/a> in 2024.<\/p>\n Mr Harborne, also known by his Thai name Chakrit Sakunkrit, is a British-Thai dual nationality businessman who has been based in Thailand for more than 20 years<\/a>. His principal business interests are AML Global<\/a> (aviation fuel), Sherriff Global Group<\/a> (private aviation) and substantial investments in blockchain and cryptocurrency, including reported links<\/a> to Tether and Bitfinex.<\/p>\n Mr Harborne has been one of the UK\u2019s largest political donors. He gave around \u00a3270,000<\/a> to the Conservative Party between 2001 and 2019, \u00a31m to The Office of Boris Johnson Ltd<\/a> in November 2022, over \u00a36m to the Brexit Party<\/a> in 2019, and (on current reporting) over \u00a317m to Reform UK<\/a>.<\/p>\n Mr Harborne is a long-standing, large-scale political ally of Mr Farage. He has been resident in Thailand for more than 20 years and, on the public material, is non-UK resident and (we assume) non-UK domiciled. On these assumptions, inheritance tax does not arise on the gift.<\/p>\n The relationship between Messrs Farage and Harborne<\/p>\n The publicly available evidence shows:<\/p>\n A long-running political and donor relationship, including (per The Guardian<\/a>) Mr Harborne taking a desk at the Brexit Party campaign HQ in 2019 and making multiple million-pound donations to the Brexit Party.<\/p>\n A social link: Mr Farage is reported<\/a> to have attended Mr Harborne\u2019s Kamalaya resort gathering in Thailand in 2022.<\/p>\n Mr Farage and Reform UK have increasingly adopted policies<\/a> favourable to cryptocurrency, aligning with Mr Harborne\u2019s interests \u2013 but this is evidence of alignment, not of paid services.<\/p>\n Later personal benefits after the gift: \u00a332,000 paid by Mr Harborne for Mr Farage\u2019s US trip in July 2024 and \u00a325,000 for a Maldives flight<\/a> in February 2026.<\/p>\n What we have not located in the public domain is any evidence that Mr Farage was retained by, invoiced, consulted for, or was paid by Mr Harborne or any of his vehicles (AML Global, Sherriff Global, Tether, Bitfinex) before the \u00a35m gift. The publicly visible trail consists of political donations, proximity, political support, post-election travel funding, and shared positions (particularly in relation to cryptocurrency). As we explain below, that absence is the central reason why the \u00a35m is probably not taxable.<\/p>\n Nor have we found any evidence of additional gifts by Mr Harborne to Mr Farage.<\/p>\n If evidence emerged that there had been commercial links, then there would be an increased likelihood the \u00a35m was taxable, and the conclusions in this note may change.<\/p>\n The explanations for the gift<\/p>\n Two explanations have been put forward by Mr Farage and Mr Harborne.<\/p>\n The first explanation provided by Mr Farage was that the donation was for personal security. Mr Farage said<\/a> the funds were to \u201censure I can be safe for the rest of my life\u201c, citing repeated physical attacks and a denial of state protection (BBC News<\/a>; see also The Observer<\/a>). Mr Harborne is reported to have said he \u201cwasn\u2019t expecting anything in return apart from ensuring his safety\u201c.<\/p>\n The second is that it was a reward for past campaigning for Brexit. Mr Farage told the BBC<\/a>: \u201cfrankly, it was given as a reward for campaigning for Brexit for 27 years\u201c. Mr Harborne has said the gift was made \u201cbecause of my great admiration for the decades of work he had done to achieve Brexit\u201c. The word \u201creward\u201d often suggests remuneration and therefore taxable income. However, as we discuss later, a \u201creward\u201d for political campaigning is very different from a reward for carrying on a taxable trade, profession or employment.<\/p>\n Some people regard the two explanations as contradictory. That is not necessarily the case: Mr Harborne could have given the \u00a35m for the purpose of covering Mr Farage\u2019s security costs, whilst his motivation was gratitude for the Brexit campaigning.<\/p>\n Mr Farage maintains<\/a> that the gift was \u201cpurely private\u201c, \u201cwasn\u2019t political in any sense at all\u201c, \u201cunconditional, non-political, personal\u201c, and that he \u201ccannot be bought by anybody\u201c. The BBC reports that a legal document was signed recording the gift as \u201cunconditional and irrevocable\u201c. Further details of that document are not in the public domain.