Jonathan Wood v The Commissioners for HMRC

Introduction

1. This appeal concerns Inheritance Tax (IHT) and whether the Appellant (Mr Wood) is chargeable to IHT in respect of nine payments he made between 21 January 2011 and 6 November 2019 set out below in the total sum of £747,500 (the Payments).

2. The Respondents (HMRC) assessed Mr Wood to IHT on six payments by a Notice of Determination dated 8 September 2023. Mr Wood subsequently disclosed three additional payments that he had made between December 2017 and November 2019, as a result of which the determination was varied upwards on review by a Review Conclusion letter dated 1 December 2023 (“the Varied Determination”). The Varied Determination assessed Mr Wood to IHT on the Payments in the sum of “not less than £99,628.75”.

3. Mr Wood submitted his appeal against the Varied Determination to the Tribunal on 20 December 2023. Evidence and Facts

4. We were provided with a document bundle of 493 pages, which included written witness statements from Mr Wood, Matthew Jim Elliott (Lord Elliott) and Lynton Keith Crosby (Sir Lynton). HMRC did not challenge Sir Lynton’s written witness statement and it was adopted by the Tribunal. We also had the benefit of oral evidence from Mr Wood and Lord Elliott who were both cross-examined by Mr Stone. The parties produced an agreed statement of facts and issues of 5 pages which was provided to the Tribunal in advance of the hearing. Mr Marre and Ms Wagjiani also provided a 23 page note on the evidence to the Tribunal on the last morning of the hearing which the Respondents reviewed and Mr Stone subsequently made brief oral comments on.

5. Based on all of the above we summarise the key evidence and make findings of relevant facts below. Unless otherwise stated the quotations in this part of the decision are all taken from Mr Wood’s written or oral evidence.

6. Mr Wood was a successful trader and hedge fund manager who now manages his own money. He has a long-standing interest in politics, particularly what he describes as centre-right views and issues concerning the UK’s relationship with the EU, which he believes has become an overly political and restrictive organisation and he supports a more independent UK.

7. Mr Wood donates to political and charitable causes that he believes in and that he considers will have a positive impact on people’s lives. As his wealth has grown Mr Wood has been able to donate more. Mr Wood has made charitable donations to causes that benefit countries outside of the UK but he has only donated to UK political causes.

8. All the Payments were made from Mr Wood’s surplus income after maintaining his usual standard of living. The recipients of the Payments (“the Recipients”) were unconnected to Mr Wood and he made the Payments through arm’s length transactions.

9. Mr Wood’s first party political donation was to the Conservative Party in 2010. Mr Wood made this donation because Andrew Feldman, who was the Conservative Party Chairman from 2010 – 2016, asked him to and he believed that a Conservative Party win was the only way that the UK could resist, what he considered to be, attempts to make closer ties with Europe. Mr Wood donated a total of £712,200 to the Conservative Party up to 2019 and made a further four donations of £250,000 each towards the end of 2019.

10. Mr Wood met Lord Rodney Leach (Lord Leach) in the early 1990s and they became friends and business associates.

11. In 1998 or 1999 Mr Wood made one of his first non-party political donations which was to Business for Sterling for approximately £25,000. Business for Sterling was a formal campaign against Britain joining the Euro which was led by Lord Leach. Mr Wood generally only made political donations to organisations that Lord Leach was part of as he considered him to be honest and intelligent with a passionate belief in what was needed to make society a better place, which accorded with Mr Wood’s own views.

12. Mr Wood met Lord Elliott in around 2011 through the No Campaign Limited. Lord Elliott was involved in many of the campaigns and organisations that Mr Wood donated to. Mr Wood considers Lord Elliott to be honest and intelligent and very good at running campaigns which is one of the reasons that he provided financial support to the Vote Leave Ltd team that Lord Elliott led.

13. In April 2008 Mr Wood set up a Charities Aid Foundation (“CAF”) which allowed him to make a lump sum payment into the CAF on which the CAF then claimed gift aid. This vehicle enabled Mr Wood to decide at a later date which funds to donate to. Mr Wood transferred a one-off net sum to the CAF of approximately £17.36million, the grossed-up value of which after claiming the gift aid was approximately £22.25million. In or around 2014 Mr Wood transferred these funds into a similar vehicle set up by UBS called a Donor Advised Fund (“DAF”).

14. Mr Wood decided how much and who to donate to depending on the project he was supporting and how much was needed at the time. He was in some cases prepared to give whatever sum was needed, within reason.

15. Mr Wood considers that his donations to the No Campaign Limited, which campaigned against the Alternative Vote, was also linked to the UK’s independence from the EU because AV is commonly used in Europe and he considered that opposing it gave the UK further independence in terms of internal governance and democracy. No Campaign Ltd was led by Lord Elliott. Lord Elliott stated in his evidence that he considered that the AV Referendum was an opportunity for him to learn how referendums work and how to campaign successfully in a referendum and that the No Campaign Ltd provided him with useful experience for running a referendum campaign which he intended to use in any future referendum for the UK to leave the EU.

16. When Mr Wood donated to the No Campaign Ltd he “expected that the team… would run a good campaign and fight for the cause.”

17. When Mr Wood funded a TV programme for the Vote No Campaign he “expected a well-executed TV programme which would assist with the campaign.”

18. Mr Wood would not donate his money to an organisation if he thought that it would not be put to good use and he did not always donate when asked. For example, in 2011 he refused to donate to the Big Society and the Leader’s Group because he did not believe in the work that they were doing.

19. Mr Wood donated to Vote Leave Ltd because he believed in the cause and that the people running it would do a good job.

20. Brexit Central was put together by the same people involved in Vote Leave and Mr Wood saw it as a continuation of the work undertaken by Vote Leave, working to make sure that Brexit actually happened.

21. Mr Wood supported the Brexit Party because he believed that it drove forward the idea of creating a better agreement between the UK and Europe which he believed was the best thing for the country and himself.

22. Mr Wood has not made any payments to the Recipients at any time other than the Payments.

23. No Campaign Limited, Vote Leave Ltd and Brexit Central were all led by Lord Elliott. Other than the No Campaign Limited, the Recipients had a common cause of securing and implementing the UK’s exit from the EU. They were all run on a not-for profit basis.

