The Conservatives have asked HMRC to investigate whether Nigel Farage should have paid tax on the £5 million gift he received from crypto billionaire Christopher Harborne.
The party leader, Kevin Hollinrake, wrote to the tax authorities asking whether it was a payment to compensate him for his candidacy as an MP.
Farage said the gift was purely personal and unconditional and that a document had been drawn up showing it was given without expectation of anything in return.
He has also previously said the payment was intended to cover his personal security costs and as a reward for his commitment to Brexit. He said it was no one's business what he did with the money and he could “spend it on Ferraris” if he wanted.
However, the Guardian reported this month that three sources said Farage had informed senior Reform UK officials that he would seek compensation of £1 million a year to make up for his loss of earnings if he ran for office.
A Reform spokesman said at the time that the Guardian report was “fake and completely false”. Harborne's lawyers referred to his previous statements about the gift, saying he “did not expect anything in return” and “had no thought that Mr Farage would return to politics”.
In light of this reporting, Hollinrake has written to HMRC asking them to investigate.
Tory Party leader Kevin Hollinrake. Photo: Christopher Thomond/The Guardian
“If these reports are accurate, they raise legitimate questions about whether the payment was truly a personal gift or whether it was linked to Mr Farage resuming leadership of Reform UK and standing for election to Parliament,” he wrote.
“If the payment were linked to discussions about Mr Farage's return as leader of Reform UK and his candidacy for Parliament with the intention of becoming a Member of Parliament, there would appear to be a serious question as to whether it should properly be classified as income rather than a gift.”
“I believe it is imperative that HMRC consider whether the payment falls within the ‘hidden remuneration’ regime or otherwise constitutes taxable income from an office, employment or political position.”
“If the payment was intended as a reward, incentive or compensation in connection with Mr Farage's role at Reform UK, the tax treatment may differ significantly from that applicable to a genuine personal gift and from the tax status of a normal political donation (not that it was declared as such).”
Following the Guardian's reporting, tax expert Dan Neidle has already raised the question of whether tax should have been incurred on the £5 million.
Reform UK has been contacted for comment.
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Farage is facing a standard investigation into Harborne's gift and other undeclared funds from fraudster George Cottrell.
He told the Triggernometry podcast at the weekend that the £5 million was “completely undeclarable in every way”.
He acknowledged that the parliamentary standards system could act against him, but claimed he had sought advice from a leading international lawyer who told him that the £5 million did not need to be declared because it was unconditional and he had a document showing it had been given voluntarily.
The rules state that gifts and contributions in kind must be reported 12 months before an MP enters parliament, but only if they are political in nature.
Farage is fighting in a by-election against more than 30 candidates in Clacton, but none of them are from the major parties, which have decided to boycott the contest.
He could potentially face a second by-election if the commissioner makes a ruling against him and the standards committee recommends a significant sanction, including suspension from the House of Commons, potentially triggering a recall petition.
The major parties have said they would run against him in a second election campaign if it came to that.
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