<\/p>\n The existence of the document may be more relevant to the politics than the tax question. The position in UK tax law is well established: labels do not bind the court; the true legal effect of a transaction is determined on its facts. That said, the document is evidentially significant: it\u2019s contemporaneous evidence of the parties\u2019 stated intention; it removes any plausible contractual counter-claim by Mr Harborne (i.e. there is nothing in the deed for him to enforce). But if there were a separate side agreement, oral understanding or pattern of conduct outside the four corners of the deed amounting to a quid pro quo, the deed would not preclude a tribunal finding accordingly. There is no public evidence of any such extrinsic arrangement.<\/p>\n We would note that it\u2019s very relevant to ask what Mr Harborne and Mr Farage considered the gift to be for. It\u2019s not generally relevant to ask what other things (unintended by Mr Harborne) the money was used to fund. So the analysis in this article is not affected by whether or not Mr Farage used some of the \u00a35m to buy a house<\/a>.<\/p>\n When was the gift made?<\/p>\n This is an important question because it\u2019s relevant to determining the purpose of the gift.<\/p>\n On 23 May 2024 Mr Farage publicly stated<\/a> he would not stand in the general election. On 3 June 2024, Mr Farage announced<\/a> that he would stand in Clacton and take over as leader of Reform UK.<\/p>\n Mr Farage\u2019s own account<\/a> is that he received the money in \u201cearly 2024\u201d and \u201cbefore he intended to stand for Parliament\u201c. On that account the gift could not have been an inducement to stand for Parliament.<\/p>\n The Guardian\u2019s original story revealing the gift said<\/a> \u201cFarage had stated he did not intend to stand as a prospective MP but U-turned in June 2024, within weeks of receiving the personal gift from the Thailand-based businessman\u201d. That suggests the gift was an inducement to stand for Parliament.<\/p>\n Some of the potential ways of taxing the payment are inapplicable if Mr Farage\u2019s timeline is correct. We will note this point each time it\u2019s relevant.<\/p>\n The starting point: gifts are not income<\/p>\n As a general proposition, the UK\u2019s only tax on gifts to individuals is inheritance tax. At the time of the gift, inheritance tax only applied to gifts by UK domiciled (or deemed UK domiciled) individuals, or gifts of UK situs property by non-UK domiciled individuals. Such gifts to individuals are \u201cpotentially exempt transfers<\/a>\u201c, chargeable to inheritance tax only if the donor dies within seven years. We assume Mr Harborne was not domiciled<\/a> in the UK at the time of his gift, and the gifted property was not UK situs<\/a>, so inheritance tax is not relevant.<\/p>\n Gifts are not generally subject to income tax. The UK has no general \u201cdonee tax\u201d on the receipt of gifts \u2013 unlike, for example, Germany\u2019s Schenkungsteuer<\/a>, France\u2019s droits de donation<\/a>, or US federal gift tax<\/a>. Everyone knows this in their day-to-day life \u2013 gifts to friends and family aren\u2019t usually subject to tax (other than inheritance tax).<\/p>\n The same is in principle true for much larger gifts. However, as a practical matter, HMRC is often suspicious of claims that large payments between non-family members are gifts. Such payments can in reality be hidden remuneration of some kind. So, for example, when Bernie Ecclestone made \u00a340m of \u201cgifts\u201d to his lawyer<\/a>, HMRC sought to tax the gifts \u2013 more on that later.<\/p>\n The technical position is that, for a receipt to be taxable as income there must be a \u201csource\u201d of that income. A pure voluntary windfall has no source, and so escapes income tax altogether. <\/p>\n The key principle is therefore: a pure voluntary gift, untethered to any source (trade, profession, employment, office, asset or casual service), is not income.<\/p>\n The following sections go through the analysis in detail, considering whether in fact the payment was attracted to a source, and whether it was truly a gift. We then look at other taxes which (in certain limited cases) could apply.<\/p>\n 1. Was it a tip?<\/p>\n This is the scenario most of us are familiar with in our day-to-day life. A tip is a \u201cgift\u201d in the sense that we are under no legal obligation to pay it, but it\u2019s subject to income tax. There is a long line of authority that taxes voluntary receipts that come as a direct consequence of services rendered, and\/or have the character of a trading or professional receipt.