HM Revenue and Customs has been forced to defend its tax collection arrangements after criticism from Cabinet ministers Boris Johnson and Michael Gove over tax demands to donors who supported Brexit in the 2016 referendum.
In an unusual statement released on Christmas Eve, the tax collection department said it “objectively applies tax laws passed by Parliament” and added: “Tax decisions are always based on the law and never on the personal beliefs or values of the individual or campaign.”
The row came after the Telegraph revealed that donors to the leave side in the Brexit referendum were being given tax bills for the donations, despite political gifts, as well as those to charities, usually being exempt.
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As the donations were to referendum campaign groups and not political parties, they are set to be liable for taxation. Donors including Lord Edmiston, who donated £1m, and former Ukip donor Arron Banks who gave £8.1m to the unofficial Leave.EU campaign, are among those to likely face demands, according to the Telegraph.
Following the revelation, both foreign secretary Boris Johnson and environment secretary Michael Gove hit out at the demands.
A source close to Johnson told the Sunday Telegraph the decision would “not only hit the plucky individuals” who backed the Vote Leave campaign, but would affect grassroots campaigns' chances of success in the future.
“We should never forget that the establishment spent £9m on state-funded leaflets. It is always hard to match that kind of spending, but this could make it almost impossible. This can only be bad for our democracy," they said.
In addition, a source close to Gove said he was “obviously concerned about action that appears to impinge on our democratic values”.
However, a spokesman for HMRC said while political parties were often exempt from tax, the same did not apply to referendums.
“Donations to campaign groups don’t qualify as exempt gifts to political parties, unless the recipient is a political party meeting the criteria set out in section 24 of the Inheritance Tax Act 1984,” he said.
“No special exemption was granted ahead of the 2016 referendum. The legislation is applied without regard to the policies of organisations, groups or parties.”