24. Lord Elliott confirmed that Mr Wood was a supportive, strategically engaged donor who contributed both money and ideas to the campaigns that he was involved in.

25. Mr Wood had no formal power and was not part of any board or executive structure for any of the Recipients. Decisions ultimately rested with the leadership of the Recipients, of which Mr Wood was not part.

26. Mr Wood considered that he, the UK and individuals within the UK would be significantly better off if the Recipients were successful.

27. Mr Wood’s non-party political donations were all to campaigning organisations set up and run by Lord Leach and/or Lord Elliott who set up and ran campaigns that Mr Wood believed would bring societal and economic benefits to the country.

28. Mr Wood had not made a prior commitment or firm resolution to make the Payments. When asked to make a donation, Mr Wood would decide whether and if so how much to donate, which might “depend entirely on what was needed and how much other donors were donating.” On occasion this would be a very quick decision as he was happy with how the campaign was being run, he supported its objectives and he had the available cash to give the amount he was asked for. Mr Wood was nevertheless making a decision, whether and how much to donate, on each occasion.

29. Mr Wood considered that making the Payments gave him “an opportunity to shape the way that the campaigns were run”. He considered that “[a]s someone who had donated, I was more likely to be listened to” and that “[m]y influence and sway developed cumulatively over the years as a result of consistently backing the people and causes that I believed in. I consider that this is the real benefit that I received from making donations.”

30. Mr Wood believed that when he made the Payments, there were “implied terms and conditions” attached, in that there was an “implicit understanding” that the campaign would be run well with the aim of achieving a “mutually beneficial outcome”. He did not consider that he was buying control of the campaigns but he considered that he was securing an input.

31. Mr Wood also considered that he would benefit personally if the campaigns to which he made the Payments were successful because he believed that weaker ties with the EU and ultimately leaving the EU would result in outcomes that were better for him personally. He therefore considered that making the Payments helped him to achieve those results as well. He considered that by donating to campaigns run by people that he knew and that he trusted to run a campaign in a way that he thought a campaign should be run to achieve a “mutually beneficial outcome”, he and his fellow donors were “asking these people to run a campaign on our behalf, with our money, the way we see fit.”. He could not run the campaign on his own, as he did not have the capacity or expertise, so instead he made the Payments so that the Recipients could run the campaigns. He stated in oral evidence: "I can't go and do it on my own. I don't have the time, I don't have the capacity, I don't have the people. I can't print the leaflets ... But these people are doing it, they are providing that service to me and all the other donors." “I can’t go out and do it on my own. So what’s the next best thing I can do? I can employ a group of people to do that for me. When I sit down and decide to give this money after an enormous amount of conversations with the entire team… I did not for one second say to them “here’s half a million pounds do what you like.” I expected them to provide the service that I couldn’t do for myself.”

32. Mr Wood also stated in oral evidence that: “if I thought it was completely and utterly crazy to the point I really, really disagreed. I would say “I want that money back, go and get it from somewhere else…” Grounds of appeal

33. Mr Wood’s grounds of appeal are: (1) Ground 1: the Payments fall within section 10(1) as they were made at arm’s length to unconnected persons and Mr Wood did not intend to confer any gratuitous benefit in making the payments; and/or (2) Ground 2: the Payments fall within section 21 as they were part of his normal expenditure and made out of his surplus income.

34. The burden of proof is on Mr Wood to make out his grounds of appeal and the standard or proof is the ordinary civil standard of the balance of probabilities.

35. We were provided with an authorities bundle of 292 pages and a skeleton argument from each party. We were very much assisted by the clear submissions both written and oral on behalf of both parties. However, although we have carefully considered all of the submissions made and the authorities referred to, we have not found it necessary to reference each and every argument advanced or all of the authorities cited in reaching our conclusions. The legislation

36. All references to sections in this decision are to the Inheritance Tax Act 1984 (IHTA) unless otherwise stated.

37. Section 1 creates a charge to tax on chargeable transfers as follows:

1. Charge on transfers. Inheritance tax shall be charged on the value transferred by a chargeable transfer.

38. Section 2 then goes on to define a chargeable transfer as follows:

2. — Chargeable transfers and exempt transfers. (1) A chargeable transfer is a transfer of value which is made by an individual but is not (by virtue of Part II of this Act or any other enactment) an exempt transfer.

39. Section 3 then defines a transfer of value as:

3. — Transfers of value. (1) Subject to the following provisions of this Part of this Act , a transfer of value is a disposition made by a person (the transferor) as a result of which the value of his estate immediately after the disposition is less than it would be but for the disposition; and the amount by which it is less is the value transferred by the transfer.

40. Sections 10 – 17 remove certain dispositions from the definition of transfer of value for IHT purposes.

41. Section 10(1), with which we are concerned, provides that:

10. — Dispositions not intended to confer gratuitous benefit. (1) A disposition is not a transfer of value if it is shown that it was not intended, and was not made in a transaction intended, to confer any gratuitous benefit on any person and either— (a) that it was made in a transaction at arm's length between persons not connected with each other, or (b) that it was such as might be expected to be made in a transaction at arm's length between persons not connected with each other.

42. Part II of IHTA provides that certain transfers of value are exempt from IHT. These include at section 21 the following:

21. — Normal expenditure out of income. (1) A transfer of value is an exempt transfer if, or to the extent that, it is shown— (a) that it was made as part of the normal expenditure of the transferor, and (b) that (taking one year with another) it was made out of his income, and (c) that, after allowing for all transfers of value forming part of his normal expenditure, the transferor was left with sufficient income to maintain his usual standard of living. Section 10(1) – Intention to confer a gratuitous benefit

43. The parties agree that Mr Wood made the Payments to unconnected persons at arm’s length. It follows that paragraph (a) of subsection 10(1) is met and that paragraph (b) is not relevant.