<\/p>\n Prior to the gift, Mr Farage had been a director of several companies<\/a> (including Reform 2025 Limited<\/a>, which was previously named Reform UK Party Ltd and before 18 May 2021 was The Brexit Party Ltd) and a member of the European Parliament. So it might be thought Mr Farage\u2019s second explanation means there is a simple tax answer \u2013 this was essentially a \u201ctip\u201d by Mr Harborne for services performed by Mr Farage in his previous roles\/offices. In our view, however, that would probably be incorrect. Notwithstanding the range of possible \u201cemployers\u201d, the known connection between the \u00a35m and any of those offices or employments is insufficient. The payment must be \u201cfrom\u201d the employment in the sense of being a reward qua employee. Mr Harborne was not, realistically, thanking Mr Farage for his performance as a Reform UK director, or his performance as an MEP, but for his campaigning activity over 27 years.<\/p>\n \u201cBrexit campaigning\u201d is not, on any orthodox tax view, a trade or profession. Mr Farage\u2019s identifiable professions in early 2024 were those of broadcaster\/commentator (GB News) and public speaker\/author. There is some blurring here, because much of Mr Farage\u2019s taxable income will have arisen from trades\/professions that followed from his Brexit campaigning \u2013 but it\u2019s still important to separate the Brexit campaigning from those trades\/professions.<\/p>\n We can draw a distinction with the leading recent case on this point, Mullens v HMRC<\/a>.<\/p>\n Mr Mullens was a solicitor who, having resigned from his City firm in 1999 to work for the Ecclestone family interests, received six payments totalling some \u00a340m between 1999\/00 and 2012\/13. He treated each as a non-taxable gift; HMRC assessed all of them as income. The First-tier Tribunal held that five of the six payments \u2013 around \u00a338.25m \u2013 were taxable income (the FTT found they were \u201cMullens\u2019 income made in return for services he had provided to the Ecclestone family interests\u201c, and this was upheld by the UTT). Only a \u00a3187,000 sum used to cover a family holiday to Mauritius was accepted by the Tribunal as a personal gift.<\/p>\n The relevance to Mr Farage is twofold. First, Mullens shows that the courts will look through the \u201cgift\u201d label where there is a pre-existing professional relationship that adequately explains the payment. Second, the contrast with Mr Farage is the central point: the decision in Mullens depended on a range of services rendered over many years. There is no public evidence that Mr Farage ever rendered any professional services to Mr Harborne or to any Harborne-controlled vehicle. Without that, Mullens in fact supports the conclusion that the \u00a35m is not taxable (on the facts as we know them).<\/p>\n Why some voluntary payments are not taxable even when connected to a profession or office<\/p>\n Even where there is an employment or profession, the courts have held that a voluntary payment is not a taxable receipt in two cases that may be relevant to our facts:<\/p>\n (a) The personal situation cases<\/p>\n Mr Farage\u2019s initial explanation \u2013 that the money was gifted by Harborne out of concern for his physical safety following instances of public harassment (such as the 2019 milkshake incident<\/a>) \u2013 potentially engages caselaw suggesting that a payment made to relieve personal distress is not taxable.<\/p>\n To be taxable as earnings under section 62 ITEPA 2003, a payment must arise from the employment or office, rather than simply being paid to someone who happens to hold that position. If the \u00a35m was strictly a collateral arrangement to protect a high-profile and distressed individual from physical danger, Mr Farage\u2019s legal team could argue that the source of the payment was Mr Harborne\u2019s personal concern for Mr Farage\u2019s well-being, not a taxable remuneration for services rendered.<\/p>\n (b) The testimonial cases<\/p>\n Mr Farage\u2019s second explanation for the \u00a35m \u2013 gratitude for 27 years of Brexit campaigning \u2013 potentially engages a second line of caselaw where income paid as a \u201cpersonal mark of esteem\u201d was not taxable.