A loophole that allowed people to avoid a cap on foreign political donations by returning to the UK is being closed, the Government has confirmed.
The new rules will impose a £100,000 donations limit on donors coming to the UK from overseas, for a year after they arrive – potentially hitting two of Reform UK’s biggest funders.
Cryptocurrency tycoons Christopher Harborne and Ben Delo could be hit by the limit after reportedly returning to live in Britain, having previously donated millions to Nigel Farage’s party.
A £3m donation from Harborne was the largest single donation Nigel Farage’s party received between January and March this year. He has reportedly now registered to vote in the UK.
Delo, another cryptocurrency magnate based in Hong Kong, donated £4m to Reform in two £2m lump sums in January and March. He has written in The Telegraph that he will move back to Britain so he can contribute more to Reform.
Since March, overseas electors – Britons registered to vote abroad – have faced an annual cap of £100,000 on political donations. But those who returned to the UK could drop their overseas elector status and donate above that threshold immediately, while Britons who had never registered to vote abroad but came back were not subject to the cap at all.
The announcement comes as Farage faces growing questions over his own declared interests, including a £5m gift from Harborne, a Thailand-based cryptocurrency investor.
The issue remains under investigation by the Parliamentary Standards Commissioner and could potentially see Farage face a by-election for his Clacton seat if he is found to have broken the rules.
Harborne, Reform’s biggest financial backer, has given the party and its predecessor, the Brexit Party, more than £22m since 2015.
While both Labour and the Conservatives have both previously received sums over the £100,000 cap from overseas donors, the move is seen as particularly damaging to Reform. When the proposals were first outlined in March, Reform UK’s home affairs spokesman Zia Yusuf accused Labour of “choking off legal funding for its main rival”.
The cap was recommended by the Rycroft Review, an independent review of political finance led by Philip Rycroft. It found that overseas donations are harder to trace than domestic ones, complicating Electoral Commission investigations.
It also warned that wealthy individuals who moved abroad, for reasons that could include reducing their UK tax contributions, could otherwise donate unlimited sums to British politics.
The measure has not yet come into force. It will be introduced as an amendment to the Representation of the People Bill, which returns to the Commons for report stage next week.
Under further changes proposed by the Government, companies will face stricter tests before donating to political parties, with donations assessed against post-tax profits over the previous five years, rather than against revenue.
At present, a company can declare high revenue and donate without proving how it generates that money or whether it pays UK tax.
Communities Secretary Steve Reed said the reforms would “shut down dodgy funding, stop foreign money influencing our elections and keep our democracy strong”.
He added: “By holding overseas donors to tougher standards and requiring candidates to prove where their funding comes from, we are taking world-leading action to protect the integrity of our elections.”
For the first time, candidates will also have to prove that campaign funding received before they formally stood for election came from legitimate sources, and declare any such donations above £2,230.
Money received before the regulated election period currently falls outside disclosure rules, meaning funding from illegitimate sources could go undeclared.
The changes build on measures announced in March, including a ban on cryptocurrency donations, and mean the Government has now accepted all of Rycroft’s recommendations in full.
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