44. The issue for determination by the Tribunal with respect to section 10(1) is therefore confined to whether, on a balance of probabilities, Mr Wood has established that each Payment “was not intended….to confer any gratuitous benefit on any person”. Case Law

45. The leading case on the interpretation and application of section 10(1) is the Supreme Court decision of Revenue and Customs Commissioners v Parry and others [2020] UKSC 35 ( Parry SC) . The facts of that case were that the deceased (the Disponer) had divorced in 2000. Her pension was held in such a way that if she died without taking any lifetime benefits, a lump sum would return to her employer, Morayford Ltd, which was linked to her ex-husband. The Disponer later became terminally ill. In November 2006, shortly before her death, she transferred the pension funds into a personal pension plan (PPP) to prevent Morayford Limited and her ex-husband from benefitting from her pension. The Disponer nominated her two sons as potential beneficiaries. She did not take any lifetime pension before she died in December 2006. In mid-2007 the PPP administrator exercised its discretion and paid the death benefits to her sons.

46. Lady Black states in paragraph [11] of her decision in Parry (SC) : “As appears, the approach of s 10(1) is to stipulate conditions which, if satisfied, result in a disposition not being a transfer of value. By way of shorthand, it is perhaps convenient to speak in terms of whether the subsection applies (that is to say its conditions are satisfied, the disposition is therefore not a transfer of value, and no tax arises) or does not apply (conditions not satisfied and tax is payable).” We will adopt the same shorthand in this decision.

47. There were a number of issues to be determined in Parry but we are only concerned with the first one, namely whether section 10(1) applies to the transfer of the pension fund into the PPP.

48. The Supreme Court held, agreeing with the majority decision of the Court of Appeal ( [2018] EWCA Civ 2266 (Parry CA) ), that in transferring the funds into the PPP the Disponer did not intend to improve her sons’ position beyond what they would have received under her will and that she had not intended to achieve any IHT advantage by transferring the funds. The disposition was therefore not intended to confer any gratuitous benefit, so section 10(1) applied to prevent it from being a transfer of value on which IHT was payable.

49. In Parry CA Newey LJ set out the purpose of section 10(1) at paragraph [81] as follows: “As [HMRC] noted in [their] skeleton argument, s 10 IHTA embodies a ‘key inheritance tax rule’, ‘ensur[ing] that bad bargains and wholly commercial transactions are excluded from charge, even though they result in a loss to an individual’s estate’. In a similar vein, Drymond’s Capital Taxes states (at para7.101) that s 10(1) is ‘of fundamental importance’ as ‘the primary provision sorting out gift’s from purchases’.”

50. Lady Black states at paragraph [60] of Parry SC that: “In interpreting s 10, it is important to keep in mind that the question is not simply, ‘Was a gratuitous benefit conferred on any person?’ The search is for what the disponor intended, and in particular for whether the disponor intended to confer any gratuitous benefit on any person.”

51. Lady Black goes on in paragraph [60] to describe the classic bad bargain situation where section 10(1) will apply as follows: “For instance, in a bad commercial bargain where the purchaser quite unknowingly pays more than an item is worth, the purchaser intends to make the purchase and, as a matter of legal analysis, the transaction confers on the vendor the right to keep the overpayment, which is a gratuitous benefit, for which he has not given value.”

52. The disposition in Parry created new rights which, as a matter of legal analysis, conferred a benefit. Practically however, the recipients of the benefit received and were intended to receive no more than they would have had previously. On those facts Lady Black held that the disponer did not intend to confer a gratuitous benefit stating at paragraph [61]: “Like Newey LJ, I do not think it is appropriate to speak of a disposition having been intended to confer any gratuitous benefit if the recipient of the benefit was intended to receive no more than he would have had in any event. It is necessary, therefore, to ask whether the disponor was intending by the overall effect of the disposition, to put the recipient in a better position, or, to borrow from what Newey LJ said at para [88], putting things broadly, to ask whether the disposition was being used to improve someone’s position on a gratuitous basis. The exercise is not, however, simply a matter of asking the disponer whether or not he or she intended to confer benefit, … I go so far with HMRC as to accept that it is not possible to consider whether a disposition was intended to improve someone’s position without taking into account what rights the recipient had, in law, before and after the disposition. This legal context will permit a more rigorous evaluation of whether the requisite absence of intention has been shown.” Mr Wood’s Submissions

53. In summary Mr Marre and Ms Wagjiani made the following submissions on behalf of Mr Wood with respect to section 10(1): (1) The test as to whether Mr Wood intended to confer a gratuitous benefit in making the Payments is subjective. In order to determine the appeal the Tribunal must therefore decide if they believe Mr Wood when he says that he intended to receive something in return for the Payments meaning that they were not intended to confer a gratuitous benefit; (2) Mr Wood’s evidence demonstrates that in exchange for the Payments he was given an opportunity to shape the campaign because he was more likely to be listened to. Also that he intended to derive personal financial benefit from making the Payments because he believed that he would benefit personally from the UK leaving the EU; (3) The Payments were not therefore driven by gratuitous intent within the meaning of section 10(1). Mr Wood paid for campaigns to deliver his own political objectives which he could not achieve on his own. The Payments were not gifts but transactions for influence and impact; (4) It is not relevant that the Recipients found themselves in a better position, only whether that was Mr Wood’s intention. It is trite law that payments that confer a collateral benefit on the recipient or the population more generally do not result in relief being denied by section 10(1), provided they are made to unconnected parties on an arms-length basis; (5) For example section 10(1) applies to a bad bargain, even though the recipient is in a better position as a result of the payment. The same is true for example in the purchase of an ethically sourced t-shirt and subscriptions for union membership or arts organisations. HMRC’s Submissions