<\/p>\n Even where there is an employment or profession, the courts have repeatedly held that a voluntary payment is not a taxable receipt where the \u201cdominant character\u201d is a \u201cpersonal mark of esteem or affection\u201d rather than a reward for services. The leading case is Reed v Seymour<\/a> [1927] AC 554, in which a benefit-match collection paid to a professional cricketer was a \u201cpersonal gift \u2026 in the nature of a testimonial\u201d and not taxable as an emolument of his employment. There were other cases and tax-exempt testimonials became standard practice, to the point that the law was eventually changed to cap the benefit<\/a> for sportspeople. However the caselaw still applies to those like Mr Farage who are not sportspeople.<\/p>\n There are three potential ways the caselaw could be distinguished:<\/p>\n The fact the testimonial payments were one-off and \u201cexceptional\u201d was always a significant part of the reasoning. If there were other similar gifts from Mr Harborne (possible, but no evidence as things stand) then the payment looks more like an emolument, and this \u201cdefence\u201d might well not prevent the \u00a35m being taxable.<\/p>\n It\u2019s also possible HMRC could distinguish the \u00a35m from the cricketer-and-his-fans paradigm of Reed v Seymour, for example on the basis that this is not a cricket club or group of fans, but a single long-standing political ally.<\/p>\n HMRC could argue that the dominant character of the \u00a35m is political alignment rather than personal esteem. However that suggests there is no taxable source.<\/p>\n Finally, note that the \u201cpersonal situation\u201d and \u201ctestimonial\u201d arguments are relevant to the question of whether there are taxable \u201cgeneral earnings\u201d but not to e.g. a disguised remuneration charge.<\/p>\n 2. Payment as an inducement to stand for election<\/p>\n We will now look outside Mr Farage\u2019s stated grounds for the gift and consider other possibilities.<\/p>\n If \u2013 hypothetically \u2013 Mr Harborne had said \u201cI will give you \u00a35m for your security, but only if you stand for Parliament in Clacton\u201c, and Mr Farage had taken the money and stood, that would be what is often called a \u201cgolden hello\u201d, and might be straightforwardly taxable as an \u201cinducement payment\u201d. It\u2019s important to say at the outset that there is no evidence for this hypothesis, and it contradicts Mr Farage\u2019s stated timeline for the gift of early 2024, and therefore we are covering it for completeness.<\/p>\n The clearest case is Shilton v Wilmshurst<\/a> [1991] 1 AC 684. Peter Shilton\u2019s former club, Nottingham Forest, paid him \u00a375,000 on condition that he agreed to be transferred to Southampton, because Forest needed Shilton\u2019s agreement in order to collect the \u00a3325,000 transfer fee from Southampton. The House of Lords held that the \u00a375,000 was an emolument from Shilton\u2019s new Southampton employment.<\/p>\n There are, however, serious barriers to this approach:<\/p>\n Chronology: on Mr Farage\u2019s own account the gift was received before he intended to stand for Parliament, and he changed his mind months after that, therefore clearly not induced by the gift. If, alternatively, the gift was made shortly before Mr Farage\u2019s announcement he would stand, then this objection falls away.<\/p>\n There is no evidence that the payment was conditional on Mr Farage standing for, or taking up, any office. In Shilton the payment was conditional in fact (no transfer to Southampton, no payment). Here, on the parties\u2019 own evidence, the payment was unconditional. That is not in principle a fatal objection: the courts could find that the parties intended the payment to be an inducement, regardless of how it was documented \u2013 but that would require evidence of which we are currently unaware.<\/p>\n A significant technicality: even if we assume (with no evidence) the agreement was conditional, it would surely not have been conditional on Mr Farage becoming an MP. It would have been conditional on Mr Farage becoming a candidate. A candidate is not an office-holder. This is a serious and perhaps fatal obstacle to applying the inducement caselaw.<\/p>\n Policy: applying Shilton on these facts would, in effect, draw many donations made to politicians\/candidates into the income tax net, as it\u2019s reasonably common for trade unions and others to make donations to support candidates through selections and elections, and in some cases candidates would not stand without those donations. They are not described as inducements to stand, but as a practical matter they are. HMRC has not, as far as we are aware, historically taxed comparable third-party gifts to politicians on a Shilton basis.