Brexit-backing MPs as well as counterparts from the remain campaign have backed a controversial measure to extend a tax break to referendum campaign donors, after several billionaire donors received large demands from HMRC.
The shadow chief secretary to the Treasury, Peter Dowd, criticised the proposed amendment to the finance bill from prominent leave campaigners Charlie Elphicke, Jacob Rees-Mogg and Iain Duncan Smith, but which has also been backed by Labour MPs and remain supporters Alison McGovern and Caroline Flint.
It would extend a tax exemption for political parties to referendum campaigns - backdating it to cover the EU referendum.
Last month it was revealed that several prominent leave campaigners who donated large sums to the Brexit campaigns during the 2016 referendum received substantial tax demands from HMRC.
They included former Ukip donor Arron Banks, who donated £8.1m to his Leave.EU campaign group, and former Conservative party co-chair Peter Cruddas, worth a reported £750m, who gave £900,000 to Vote Leave.
Prominent leave campaign donors bore the brunt of the demands more than remain supporters, because the large donations to the leave campaign were more likely to come from wealthy individuals or businessmen, not listed companies.
HMRC’s demands hinge on inheritance tax rules that require tax to be paid upfront on large gifts. Party political donations, as well as donations to charities, are usually exempt, but HMRC has said that does not apply to individuals who donated to the referendum campaign.
HMRC said it had applied the law equally across all donors, but senior UK cabinet ministers Boris Johnson and Michael Gove expressed concerns about the demands.
Others backing the amendment, which could also be backdated to apply to the Scottish referendum and the alternative vote referendum, include Lib Dem MP Alistair Carmichael and Brexit-supporting Labour MP Kate Hoey. Craig Mackinlay, the MP facing prosecution for alleged breaches of campaign finance rules, has also backed the amendment.
Treasury minister Mel Stride has previously said the government would look at changing the rules, though stopped short of pledging to change them retrospectively.
In response to a question from Rees-Mog, Stride said: “The chancellor and I have discussed the issues that my honourable friend has raised in previous weeks, and we are sympathetic to looking carefully at how the law may be changed for future referendum campaigns.”
Dowd said: “It is astonishing that the government says it is ‘sympathetic’ to Jacob Rees-Mogg’s plan to offer further tax breaks to millionaires, despite the public continuing to suffer under eight years of austerity.”
“I see no reason why working people should have to subsidise the political convictions of the wealthy. This is the same old nasty party, looking after the richest few while the many struggle to get by. Labour will fight these plans at every stage.”
Another former remain campaign source said: “It’s outrageous to see allies of Open Britain and Aaron Banks teaming up to give tax breaks to rich people. It’s one thing to say the rules should be changed in the future; it’s quite another to try to fix the system retrospectively.
“Parliament will see through this blatant attempt to take money away from overstretched public services and hand it over to wealthy donors.”
Another who received a demand from HMRC was Robert Edmiston, a millionaire motor trader worth a reported £440m, who donated £850,000 to Vote Leave and £150,000 to the Grassroots Out campaign through his company IM Group.
David Harding, the billionaire founder of Winton Capital Management and a remain campaign donor, also received a similarly substantial tax bill.
Rees-Mogg told the Telegraph at the time the tax bills were revealed that it showed the government was “penalising people who had the audacity to challenge it”.
Jolyon Maugham QC, a tax expert and pro-remain campaigner who set up the Good Law Project to challenge both tax evasion and Brexit matters, said: “Backdating this amendment would pass money to four immensely wealthy individuals. And the amount the state would give them – either by releasing a debt or even returning cash – could be as much as £4,300,000.
“And we, the people, would get precisely nothing in return. Is this really a good use of scarce public money, whilst people are dying in hospital corridors? Quite remarkably, the amendment is supported by a number of Labour MPs as well as one Lib Dem. We must hope they withdraw their support.”
