The Conservatives have asked HMRC to investigate whether Nigel Farage should have paid tax on the £5m gift he received from the crypto billionaire Christopher Harborne.
The party chair, Kevin Hollinrake, wrote to the tax authorities questioning whether it was a payment to compensate him for running to be an MP.
Farage has said the gift was purely personal and unconditional, with a document drawn up to say it was given with no expectation in return.
He has also previously said the payment was to go towards his personal security costs, and a reward for campaigning for Brexit. He said it was no one’s business what he did with the money and that he could “spend it on Ferraris” if he wanted.
The Guardian, however, reported this month that three sources had said Farage informed senior Reform UK figures that he would require compensation of £1m per year to offset his loss of earnings if he were to run for office.
A Reform spokesperson said at the time that the Guardian’s report was “fake and wholly incorrect”. Lawyers for Harborne referred back to his previous statements about the gift, saying he “expected nothing in return” and “did not envisage Mr Farage returning to politics”.
In light of that reporting, Hollinrake has written to HMRC asking it to investigate.
“If those reports are accurate, they raise legitimate questions as to whether the payment was truly a personal gift, or whether it was connected to Mr Farage resuming the leadership of Reform UK and standing for election to parliament,” he wrote.
“If the payment was connected to discussions about Mr Farage returning as leader of Reform UK, and standing for parliament with a view to becoming a member of parliament, there would appear to be a serious question as to whether it should properly be characterised as income rather than a gift.
“I believe it is imperative that HMRC examines whether the payment falls within the ‘disguised remuneration’ regime or otherwise constitutes taxable earnings arising from an office, employment or political position.
“If the payment was intended as a reward, inducement or compensation connected with Mr Farage’s roles within Reform UK, the tax treatment may be materially different from that applicable to a genuine personal gift and different to the tax status of a normal political donation (not that it was declared as such).”
The tax expert Dan Neidle has already raised questions around whether the £5m should have incurred tax after the Guardian’s reporting.
Reform UK has been approached for comment.
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Farage faces a standards inquiry over Harborne’s gift and other undeclared funding from the fraudster George Cottrell.
He told the Triggernometry podcast over the weekend that the £5m was “totally undeclarable in every single way”.
He acknowledged that the parliamentary standards system could find against him, but claimed he had sought advice from a top international lawyer who told him the £5m did not need to be declared because it was unconditional and he had a document saying it had been given freely.
The rules state that gifts and benefits in kind have to be declared for the 12 months before an MP enters parliament, but only if they are political.
Farage is fighting a byelection against more than 30 candidates in Clacton, but none of them are from the main parties, which decided to boycott the contest.
He could potentially face a second byelection if the commissioner finds against him and the standards committee recommends a substantial sanction including suspension from the Commons, triggering a possible recall petition.
The major parties have said they would stand against him in a second contest were it to occur.