<\/p>\n 3. Miscellaneous income: ITTOIA 2005, s687<\/p>\n Section 687 ITTOIA 2005<\/a> is the \u201cresidual charge\u201d which taxes \u201cincome from any source that is not charged to income tax under or as a result of any other provision of this Act or any other Act\u201c. Crucially, it still requires a \u201csource\u201d.<\/p>\n The danger zone for section 687 is a casual or one-off quid pro quo. The classic authority is Brocklesby v Merricks<\/a> (1934) 18 TC 576: an architect who did a one-off favour by introducing an estate agent to a client received a share of the resulting profits, and that receipt was held to be taxable as miscellaneous income even though the architect was not carrying on a trade as an introducer. A single casual service can be a source, and we understand that HMRC as a matter of practice applies section 687 in such cases.<\/p>\n There is, however, no evidence that we are aware of that any service was rendered by Mr Farage to Mr Harborne in return for the \u00a35m. Mere political alignment \u2013 even strong alignment, and even alignment that Mr Harborne hoped Mr Farage would maintain \u2013 is not a \u201cservice\u201d in the Brocklesby sense. If, by contrast, HMRC were to find evidence of a discrete one-off quid pro quo(a specific introduction made by Mr Farage, a single appearance at a private event, a particular intervention in a regulatory matter) the analysis could readily switch. The section 687 risk should not be dismissed simply because there is no evidence of \u201congoing\u201d services.<\/p>\n There is also an important policy point. There is no clean legal or tax distinction between (i) a personal gift to a politician and (ii) a gift earmarked for political campaigning. Many campaigns are run through local parties or companies, but many are run personally by the candidate. Many (or indeed most) political donations are made because the donor believes the candidate is aligned to his or her views. There is nothing exceptional about Mr Harborne giving a donation and Mr Farage\u2019s subsequent support for (for example) reduced tax on cryptocurrency gains (particularly bearing in mind that Mr Harborne would not benefit personally from this change given that he is not subject to UK tax). A general rule taxing personal donations as income would have wide consequences for many political donations.<\/p>\n 4. Disguised remuneration: Part 7A ITEPA 2003<\/p>\n Part 7A ITEPA 2003 is a highly technical provision designed to stop people avoiding income tax and National Insurance by having a third party make a payment to an employee. The rules impose PAYE and NIC on \u201crelevant steps\u201d taken by a third party in \u201cconnection with\u201d an employment or prospective employment.<\/p>\n The leading recent authority on \u201cin connection with\u201d is HMRC v Marlborough DP Ltd [2024] UKUT 98 (TCC)<\/a>. Although wide, the words are not unlimited. The Upper Tribunal held:<\/p>\n \u201cWe do not think that it was Parliament\u2019s intention to catch loans where the relationship between the loan and the employment was merely incidental or peripheral \u2013 merely part of the background, so to speak.<\/p>\n \u2026<\/p>\n The words used by Parliament involve a test of connection not one of causation. \u2026 there must be a strong or direct connection between the employment\/directorship and the loan\u201c<\/p>\n There are two ways in which the payment might be \u201cin connection with\u201d an employment.<\/p>\n The Reform UK directorship. Part 7A applies where a \u201crelevant third person\u201d (here, Mr Harborne) takes a \u201crelevant step\u201d in connection with the employment of person \u201cA\u201d (here, Mr Farage) with their employer \u201cB\u201d (here, Reform 2025 Limited). If the \u00a35m were in essence a payment to keep Mr Farage as leader or director of Reform 2025 Limited, Part 7A could in principle apply. The hypothetical \u201cI\u2019ll give you \u00a35m if you keep leading Reform for another five years\u201d would be potentially within s554A. There is, however, no evidence of any such conversation.<\/p>\n The prospective MP office. Part 7A applies to prospective employment\/office. If HMRC could show that the \u00a35m was, in essence, connected with Mr Farage taking up the office of MP, that office could be the relevant employment. There is, again, no evidence of this \u2013 furthermore, the approach runs into the \u201ccandidate\u201d problem that we discussed in the context of inducement.