The gift that keeps on giving
24th April 2026
Posted in Articles, IHT by Andrew Marr
At last, we have an interesting inheritance tax case which is a rare thing indeed. This is an unusual one because it concerns sums which were given for political reasons but not to a registered political party. As such, they do not attract the political party exemption for gifts and, furthermore, because they were made to companies, HMRC argued that they should have been immediately chargeable to IHT at 20% as chargeable lifetime transfers. As well as these niche conditions, the case also covered two of the more general IHT concepts, such as:
1. Was there an intention to confer gratuitous benefit?
2. Could the gifts be treated as regular gifts out of income?
Facts of the case
Mr Wood, a very wealthy individual, was keen to ensure that the UK was out of the EU and therefore donated a lot of money to various companies that ran campaigns to achieve this end. Between 2011 and the end of 2019 he made numerous donations to four different organisations ranging in value between £2,500 to £250,000.
He held no shares in and nor was he on the board of any these companies. He did, however, contribute his ideas and views to these organisations, and he felt that the payments gave him “an opportunity to shape the way that the campaigns were run” and that “as someone who had donated, I was more likely to be listened to”. Essentially, he believed that he would personally benefit if the campaigns to which he donated were successful. However, there was no written agreement that the companies must consider his views, but Mr Wood believed there were “implied terms and conditions” attached to the payments.
He hoped for a mutually beneficial outcome from the campaigns as he felt that weaker ties with the EU would benefit him personally. He considered the companies were running a campaign for him and his fellow donors; “with our money, in a way we see fit”. In his submission, he stated that he could not run such a campaign himself, so he was doing the next best thing and paying someone else to do it for him.
Mr Wood made donations as and when the campaigns needed money, provided he was happy with how it was being run, if he supported its objectives and whether he had the cash available to do so. As a result, the donations were sporadic.
Mr Wood contested that he did not intend to confer any gratuitous benefit when making the payments and therefore s10(1) of IHTA 1984 should apply to exempt the gifts.
The courts considered both the words ‘intended’ and ‘benefit’. The law states that it is not enough that someone does benefit (as in the case of Court of Appeal v Parry 2018), it is whether it was intended by the donor. As is set out above, Mr Wood stated that he did not intend to confer any benefit because he intended to gain personal financial benefit if the campaigns were successful, and he was able to direct the parties to deliver his own political objectives.
If this argument failed, Mr Wood wished to rely on the gifts being regular gifts out of surplus income, so as to attract an exemption from IHT.
The decision
Firstly, with respect to the decision on the intention to confer gratuitous benefit, the courts did not accept Mr Wood’s arguments:
Intention
1. Despite Mr Wood’s intention to gain influence and be listened to, he was under no illusion that he had an enforceable right to be listened to. As such Mr Wood did not gain any real influence over the campaigns.
2. Any financial benefit he may get was “wholly beyond his control”.
3. There were mixed intentions to the gifts as he clearly did intend to benefit the various parties (even if he intended to also benefit himself) and therefore because there was some intention, the relief cannot apply at all.
4. The exemption for qualifying political party donations would be otiose if “achieving a mutually beneficial outcome” was sufficient to prevent the gift from “conferring any gratuitous benefit”. In fact, the courts went further to state that they could not envisage any gift to an unconnected person that would not fall into one where the donor shares a mutual objective with the recipient and therefore the relief cannot extend this far.
Confer benefit
1. He received no goods or services for the monies donated; he had no legally enforceable rights due to the donations made and the various companies had no legally enforceable obligations to Mr Wood.
2. He knew he was putting the campaigns in a better position than they were before the gifts, and he wanted to contribute to their success.
Therefore, he had intended to confer a benefit when making the payments. As such, the exemption under s10(1) of IHTA 1984 did not apply and the gifts were chargeable.
Gifts out of income?
In respect of the regular gifts out of income exemption, it was clear that they were funded from surplus income, therefore the matter for the court to decide was whether they were “part of the normal expenditure of” Mr Wood.
By Mr Wood’s admission, the gifts were sporadic and made at the time the campaigns needed money. There was no firm commitment, and he was not bound to make future donations. The donations made varied in their amounts and the nature of the recipients varied. Whilst a grouping of the parties was provided by Mr Wood to show the settled pattern of donating to similar organisations, the courts concluded that the definition put forward was so wide as to “betray the variety of the recipients”. There was no commonality between all the parties to which he donated.
The courts found that there was no predictability, no formula, and the funds were called for in response to a particular political situation as it arose. Hence, for these reasons, they did not fall within a settled pattern and were not “normal”. As such, they did not satisfy the exemption and were chargeable transfers of value, subject to an immediate IHT charge at 20% on amounts over his available nil rate band.
Forbes Dawson view
Whilst the issue of the intention to confer benefit does not come up that much in IHT planning, it does focus the mind on charitable donations and the need to ensure that any charities are properly registered, as they too could be structured as companies, with the potential for chargeable lifetime transfers.
Any case that discusses the subjectivity of regular gifts out of income is helpful. It is useful to see what is acceptable to HMRC when considering this point. One clear message, which we always recommend, is to document the intention of the gifts. Also useful, is the advice to define the gifts by a formula.
For example,
1. I pledge to give 50% of my surplus income every year to my grandchildren
2. I intend to pay 10% of my mother’s care home costs every year
3. I intend to pay 20% of my surplus income to those in need
4. I will pay the insurance premiums for my brother’s insurance policy every year
The case reiterated that there is no minimum period over which the gifts should have occurred. If there is evidence of the pattern of actual, or intended, regular payments then this should satisfy the definition of ‘normal’.
