Reform could be hit with £3m tax bill because of Farage’s £5m donation, tax expert claims

Reform UK could be hit with a £3m tax bill as a result of Nigel Farage's undeclared £5m donation, a tax expert has claimed.

It comes after reports that the Reform leader told senior party figures he would need “a million a year” to cover lost earnings if he stood for parliament in the 2024 general election, raising further questions about why he was given the money.

Dan Neidle said that, if the reporting is correct, Reform could be liable for a tax bill of up to £3bn, adding that he “would now be surprised if HMRC do not open an enquiry”.

However, the party has denied the report in the Guardian, saying it is “fake and wholly incorrect”.

The Reform UK leader received the sum from crypto billionaire Christopher Harborne in 2024, before announcing his decision to stand in the general election. Mr Farage is now being investigated by the Commons standards watchdog because he failed to declare it after he became an MP.

Mr Farage has given different explanations for the £5m sum, including non-political purposes, to pay for his safety and security and later a “reward for campaigning for Brexit for 27 years”.

Parliamentary rules say any potentially “relevant interests” should be declared from the 12 months before becoming an MP.

In a series of fresh revelations about the cash, the Guardian reported on Wednesday that Mr Farage had discussions with senior figures in March 2024 – shortly before Mr Harborne gave him the money – where he said he would need "a million a year” to cover lost earnings if he stood for parliament in the general election.

At the time, Mr Farage is said to have been under the impression he would be required to give up his role as a presenter on GB News.

Posting to social media in the wake of the reports, Mr Neidle said: "The significant new element is discussions between Farage and senior Reform figures about compensating Mr Farage for returning as leader.

"Because Mr Farage was already a director of the Reform company, it looks like an arrangement to provide a reward connected with an office.

“If that's true and if Christopher Harborne paid the £5m as part of this arrangement, then HMRC would have a strong argument that the ‘disguised remuneration’ rules apply.

"The rules are fearsomely complicated, but were created to ensure that if someone receives a reward of some kind (not from their employer, but from a third party), then it's still taxed.”

He pointed out that any arrangement "can be informal and doesn't have to be legally binding”, adding: "If the rules applied, then Reform 2025 Ltd (the company that operated the Reform Party at the time) would be liable for PAYE on the £5m. So about £3m. Mr Farage would then have to compensate the company.”

"I would now be surprised if HMRC do not open an enquiry. But unless Mr Farage tells us about it, we will never know if there's an enquiry or what the outcome is”, the tax expert said. But he emphasised that everything in his analysis was predicated on the Guardian article being correct, which was as yet unconfirmed.

If the party did incur a tax liability, that would not usually demonstrate any wrongdoing on behalf of Reform, Farage or any other party involved.

Mr Farage has been facing mounting scrutiny in recent weeks over his finances, with the party leader earlier this month resigning as an MP in order to call a by-election in his constituency.

The Reform leader said he wants a “people versus the establishment” fight in the Essex seat after coming under scrutiny about undeclared gifts and financial support before he was first elected.

His decision to trigger a by-election before the completion of a parliamentary probe into his undeclared donations means the investigation is now paused and will resume if he is re-elected.

A Reform UK spokesperson told The Independent: “The Guardian reporting is fake and wholly incorrect.”

HMRC has been contacted for comment.