54. In summary Mr Stone KC and Ms Defriend made the following submissions on behalf of HMRC with respect to section 10(1): (1) Mr Wood has failed to discharge the burden of demonstrating that he did not intend to confer any gratuitous benefit on any person by making the Payments because the Payments were not in return for services and Mr Wood did not gain any real influence over the campaigns to which he donated; (2) The financial benefit from a successful Brexit that Mr Wood hoped to achieve with some of the Payments is not capable of being an intention for section 10(1) purposes because it is “wholly beyond the control” of Mr Wood’s will, being a result that is “dependant on so many other influences” (per Cunliffe v Goodman [1950] 2 KB 237 at 253 ( Cunliffe )); (3) Notwithstanding any other intentions that Mr Wood may have had, he plainly did intend to put the recipients in a better position with the Payments and therefore confer a gratuitous benefit on them. If a donor has mixed intentions, section 10(1) does not apply if any one of those intentions is to confer a gratuitous benefit; (4) Section 24 (which exempts donations to certain qualifying political parties from an IHT charge) would be otiose if, as asserted by Mr Wood, sharing the same values or objectives “to achieve a mutually beneficial outcome” is sufficient to prevent a donation from “conferring any gratuitous benefit” on the recipient so that section 10(1) applies. As Parliament does not do anything in vain, this supports the view that Mr Wood’s interpretation of section 10(1) was not intended by Parliament. Discussion and our view on section 10(1)

55. It is clear on the authority of Parry SC that the subjective intention of Mr Wood in making the Payments is relevant to determine whether section 10(1) applies to the Payments. However, we must first establish whether Mr Wood did in fact confer a gratuitous benefit on the Recipients. Objectively a gratuitous benefit?

56. In order to establish whether Mr Wood did in fact confer a gratuitous benefit on the Recipients, we start by considering the legal position of Mr Wood and the Recipients before and after the Payments were made.

57. None of the evidence before us suggested that the Payments gave Mr Wood any legally enforceable rights or the Recipients any legally enforceable obligations. Mr Wood did not have a right to receive any goods or services as a result of the Payments.

58. Before they received the Payments, the Recipients had no control of the funds. After they received the Payments, the Recipients had complete control of the funds. The Payments in this appeal are therefore very different from the disposition in Parry where the recipients received no real improvement in their position. Here the Recipients were placed in a significantly better position on receipt of the Payments.

59. We find therefore that Mr Wood did in fact objectively confer gratuitous benefits on the Recipients, both legally and practically by making the Payments. Subjectively did Mr Wood intend to confer a gratuitous benefit?

60. The mere fact that Mr Wood conferred gratuitous benefits on the Recipients with the Payments is not enough to take the Payments out of section 10(1), he must have also intended to confer that gratuitous benefit. We proceed therefore to consider whether Mr Wood subjectively intended to confer the gratuitous benefits on the Recipients.

61. We accept Mr Wood’s evidence that he intended to receive something in return for the Payments. We accept that Mr Wood intended to gain influence over the campaigns and to be listened to by the Recipients and that he thought that he would have more influence because of the Payments.

62. However, Mr Wood also acknowledged that he was not buying any particular services with the Payments, and it was not Mr Wood’s evidence that he considered that he was buying the right to shape the campaigns and be listened to by making the Payments. We understood that he expected that he would be listened to, and that this was in part because of the Payments, but we did not understand Mr Wood to be under any illusion that the Payments had bought him an enforceable right to be listened to.

63. Mr Wood stated in oral evidence that if he was unhappy with how a campaign was being run he would ask for his money back, but he did not suggest that he had a right to demand his money back if the Recipient was unwilling or unable to return the money in those circumstances and we did not understand him to be under a mistaken belief that he had the right to do so. Mr Wood also stated that if he were not happy with how a campaign was being run, he would not donate again, which is of course the most likely way in which he would demonstrate his displeasure and one that the Recipients would wish to avoid.

64. This is not therefore a case of a bad bargain where Mr Wood thought that he was buying services and rights that he wasn’t. Mr Wood knew that he was not securing any enforceable legal rights as a result of the Payments. Mr Wood also knew that he was putting the Recipients in a far better position by making the Payments than they were in beforehand and that was indeed his purpose in making the Payments. He wanted to contribute to their success, he wanted them to be able to meet their expenditure. Subjectively therefore, Mr Wood intended to confer what are objectively gratuitous benefits on the Recipients. Relevance of Mr Wood’s subjective view that he was receiving something in return for the Payments

65. We agree with HMRC’s submission, that Mr Wood’s stated intention in making the Payments to achieve a successful Brexit which would benefit him financially cannot amount to an intention in the context of section 10(1) because it is wholly beyond his control. As stated in Cunliffe at 253: “Nor, short of this, can X be said to intend a particular result if its occurrence, though it may be not wholly uninfluenced by X’s will, is dependent on so many other influences, accidents and cross-currents of circumstances that, not merely is it quite likely not be achieved at all, but if it is achieved, X’s volition will have been no more than a minor agency collaborating with, or not thwarted by, the factors which predominately determine its occurrence. If there is a sufficiently formidable succession of fences to be surmounted before the result at which X aims can be achieved, it may be unmeaning to say that X ‘intended’ that result.”

66. Counsel for Mr Wood submit that because Mr Wood considered that he was getting something in return for the Payments, it was not his subjective intention to confer a gratuitous benefit. The difficulty with this submission is that the question of whether or not a gratuitous benefit has been conferred is not subjective. Objectively a gratuitous benefit has been conferred, the subjective test is only in relation to whether it was Mr Wood’s intention to confer what is objectively a gratuitous benefit. We find that Mr Wood did intend to confer what is objectively a gratuitous benefit. Mr Wood cannot convert a gratuitous benefit into a contract for consideration simply because he subjectively considers that he did receive something in return for the Payments, whether that be an opportunity to input into the campaigns, the advancement of his political and financial goals or any other intangible benefit that he considered he received, notwithstanding that he had no legal right to receive anything. Collateral gratuitous benefit/mixed intentions

67. Counsel for Mr Wood submit that it is trite law that section 10(1) applies to a disposition that is at arm’s length to an unconnected party that confers a collateral benefit on the recipient or the wider population, and provides as examples a bad bargain, purchase of an ethically sourced t-shirt and subscriptions to a union or musical society.

68. We do not consider that these examples can be considered together. Section 10(1) applies to a bad bargain because the disponer did not intend to confer a gratuitous benefit on the recipient, not because the disponer had mixed intentions in making the disposition, only one of which was to confer a gratuitous benefit.

69. This is very different to the purchase of an ethically sourced t-shirt or a subscription to a union or musical society, where on Mr Marre’s analysis, the disponer has multiple intentions, one of which is to confer a gratuitous benefit on the recipient and the other is to receive a good or service in return. We did not find these examples helpful in our analysis. In our view, if section 10(1) applies to these examples, it is not because the donor had mixed intentions, only one of which was to confer a gratuitous benefit.

70. To find otherwise would, in our view, be to approach the requirements of section 10(1) the wrong way around. If the disponer has an intention to receive something in return for their disposition as well as the intention to confer a gratuitous benefit, the former does not extinguish the latter. On the contrary section 10(1) provides that where the disponer has the intention “to confer any gratuitous benefit on any person” (bold added), section 10(1) will not apply to the disposition. It follows that where there is an intention to confer a gratuitous benefit, section 10(1) will not apply to the disposition, irrespective of whether the disponer also had an intention to receive something in return for their disposition.

71. This is clearly the position based on the words of section 10(1) and is also supported by Lady Arden at paragraph [50] of her decision in Parry CA as follows: “The exemption is lost if there is more than one intention, provided that there is an intention to confer any gratuitous benefit.”

72. The Supreme Court did not uphold Lady Arden’s overall reasoning in Parry CA but they did not disagree with this aspect of her reasoning, which in our view must be correct based on the wording of section 10(1).

73. It follows that if a donor intends to both confer gratuitous benefits and receive something in return, as Mr Wood did by making the Payments, they will have still intended to confer a gratuitous benefit and therefore section 10(1) will not apply. It is only if the donor had no intention to confer “any” gratuitous benefit that section 10(1) will apply to the disposition.

74. Whatever else Mr Wood hoped or expected to receive as a result of making the Payments, we find that on the balance of probabilities he knew and intended that the Recipients’ financial positions would be improved by the Payments and he therefore knew and intended for the Payments to confer gratuitous benefits. Redundancy

75. HMRC further submit that the interpretation of section 10(1) put forward by Mr Wood’s counsel would render section 24 redundant because donors to political parties generally share the same political objectives as the political party to which they are donating. If section 10(1) applied to such a donation, simply because the donor considered that he was getting something in return for his donations, namely the advancement of his political objectives, then section 10(1) would apply to most donations to political parties, and there would be no need for section 24. It follows, in HMRC’s submission, that it is unlikely that Parliament intended section 10(1) to be interpreted in that way because Parliament does not generally do anything in vain.

76. We accept counsel for Mr Wood’s submission that it is entirely possible, both conceptually and as a matter of fact, for transactions to not be subject to IHT for a number of reasons, and that arguments from redundancy carry little weight (see Lewison LJ’s decision in DMWSHNZ Ltd v Revenue and Customs Commissioners [2015] EWCA Civ 1036 at paragraph [38]). However, this is only relevant if redundancy were the sole argument that HMRC were relying on for its interpretation of section 10(1).

77. In our view counsel for Mr Wood’s interpretation of section 10(1) is wrong because of the wording of section 10(1) and the reasoning of the decision in Parry SC , as explained fully above. We further consider that to find otherwise would make section 24 redundant, which provides further support for our interpretation.

78. We would also go further than HMRC because we consider that if section 10(1) was interpreted in the way contended for by Mr Wood, so that section 10(1) applies to any gift where the donor subjectively shares a mutual objective with the recipient and therefore considers that they are receiving something in return for the gift, it is hard to imagine what gifts made to unconnected parties at arm’s length that section 10(1) would not apply to.

79. While there may be some overlap in the application of an Act, it is unlikely that Parliament would enact Part II of IHTA, when the vast majority of it is redundant as a result of section 10(1).

80. For all the reasons set out above we find that section 10(1) does not apply to the Payments which are therefore transfers of value within the meaning of section 3. Section 21 Exemption – Normal Expenditure

81. The Parties agree that subsections 21(1)(b) and (c) are met. The issue for determination by the Tribunal with respect to section 21 is therefore confined to whether condition (a) is met because the Payments were made “as part of the normal expenditure of” Mr Wood. Case Law

82. There is no definition of ‘normal’ for the purpose of section 21. The High Court decision of Lightman J in Bennett and others v IRC [1995] STC 54 (“ Bennett ”) addresses the meaning of ‘normal expenditure’ for the purpose of section 21. Lightman J begins at 58(d) of his decision by quoting the Oxford English Dictionary definition of ‘normal” as: “Constituting, conforming to, not deviating or differing from, the common type or standard; regular, usual.”

83. Lightman J then goes on to find at 58g to 59e of his decision: “In my view, in the context of s 21 of the 1984 Act , the term 'normal expenditure' connotes expenditure which at the time it took place accorded with the settled pattern of expenditure adopted by the transferor. The existence of the settled pattern may be established in two ways. First, an examination of the expenditure by the transferor over a period of time may throw into relief a pattern, eg a payment each year of 10% of all income to charity or members of the individual's family or a payment of a fixed sum or a sum rising with inflation as a pension to a former employee. Second, the individual may be shown to have assumed a commitment, or adopted a firm resolution, regarding his future expenditure and thereafter complied with it. The commitment may be legal (eg a deed of covenant), religious (eg a vow to give all earnings beyond the sum needed for subsistence to those in need) or moral (e g to support aged parents or invalid relatives). The commitment or resolution need have none of these characteristics, but none the less be likewise effective as establishing a pattern, eg to pay the annual premiums on a life assurance qualifying policy gifted to a third party or to give a predetermined part of his income to his children. For an expenditure to be 'normal' there is no fixed minimum period during which the expenditure shall have occurred. All that is necessary is that on the totality of evidence the pattern of actual or intended regular payments shall have been established and that the item in question conforms with that pattern. If the prior commitment or resolution can be shown, a single payment implementing the commitment or resolution may be sufficient. On the other hand, if no such commitment or resolution can be shown, a series of payments may be required before the existence of the necessary pattern will emerge. The pattern need not be immutable; it must, however, be established that the pattern was intended to remain in place for more than a nominal period and indeed for a sufficient period (barring unforeseen circumstances) in order for any payment fairly to be regarded as a regular feature of the transferor's annual expenditure. Thus a 'death bed' resolution to make periodic payments 'for life' and a payment made in accordance with such a determination will not suffice. The amount of the expenditure need not be fixed in amount nor need the individual recipient be the same. As regards quantum, it is sufficient that a formula or standard has been adopted by application of which the payment (which may be of a fluctuating amount) can be quantified eg 10% of any earnings whatever they may be or the costs of a sick or elderly dependant's residence at a nursing home. As regards the payees, it is sufficient that their general character or the qualification for benefit is established, eg members of the family or needy friends. … What is necessary and sufficient is that the evidence should manifest the substantial conformity of each payment with an established pattern of expenditure by the individual concerned—a pattern established by proof of the existence of a prior commitment or resolution or by reference only to a sequence of payments.”

84. We were referred to two further cases that applied the principles established in Bennett .

85. In the Special Commissioners decision in Nadin v Inland Revenue Commissioners [1997] STC (SCD) 107 the deceased had made nine payments of varying amounts ranging from £1,000 to £13,000 on diverse days between 1988 and 1993 to three members of her family which met the criteria in section 21(1) (b) and (c). The Special Commissioners held that it was not relevant that she made gifts to three different relatives but went on to find at 111h: “Unfortunately, I am unable to discern any pattern established by the series of gifts which she made. Their very irregularity both in point of time and in amount point to a lack of pattern.”

86. In the Special Commissioners decision in McDowall and ors (exors of McDowall, dec’d) v IRC [2004] STC (SCD) 22 (“ McDowall ”) Mr McDowall (“WCM”) had become incapable of managing his financial affairs, which were taken over by his attorney, Mr McNeill. The actions that Mr McNeill took are summarised at 27b as follows: “Mr McNeill, as attorney, made a commitment regarding future expenditure, namely to distribute a substantial part of the excess of WCM’s income over the amount required for his maintenance (making due allowance for unforeseen circumstances) equally among WCM’s five children. Between about January 1997 and March 1997 a payment of £12,000 was made by Mr McNeill by a cheque drawn on the current account, to each of WCM’s five children.…..The payments of £12,000 to each of the five children in 1997 demonstrated that the commitment was being implemented.”

87. The Special Commissioners found at 28b that Mr McNeill: “gave a great deal of thought to the matter and formed the view that the gifts he made were made out of income and that he was reinstituting the pattern of making gifts which WCM had adopted before he granted the Power of Attorney… with reference to the five payments of £12,000 that he intended these to be the last large gifts; and that thereafter there would be small gifts at birthdays and Christmas….. In cross, he accepted that, in the past, the larger gifts made by WCM had been sporadic and for a particular purpose.”

88. On these facts the Special Commissioners concluded at 34b, based on the guidance given by Lightman J in Bennett , that : “In our view, the pattern of payment of small gifts at birthdays and Christmas is readily distinguishable from the larger payments of £12,000 and can provide no support for establishing a pattern of payment of larger sums; nor did we consider the deceased's habit of making gifts, including those disguised as loans, on sporadic occasions of need can help the appellants. However, we consider that the evidence is just sufficient to enable us to conclude that Mr McNeill, as attorney, made a commitment regarding future expenditure, namely to distribute a substantial part of the excess of WCM's income over the amount required for his maintenance (making due allowance for unforeseen circumstances) equally among WCM's five children. The payments of £12,000 to each of the five children in 1997 demonstrated that the commitment was being implemented, and we are satisfied from his evidence that, but for WCM's death, Mr McNeil would have continued to make similar, even if much smaller, payments.... The settled pattern referred to by Lightman J has been established by the prior commitment. There may not have been a clear formula, as Lightman J suggested, but in Bennett itself the arrangement was no more formally prescribed than to pay out the surplus of income over expenditure, as Mr McNeil intended here.”

89. We were also referred to the Court of Appeal decision of Welsh v Stokes [2007] EWCA Civ 796 ( Welsh ), which postdates Bennett, Nadin and McDowall. In Welsh , the Court of Appeal considered the meaning of “normally” in the context of section 2(2) (b) of the Animals Act 1971 to establish what is meant in that subsection by the words: “…characteristics of the animal which are not normally found in animals of the same species or are not normally so found except at particular times or in particular circumstances;” (italics added)

90. As with ‘normal’ for the purpose of section 21 , ‘normally’ is not defined for the purpose of section 2(2) (b) of the Animals Act 1971 and Dyson LJ begins at paragraph [44] of his decision by quoting the Shorter Oxford English Dictionary definition of ‘normal’ and then goes on to apply this to section 2(2) (b) as follows: “44 The Shorter Oxford English Dictionary provides a definition of “normal” as being “according to or squaring with a norm; constituting, conforming to, not deviating or differing from a type or standard; regular, usual 1828. A “norm” is defined as a “rule or authoritative standard”. “Abnormal” is defined as “deviating from the type; contrary to rule or system; unusual 1835”. Depending on the context, therefore, “normal” can mean “conforming to a type” or “usual”. The latter meaning connotes a greater degree of regularity or frequency of occurrence than the former. But even the former must connote some frequency of occurrence. If a characteristic is rarely found in animals of the same species, it may be difficult to say that the characteristic conforms to the type of animal in question. 45 In some contexts it is clear that the word “normally” means “usually”. If I say: “I normally travel to work on the No 18 bus”, I am saying that I usually travel to work on that bus. I may occasionally travel to work by different means, but that is an exception to my usual practice. In other contexts, however, the position is different. It is a proper use of language to say “horses will most often turn and flee when faced with a frightening stimulus, but it is also normal for them to rear in such circumstances”. It is normal for horses to rear when frightened in such circumstances, because it is natural for them to do so, although rearing may be a less usual response than turning and feeing. Another way of making the same point is to say that it is not abnormal (even if it is unusual) for horses to rear when frightened. 46 It seems to me that the core meaning of “normal” is “conforming to type”. If a characteristic of an animal is usual, then it will certainly be normal. The best evidence that a characteristic conforms to the type of animals of a species is that the characteristic is usually found in those animals. 47 I can find nothing in the context of sub section (2 )(b) to suggest that Parliament did not intend “normally” to bear this core meaning. It is difficult to see why Parliament should have intended to exclude from the ambit of sub section (2 )(b) cases where the relevant characteristic is natural, although unusual, in the animal which has caused the damage.” Mr Wood’s Submissions

91. In summary Mr Marre and Ms Wagjiani made the following submissions on behalf of Mr Wood with respect to section 21 : (1) The High Court decision in Bennett and others v Inland Revenue Commissioners [1995] STC 54 ( Bennett ) predates the Court of Appeal decision in Welsh so Bennett should be read with the gloss of Welsh . It follows that if the Payments ‘conformed to type’ they formed part of Mr Wood’s normal expenditure. (2) This is also supported by the Court of Appeal in Northern Ireland decision in the case of A-G for Northern Ireland v Heron [1959] TR 1, 38 ATC 3 (cited with approval in Bennett ) which held that: “… in the phrase “normal expenditure” the adjective, without further qualification, appears certainly to refer to the type, and not the amount of the expenditure.” It is therefore irrelevant for the purpose of applying the statutory test in section 21 , that the Payments were of differing amounts, because they were of a normal type for Mr Wood to make. (3) The guidance provided by Bennett does not impose a requirement of fixed amounts or timing or a minimum period, instead it supports a qualitative, type-focused enquiry such that a payment is part of normal expenditure if it fits into a settled pattern of expenditure that can be identified on the evidence. (4) On the evidence the Payments all conformed to the same recognisable type, because: (a) They were all payments to political campaigning organisations which pursued the same objectives of British sovereignty and greater independence from the EU; (b) All the Recipients except the Brexit Party were connected to the same core group of people and the Brexit Party pursued the same ideological objectives as the other Recipients. (5) The Payments also form part of a longer pattern of payments made by Mr Wood to centre-right causes including the Conservative Party, Open Europe and Business for Sterling. (6) The Payments were made in substantial conformity with a pattern of payments to political organisations, with a unity of purpose and individuals behind those campaigns. The Payments varied in amount but that was inherent in the type of expenditure which was dependant on the needs of the organisation in question. It follows that the Payments were made as part of Mr Wood’s normal expenditure. HMRC’s Submissions

92. In summary Mr Stone KC and Ms Defriend made the following submissions on behalf of HMRC with respect to section 21 : (1) The Court of Appeal in Welsh were considering the meaning of the word ‘normally’ in the context of section 2(2) (b) of the Animals Act 1971 to establish what is meant by characteristics of an animal which are not normally found in animals of the same species. Dyson LJ’s reasoning in that case is very specific to that legislation with no suggestion that he intended it to have read across to IHTA. The most authoritative guidance on what amounts to “normal expenditure of the transferor” in section 21 therefore remains Bennett. The proper test is therefore whether the Payments form part of ‘a settled pattern’ not whether they ‘conform to type’. (2) Mr Wood has failed to produce any evidence to demonstrate that he entered into any commitment or adopted any firm resolution as regards his future expenditure. (3) Mr Wood has failed to demonstrate that the Payments formed part of a settled pattern established over time. On the contrary the evidence demonstrates that Mr Wood simply made contributions to causes as and when he wished to do so, on a purely discretionary and sporadic basis. (4) The Payments varied significantly from year-to-year in terms of: (a) their quantum, ranging from £2,500 to £500,000, with no evidence that Mr Wood adopted or applied any formula or standard in determining the amount of each Payment; (b) the nature of the Recipients, ranging from campaigning organisations, political parties, to a website and in the case of No Campaign Ltd was not even concerned with the UK’s relationship with the EU; and (c) their frequency, demonstrating that the Payments were sporadic with no regularity which could demonstrate a settled pattern. (5) Gifts made only when asked or when a campaign requires funds are sporadic responses to external events, not a settled pattern of the donor. The First-tier Tribunal found in McDowall, that gifts made on occasions of need do not constitute a settled pattern. Every donation was ad-hoc and discretionary, requiring Mr Wood to decide afresh on each request, whether and how much to give. Discussion and our view on section 21

93. In the case of Welsh , the Court of Appeal determined the meaning of ‘normally’ in the context of section 2(2) (b) of the Animals Act 1971 . Dyson LJ first considered the definition of ‘normal’ in the Shorter Oxford English Dictionary stating: “[44] ….. Depending on the context, therefore, “normal” can mean “conforming to a type” or “usual”. The latter meaning connotes a greater degree of regularity or frequency of occurrence than the former.”

94. Dyson LJ then went on to consider how that meaning should be applied in the context of section 2(2) (b) of the Animals Act 1971 finding that: [46] It seems to me that the core meaning of “normal” is “conforming to type”. … [47] I can find nothing in the context of sub section (2 )(b) to suggest Parliament did not intend “normally” to bear this core meaning. It is difficult to see why Parliament should have intended to exclude from the ambit of section (2 )(b) cases where the relevant characteristic is natural, although unusual, in the animal which has caused the damage.”

95. It is clear from the decision in Welsh that Dyson LJ was very much confining his determination of the meaning of normal to the context of the specific legislation that he was concerned with. He acknowledges in his decision that ‘normal’ can have different meanings in different contexts and he did not consider the context of section 21 or Parliament’s intention of the meaning of ‘normal’ in the context of section 21 . It follows that there is no read across of the meaning of ‘normally’ in the context of section 2(2) (b) of the Animals Act 1971 as determined by Dyson LJ in Welsh to the meaning of ‘normal’ in the context of section 21 .

96. The High Court decision in Bennett therefore remains the leading authority on the meaning of ‘normal expenditure’ in the context of section 21 and how to determine whether particular expenditure forms part of ‘normal expenditure’ for the purpose of section 21 .

97. We therefore apply the following points of principle from Bennett to determine whether the Payments were made as part of Mr Wood’s ‘normal expenditure’ for the purpose of section 21 . (1) The Gifts must have accorded with “a settled pattern of expenditure” adopted by Mr Wood; (2) A settled pattern may be established in two ways: (a) By examining Mr Wood’s expenditure over a period of time; or (b) Mr Wood must have assumed a commitment or adopted a firm resolution regarding his future expenditure and thereafter complied with it; (3) There is no fixed minimum period required for the Payments to be “normal”, provided that “on the totality of evidence” the pattern of expenditure is established and the Payments conform with that pattern; (4) The pattern must have been, “intended to remain in place for more than a nominal period and indeed for a sufficient period (barring unforeseen circumstances) in order for the payment fairly to be regarded as a regular feature of the transferor’s annual expenditure” ( Bennett 59(a)); (5) It is not necessary that the amount of the Payments be fixed, it is, “sufficient that a formula or standard has been adopted by application of which the payment (which may be of a fluctuating amount) can be quantified”( Bennett 59(b)); (6) It is not necessary that the recipient of the Payments is the same. It is, “sufficient that their general character or the qualification for benefit is established eg members of the family or needy friends” ( Bennett 59(c)).

98. In his evidence Mr Wood expressly and repeatedly denied having made any firm commitment or resolution to make donations. He did state in oral evidence that there was an “implicit understanding” between himself and a small circle of political campaigners that he would provide funding for particular campaigns but he clarified that he was not bound to make any future payments and confirmed that the Payments were responses to circumstances rather than as a result of any prior commitment. Expenditure over a period of time

99. It is necessary therefore to examine Mr Wood’s expenditure over a period of time to establish whether there is a settled pattern for the purpose of section 21 .

100. Counsel for Mr Wood put the Payments in the context of three types of recipient that we should consider. Grouping 1 - The Payments as part of donations to centre-right political causes

101. Counsel for Mr Wood submitted that the Payments, together with donations that Mr Wood made to the Conservative Party formed part of a longer pattern of donations made to centre-right political causes beginning in 2010 and continuing until 2019.

102. We have difficulty with this grouping because there was no evidence put before us to demonstrate that any of the Recipients can be objectively described as campaigning for centre-right causes. Grouping 2 - The Payments as part of donations to “organisations led by and with links to the same, small group of people” / to “organisations led by Lord Elliott”

103. The Recipients were all, except the Brexit Party, organisations led by or with links to the same, small group of people, namely teams led by Lord Elliott. The difficulty with this grouping is that it does not include the donations to the Brexit Party, so it cannot incorporate all of the Payments. Grouping 3 - The Payments as donations to “organisations campaigning for political reform and in particular organisations campaigning for a particular type of democratic approach characterised by the historic British style of voting and loosen or sever ties to the European Union and promote British sovereignty.”

104. The length of the description of this grouping betrays the variety in the Recipients. Far from campaigning for political reform, the NO Campaign Ltd was campaigning for the status quo. Also we were not presented with any evidence to objectively support an ideological link between the first past the post voting system and British sovereignty or looser ties with the EU. This grouping does not therefore incorporate the donations to the No Campaign Limited.

105. For the reasons set out above, we do not consider that any of the proposed groupings incorporate all of the Payments. At best they are payments to organisations set up and run by Lord Elliott (grouping 2), in which case they do not include the Brexit Party donations, or they are payments to organisations campaigning for political reform/greater independence from the EU (grouping 3), in which case they do not include the No Campaign Limited.

106. In the case of grouping 2 the donations covered a period from 2011 to 2019 and in the case of grouping 3 they covered a period from 2016 to 2019. In either case this is not a nominal period and could be a sufficient period to demonstrate a settled pattern. Formula or Standard

107. The donations do not need to be of a fixed amount, but where they are not of a fixed amount it must be shown that a: “formula or standard has been adopted by application of which the payment (which may be of a fluctuating amount) can be quantified” ( Bennett 59b)

108. In oral evidence Mr Wood stated that “there is no exact science”, “it depends on the need at the time”, “I can’t decide when the campaigns happen…. I can only give when the need arises” and “I was only asked at certain times, and that is when I gave”. It follows that, whichever grouping we are considering, Mr Wood did not adopt a formula or standard to determine how much he donated on each occasion or the totality of donations in a year.

109. Lightman J states in Bennett : “All that is necessary is that on the totality of evidence the pattern of actual or intended regular payments shall have been established and that the item in question conforms with that pattern.”( Bennett 58j)

110. However, a pattern requires a level of predictability or recurrence which is entirely lacking in Mr Wood’s Payments and Mr Wood did not provide any basis on which a pattern could be discerned from his donations.

111. There is also no regularity to the Payments. The amount of each Payment varied from £2,500 to £250,000 and there were varying gaps between the Payments from almost 5 years to 6 days.

112. The Special Commissioners held in McDowall that applying the guidance of Bennett did not require a clear formula, accepting as Lightman J had done in Bennett that a commitment to “pay the surplus income over expenditure” was sufficient to establish a settled pattern. However, Mr Wood did not make a commitment and did not come close to spending his surplus income on donations in any given year, nor did he suggest any other ‘formula or standard’ that he used to determine how much he would donate in a year and to whom.

113. Instead, Mr Wood’s donations are akin to the series of gifts in Nadin whose, “.. very irregularity both in point of time and in amount point to a lack of pattern.” ( Nadin 111h)

114. Examining the donations made by Mr Wood to organisations within any of the proposed groupings does not “throw into relief a pattern” ( Bennett 58g) but simply demonstrates that he made significant donations over many years to certain political organisations, as and when there was a need, he chose to and his cash resources allowed. There is a lack of any predictability in Mr Wood’s donations, even in hindsight and they do not therefore constitute a pattern.

115. Counsel for Mr Wood submitted that this is the nature of the type of donations to political campaigning organisations, that have a sporadic need for money depending on the political environment. We do not doubt that is true, but it does mean that the Payments are therefore, by their nature, not part of Mr Wood’s normal expenditure. They are donations made in response to particular political situation, such as a referendum, which is itself, not normal.

116. For all the reasons above we find that on the totality of the evidence, no discernible pattern of actual payments has been established with which the Payments conform. It follows that the Payments were not part of Mr Wood’s ‘normal expenditure’ within the meaning of section 21 . Conclusions

117. We find that section 10(1) does not apply to the Payments and they are therefore transfers of value within the meaning of section 3.

118. We further find that the Payments did not form part of Mr Wood’s normal expenditure and were therefore not exempt pursuant to section 21 .

119. For all the reasons above we dismiss the appeal. Right to apply for permission to appeal

120. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Release date: 26 March 2026