<\/p>\n On the public facts, neither theory is presently sustainable. The reported reasons for the gift are at best \u201cincidental or peripheral\u201d to the directorship and the prospective MP office in the Marlborough sense. Part 7A is the most fact-sensitive of the income-tax routes and has wide drafting, but on the publicly available facts the \u201cstrong or direct connection\u201d is missing.<\/p>\n 5. Compensation for, or replacement of, lost earnings<\/p>\n The \u00a35m could be taxable if it was a payment to compensate Mr Farage for, or replace, lost earnings. There is, it must be noted, no evidence that this was the case. But for completeness we will consider the scenario where Mr Farage was concerned that stepping up to frontline politics would mean his earnings would fall significantly, and Mr Harborne\u2019s payment was intended to compensate for that.<\/p>\n Compensation for the loss of, or for surrendering, trading or professional profits can be taxable in the same way as the income it replaces.<\/p>\n This is therefore superficially a plausible answer if evidence emerges that the real rationale for the payment was compensation for the loss of earnings. There are, however, two significant problems with the approach:<\/p>\n We are not sure the caselaw is applicable to a payment which (we expect) bears no direct relationship to envisaged earnings. It\u2019s quite unlike the quantified compensation in e.g. Burmah Steam Ship Co.<\/p>\n Not only is there currently no evidence that replacing lost earnings was the rationale for the gift, but the evidence suggests<\/a> the opposite: that Mr Farage has continued to undertake lucrative outside work since becoming elected.<\/p>\n 6. Falkirk Ice Rink and the security costs<\/p>\n The facts here are unusual, and existing caselaw could be applied in a slightly unusual way.<\/p>\n CIR v Falkirk Ice Rink Ltd<\/a> [1975] STC 434 held that an unsolicited donation by a curling club to a commercial ice rink, specifically to subsidise the rink\u2019s loss-making curling operations, was a trading receipt: it was given to supplement the company\u2019s trading revenue and ensure the continuation of the trade. Smart v Lincolnshire Sugar Co Ltd<\/a> 20 TC 643 held that a government subsidy to supplement trading receipts, and preserve the solvency of a company, was taxable.<\/p>\n This principle is not theoretical; in our experience it\u2019s considered by practitioners when voluntary payments are made, and HMRC\u2019s published manuals suggest<\/a> it\u2019s applied by HMRC in practice.<\/p>\n The analysis is significantly dependent upon how Mr Farage has treated the security costs that the \u00a35m is said to fund.<\/p>\n Mr Farage very possibly could claim a tax deduction for those costs. There is a specific statutory deduction for security expenditure incurred to meet a \u201cspecial threat\u201d to a self-employed individual that arises wholly or mainly because of their trade or profession.<\/p>\n This all suggests that:<\/p>\n If Mr Farage has claimed (or claims) a tax deduction for the security costs funded by the \u00a35m, on the basis that those costs are part of his profession as broadcaster, commentator and public speaker, then the matching receipt may be, on a Falkirk\/Lincolnshire Sugar analysis, a trading subsidy and itself taxable. The \u00a35m would be a payment to supplement the income of the profession and enable it to continue.<\/p>\n Conversely, if no deduction is taken, that would be helpful evidence for Mr Farage that the expenditure was personal\/political rather than professional. It would not be conclusive: the question would still be the character of the receipt in his hands.<\/p>\n And of course if in fact the \u00a35m was not used to fund security then this point is of no relevance.<\/p>\n On the currently-known facts, in our view this is the strongest argument HMRC would have to tax the payment \u2013 but there are three important caveats:<\/p>\n To stress again, as a practical matter we think it\u2019s only relevant if Mr Farage has claimed (or claims) a tax deduction for the security costs funded by the \u00a35m. We do not know if that is the case.<\/p>\n The argument would be strongest to the extent the payment was earmarked for, and actually used on, deductible security expenditure. It would be much weaker for any part not so earmarked or used.<\/p>\n The argument may fail if Mr Farage\u2019s trade\/profession would have continued to solvently fund the security costs even absent the gift. The extent of his outside activities suggests to us that it plausibly would have been solvent regardless. This is an objection to a Falkirk-style charge; it\u2019s unclear if it\u2019s a fatal one.