Political Donations and Inheritance Tax: Lessons from Wood v HMRC

A recent inheritance tax case provides useful guidance on substantial donations and the normal expenditure out of income exemption.

The recent First-tier Tribunal decision in Wood (Wood v HMRC [2026] UKFTT 589 (TC)) considered the inheritance tax treatment of a series of substantial political campaign donations made over several years. Mr Wood argued that the payments either fell outside the scope of inheritance tax because they were not intended to confer a gratuitous benefit in making the payments, or alternatively, the payments were exempt from inheritance tax as they qualified for the ‘normal expenditure out of income’ exemption.

The Tribunal ultimately rejected both arguments. While the facts of the case were slightly unusual and would likely not apply to most, the decision does provide useful guidance on the evidential and practical requirements of making substantial donations, and the guidance in relation to the ‘normal expenditure out of income’ exemption is particularly helpful.

Background:

Donations to ‘qualifying political parties’ are exempt from inheritance tax if at the last general election, the party had either:

• at least two elected MPs; or
• one elected MP and at least 150,000 votes.

Donations to non-qualifying organisations, such as campaign groups, are treated as chargeable lifetime transfers which could trigger an immediate inheritance tax liability.

Facts of the case: 

The appeal concerned a series of donations made by Mr Wood between 2011 and 2019 to a number of political organisations campaigning in support of the UK’s withdrawal from the European Union. In total, the donations amounted to £747,500.00, with individual payments ranging from £2,500 to £250,000 and being made at irregular intervals from almost 5 years to 6 days.

HMRC assessed the donations as chargeable transfers for inheritance tax purposes and determined that Mr Wood owed an inheritance tax liability of ‘no less than £99,628.75’. Mr Wood appealed on the two grounds mentioned above.

The Tribunal therefore had to consider whether the transfers were genuinely non-gratuitous, and whether their pattern, amount and frequency were sufficiently settled to satisfy the normal expenditure exemption.

The Tribunal’s decision:

The Tribunal rejected Mr Wood’s argument that the payments were non-gratuitous on the basis that objectively the payments conferred a gratuitous benefit on the recipient organisations. Whilst the Tribunal accepted that Mr Wood hoped to obtain influence, access and political outcomes aligned with his own views, it concluded that these expectations did not amount to any enforceable rights or consideration in return for the payments. The recipient organisations retained complete control over the funds once received and Mr Wood was not purchasing a specific service or securing any contractual entitlement.

The Tribunal also rejected Mr Wood’s argument that the payments qualified for the normal expenditure exemption. Despite accepting that the donations were made from Mr Wood’s surplus income and did not affect his usual standard of living, the Tribunal emphasised the need for either a settled pattern of gifting or a prior commitment to make such payments. In this case, the payments were made at irregular intervals, varied significantly in amount and were heavily influenced by political events and campaign requirements at the time. Mr Wood also denied having made any firm commitment to make the donations. The Tribunal therefore concluded that the payments lacked the consistency and regularity required for the exemption to apply, and there was no discernible pattern or predictability.

Conclusions:

The decision in Wood highlights that the normal expenditure exemption will not apply merely because gifts are funded from surplus income. A clear and established pattern of gifting, or, evidence of a settled intention to make regular payments are essential.

Individuals undertaking inheritance tax planning involving regular gifting should therefore ensure that arrangements are appropriately documented and reviewed on an ongoing basis to maximise the likelihood of any available exemptions applying successfully.

If you have any questions or we can assist, please contact any member of the Probate, Tax and Estate Planning team on 0113 244 6100.

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The information in this article is necessarily of a general nature. The law stated is correct at the date (stated above) this article was first posted to our website.

Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors.