Key findings

Scale and concentration of political donations

Between 2001 and 2024, individual donors accounted for the largest share of reportable donations at £700 million, followed by corporate donors at £293 million and trade unions at £247 million. Donations are highly concentrated: the top 1% of individuals donated just over half of all individual donations, while the top 1% of corporate donors accounted for 45% of all corporate donations.

This level of concentration is similar to the level in 2001, shortly after the current regulatory framework was introduced. But that similarity belies substantial change: concentration fell from 2001 until 2015, but a rise over the last decade has reversed this trend.

Transparency

The individuals behind corporate donations are not reported to the Electoral Commission. The only route to transparency is cross-referencing Electoral Commission data with Companies House records, a process that presents practical obstacles even for specialist researchers. The results of doing so are troubling.

• We find that around a quarter of donor companies fail to meet the principle of transparency (opaque corporate donors) as they either do not report any person with significant control (PSC) at all, or their PSC is someone other than the beneficial owner of the company (i.e. a trustee).
• These opaque corporate donors account for a quarter of all corporate donations by value, as their donations are similar in size to those from donor companies that report their ultimate beneficial owners.
• Companies that make corporate donations are significantly less transparent than the typical UK company, suggesting that the PSC register is particularly unfit to bring transparency to political donations.

Foreign interference

Almost one in every ten pounds donated by companies comes indirectly from individuals who could not donate directly, as far as we can infer from their reported characteristics.[1] Their donations are on average almost twice as large as those from companies owned by individuals who could donate directly. These figures are likely to be conservative, since the true extent of foreign interference is obscured by the large proportion of opaque corporate donors.

Tax-advantaged giving through companies

The tax system provides an implicit subsidy for individuals who donate through their companies. A company owner who donates via their company instead of out of their personal income effectively saves Income Tax on their donation. For an additional rate taxpayer who would alternatively have to pay themselves in dividends, a corporate donation provides an implicit subsidy of 39%.

A similar tax differential applies for funding donations with after-tax employment income, as most individuals would have to do. The implicit tax subsidy for company owners donating through their companies is around 38.8%. Although donations to political parties are not eligible for Gift Aid relief (which is available for other charitable donations), company owners can effectively engineer the same tax saving by donating via their company.

Through a comparison of donors at different ages – who additionally face different incentives because of Inheritance Tax – we find evidence that company owners are indeed sensitive to tax treatment in their choice of how to donate.

Treating corporate political donations as deemed distributions would eliminate this advantage and would raise (on a static basis) nearly £6 million annually in tax.[2] Although negligible as a share of the government’s revenue, this is meaningful in this regulatory environment as it would be roughly equivalent to a 15% increase in the Electoral Commission’s annual budget.c

Problems with the Bill

The Bill correctly identifies the risks posed by corporate donations, but the proposed reforms are insufficient to tackle them. We identify three main problems with these reforms.

First, the Bill continues to rely heavily on the People with Significant Control register (PSC register) to uphold the principle of transparency in political donations, despite the PSC register being fundamentally inadequate for this purpose. The PSC register provides no transparency at all for unincorporated entities (e.g. unincorporated associations). Even for companies, our empirical analysis shows that the PSC register fails to bring transparency for around a quarter of all corporate donations by value. More fundamentally, the PSC register is designed to disclose individuals who control the company, but this may not be the same as those who control donations by the company, specifically.

Second, the ‘significant control test’ introduced by the Bill is vulnerable to circumvention because it effectively defers to the PSC register. An individual donor could exert control over a corporate donation that they have funded – for example by imposing conditions on their payment to the company – without triggering any of the PSC criteria. Additionally, enforcement of the PSC register is very challenging when no individual owns more than 25% of shares (or voting rights). This is likely to lead to significant non-compliance from ultimate donors who are trying to conceal their identity, especially when the Bill effectively exempts companies from the ‘significant control’ test if the company has no registrable PSC.

Third, the ‘available revenue’ limit is both easy to manipulate and hard to enforce. A turnover-based cap can be easily inflated through artificial transactions (for example, including a UK company to act as an intermediary between two related companies in a supply chain). Enforcement to ensure the turnover only represents genuine economic activity would require the Electoral Commission to apply transfer-pricing-style scrutiny, for which it lacks resources and expertise.

Recommendations

We strongly recommend that corporate political donations should be banned altogether. After careful consideration of all the options, we conclude that even the best-designed regulations of corporate donations will remain vulnerable to abuse by foreign actors and lack the transparency required to provide the public with confidence in the integrity of our political system. There is extensive international precedent for an outright ban, including from France and Canada. The Bill already recognises that companies do not have an independent right to donate beyond that of their individual owners.[3] Therefore, it is unclear what would be lost with introducing a ban on corporate donations. Those individuals could still donate directly.

However, if an outright ban lacks political support, we recommend six reforms.

1. Establish a donor registration system. All but the smallest donors (both individuals and entities) should register with the Electoral Commission and receive a unique identifier before donating. This moves compliance from individual parties to the regulator and resolves data quality problems that currently undermine aggregation and scrutiny. Even if corporate donations are banned altogether, a donor registration system should be implemented for individuals.
2. Remove reliance on the PSC register and instead require reporting directly to the Electoral Commission. Reliance on linking corporate donors to the PSC register to uphold the transparency of corporate donations has fundamental problems: it provides zero transparency for unincorporated entities, poses a major practical obstacle for public scrutiny, and it provides loopholes that are easily exploitable.

Given the heightened sensitivity and risk of abuse of political donations, a different test of ultimate control should be introduced. All non-individual donors (not only companies) should be required to disclose the individuals who exercise control over the entity at the point of registration, and this test should always require at least one named individual to be reported. We recommend a 5% minimum shareholding threshold, plus the identification of whoever authorised the donation.

• Close the foreign interference loophole. Entities should only qualify as permissible donors if controlled by individuals who would be eligible to donate directly, as evidenced by registration in an electoral register. For companies with multiple shareholders, we suggest that at least 75% of shares should be held by individuals on an electoral register.
• Introduce a requirement for donors to confirm the source of donation, with significant penalties for false statements. Without this requirement, a foreign individual could channel political donations through companies that meet the requirements to be registered as ‘permissible donors’. There is already a provision in PPERA (section 54A) requiring declaration of the source of donations, with a criminal offence of making a false declaration, that is ready to be used. This provision, enacted in 2009, has not come into force as the statutory instrument to give it effect has not been introduced.
• Equalise treatment of all non-individual donations. Unincorporated associations and other entities should face the same registration, disclosure and permissibility requirements as corporate donors, to prevent regulatory arbitrage and the displacement of risks from corporate donors to other structures.
• Remove the tax subsidy for corporate donations. Political donations made by companies should be treated as deemed distributions, taxable as dividend income in the hands of controlling shareholders. This would eliminate the unjustified tax advantage of donating through a company rather than directly.

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[1] Among corporate donations where we can identify their ultimate beneficial owners.

[2] Taking average of corporate donations over 2020-2024 and assuming shareholders of donor companies are additional rate taxpayers.

³ The Bill determines the companies’ right to donate based on the right to donate of their PSC, although with a very important exemption (see Section 4.2.2). The PSC are individuals who meet either an ownership test (e.g. hold more than 25% of the shares) or a control test (e.g. right to appoint majority of directors). Typically, company owners will meet both tests, but this may not be the case in some circumstances. In this note we refer to ‘owners’ for simplicity, but we are usually referring to PSCs, which in some special cases will also capture persons with control but not ownership of the companies.