<\/p>\n 7. Capital gains tax<\/p>\n A gift is not subject to capital gains tax for the recipient.<\/p>\n We have, however, seen cases where a document, like Mr Farage\u2019s, intended to confirm that a payment was \u201cunconditional and irrevocable\u201d, has ended up actually creating a tax charge. Say, for example, the document was drafted so that Mr Harborne agreed to pay \u00a35m unconditionally to Mr Farage, with the payment following subsequently (as opposed to the document simply describing what happens if the payment is made, or describing the parties\u2019 view after the payment had been made). In such a case, the \u00a35m payment could be treated as a capital sum derived from an asset<\/a> (the asset being the chose in action created by the document) and potentially taxable under section 22 of the Taxation of Chargeable Gains Act 1992<\/a>.<\/p>\n Tax practitioners know this as a dangerous \u201cbear-trap<\/a>\u201c. If Mr Farage was caught by it then that would be a rather unfair result caused by unfortunate drafting \u2013 but that is no defence to a tax charge. While modern tax law allows HMRC to look past artificial legal structures to the underlying economic reality, this principle is famously asymmetrical: taxpayers are generally stuck with the legal consequences of the documents they actually sign, however poorly drafted.<\/p>\n An additional complication is that, if there is a prima facie capital gains tax charge, the HMRC concession<\/a> in paragraph 11 of ESC D33 may relieve all or part of it on the basis that the right was a private\/domestic asset and not a CGT asset acquired for commercial reasons. Following HMRC\u2019s January 2014 revisions, the concession is limited to the first \u00a3500,000 of gain in any one case. The legal status of HMRC\u2019s extra-statutory concessions is more constrained<\/a> following R v HMRC ex p Wilkinson<\/a> [2005] UKHL 30; HMRC has retained ESC D33 (in its limited<\/a> form) but did not legislate<\/a> it, so its application depends on HMRC\u2019s continuing willingness to operate the concession.<\/p>\n 8. Other taxes \u2013 National Insurance and VAT<\/p>\n If there is an income tax charge then National Insurance may apply.<\/p>\n If re-characterised as a trading or professional receipt, National Insurance at the applicable thresholds and rates would arise on Mr Farage\u2019s self-employed profits. If re-characterised as general earnings of an office or employment, Class 1 NIC (both primary and secondary) would apply; the secondary (employer) NIC liability would fall on the employer (if, broadly speaking, it has a UK presence<\/a>). If re-characterised under Part 7A, Class 1 NIC mirrors PAYE. If treated as miscellaneous income under ITTOIA 2005, section 687<\/a>, no NIC arises (section 687 income is not \u201cearnings\u201d for Class 1 NIC purposes nor \u201cprofits\u201d for Class 4 NIC purposes).<\/p>\n VAT is a tax on consideration for a supply. A \u201cgift\u201d that is not consideration for any identifiable supply by Mr Farage to Mr Harborne is outside the scope of VAT. There is no current evidence of any supply by Mr Farage to Mr Harborne, so (on the current facts) no potential for VAT.<\/p>\n We don\u2019t see a scenario in which National Insurance or VAT would apply but income tax would not. Conversely, in many of the income tax scenarios (e.g. simple remuneration or inducement payment) there would be no VAT, and in some no National Insurance.<\/p>\n Conclusion<\/p>\n On the public facts and on the two explanations advanced by Mr Farage, the \u00a35m payment from Mr Harborne is most naturally characterised as a non-taxable personal gift. None of the principal income-tax charging provisions appears engaged on the present evidence. IHT is out of scope on the assumption that Mr Harborne is non-UK resident, non-UK domiciled and not deemed UK domiciled, and that the property gifted was not UK situs. VAT does not arise absent an identifiable supply.<\/p>\n HMRC not infrequently open enquiries when large gifts are made between people who are not related to each other, and it would be unsurprising if they did so in this case. The usual deadline to open an enquiry is a year from the date the tax return is filed. Looking at how that will apply in practice:<\/p>\n If the gift was made before 6 April 2024, it fell in the 2023\/24 tax year. The normal filing deadline for that return was 31 January 2025. If Mr Farage filed on or before that date, HMRC\u2019s ordinary enquiry window will now have closed. That does not necessarily prevent HMRC acting: if Mr Farage\u2019s tax return did not contain enough information to alert HMRC to the nature and size of the gift, HMRC would likely be able to raise a discovery assessment<\/a>. The ordinary discovery time limit is four years after the end of the relevant tax year \u2013 so, for 2023\/24, 5 April 2028.<\/p>\n If the gift was made on or after 6 April 2024, it fell in the 2024\/25 tax year. The normal filing deadline was 31 January 2026. Unless Mr Farage filed very early, HMRC are likely still to be within the ordinary enquiry window.<\/p>\n For tax to arise, material facts would have to be different from those currently stated by Mr Farage. The main factual matters we would expect HMRC to review are:<\/p>\n Previous gifts or undisclosed commercial links. If there were other large gifts, retainers, introductions, consultancy arrangements, business links, or other payments between Mr Harborne and Mr Farage, that could weaken the personal-gift analysis. We have not found evidence of such links in the public domain.<\/p>\n Evidence of services or a quid pro quo. If HMRC found evidence that Mr Farage had provided services to Mr Harborne, or to a Harborne-connected business, or that there was any understanding that he would do, refrain from doing, or procure something specific in return for the \u00a35m, the analysis could change significantly. That would be the clearest route to an income tax charge.<\/p>\n Evidence that the payment replaced lost earnings. If the \u00a35m was in substance compensation for income Mr Farage expected to lose by returning to frontline politics, HMRC may say that the payment took the character of the earnings it replaced. Again, there is currently no public evidence that this was the rationale, and Mr Farage appears to have continued substantial outside work after his election.<\/p>\n The tax treatment of the security costs. If Mr Farage has claimed, or later claims, a deduction for security expenditure on the basis that it\u2019s incurred for his trade or profession, HMRC may say that the matching funding from Mr Harborne is a taxable trading receipt (but this would probably be limited to the part of the gift earmarked or intended to cover security costs).<\/p>\n The details of the arrangements between the parties. If the \u201cunconditional and irrevocable\u201d document described by Mr Farage actually created a \u00a35m chose in action, then that could give rise to a capital gains tax charge for Mr Farage.<\/p>\n Disclosure<\/p>\n Dan Neidle, the founder of Tax Policy Associates, is a member of the Labour Party. Tax Policy Associates has no political affiliation. Our work covers UK tax policy and tax avoidance generally; only a minority of our investigations relate to politicians. Our previous reports suggesting politicians avoided or failed to pay tax investigated\u00a0Angela Rayner<\/a> (twice<\/a>),\u00a0Keir Starmer<\/a>,\u00a0Ian Lavery<\/a>,\u00a0Nadhim Zahawi<\/a>, Richard Tice<\/a> and Zack Polanski<\/a>. We have also published reports dismissing allegations that Rishi Sunak<\/a> and Jeremy<\/a> Hunt<\/a> avoided tax.<\/p>\n Many thanks to M and B for initial comments, and to X, T, D, A, C, J and K for the final analysis. Thanks to M (again), L, S, G, H and J for their review of the near-final draft.<\/p>\n Most of our contributors are practising solicitors, barristers or accountants, and so for professional reasons cannot be named. Tax Policy Associates would not exist without their work, and so we always credit all contributors by initial. <\/p>\n Photo<\/a> \u00a9 House of Commons, licensed under CC BY-NC-ND 2.0<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Christopher Harborne, a British-Thai billionaire, gave Nigel Farage \u00a35m in 2024. Genuine gifts are usually tax-free. However, Mr…\n","protected":false},"author":2,"featured_media":594742,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[49,50,51,47,52,48],"class_list":["post-594741","post","type-post","status-publish","format-standard","has-post-thumbnail","category-headlines","tag-headlines","tag-news","tag-top-news","tag-top-stories","tag-topnews","tag-topstories"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/594741","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=594741"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/594741\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/594742"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=594741"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=594741"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=594741"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}