What the Proposed Residency Test for Large Donors Would Change
The government plans to tighten residency rules for people who give large sums to political parties. Ministers said the change would sit alongside a proposed £100,000 annual cap on donations from British voters living overseas BBC.
The rules have not yet changed. The proposal relates to a live dispute over whether donations can lawfully be accepted. Reform UK has received two donations totalling £72m from British crypto-billionaires Ben Delo and Christopher Harborne, both of whom had recently lived abroad.
Reform leader Nigel Farage said the donations are "100% compliant with the law today." Former Conservative leadership contender Robert Jenrick said the £72m gifts are "entirely in line with the law." Mr Delo and Mr Harborne have reportedly already returned to the UK Independent.
The cap and the residency test
Under current rules, donations from foreign donors are illegal. British citizens on the overseas electors register, the list of British voters living abroad who can still vote, can still give unlimited amounts to UK parties. Ministers said they want to end that position.
The plan is for an annual £100,000 cap on donations and regulated transactions, such as loans, from overseas electors. The cap would be backdated to 25 March. The March announcement paired the cap with a proposed ban on crypto donations GOV.UK.
The residency element would add a further condition. Ministers want a minimum period of at least 12 months during which the £100,000 cap would continue to apply to a donor who moves back to the UK. Communities Minister Baroness Taylor of Stevenage said the government is considering strengthening residency requirements, including "ensuring length of time spent in the UK aligns with broader government policy."
Lady Taylor said donors giving above the £100,000 annual cap must demonstrate a "genuine and ongoing connection to the UK." The precise legal test for that connection has not been published. Permissibility, whether a donation can lawfully be accepted, is decided on donor status at the point of acceptance. A shift from registration alone to a test based on residence and connection would require new checks by parties.
The parliamentary vehicle
MPs have approved amendments to the Representation of the People Bill which back the government's donation proposals. The Bill, the law which sets how elections are run, is now being scrutinised in the House of Lords.
Ministers are seeking a further amendment in the Lords that could test the legality of the £72m Reform donations Guardian. The government has not presented the change as retrospective prosecution. Ministers said the mechanism is backdating of the cap to 25 March, with donations from impermissible donors received on or after commencement, the date the new law starts, to be returned within 30 days of receipt.
Commencement and return will need close attention. The Electoral Commission is the independent body which oversees elections. Residence is less straightforward to verify than registration, particularly for high net worth donors with multiple addresses, recent moves and complex tax positions. Peers are expected to examine enforceability.
The wider finance package
The donations row sits inside a broader package on political finance. The government's July statement, titled 'Tough new rules to crackdown on foreign money in UK elections', includes tougher checks on company donations GOV.UK. Ministers have also proposed a ban on crypto donations to protect democracy.
The existing reporting system would remain. Parties are required to report donations over £11,180, and accounting units, the local branches, over £2,230. Donations of £500 or less sit outside electoral law and do not need to be recorded or reported. Existing rules will continue to apply to in-kind donations below £2,230, meaning practical help or goods rather than cash. Parties accepted over £93m in donations in 2023.
Labour's own funding position forms part of the argument at Westminster. Since 2020, Labour has received almost £43m from trade unions. Backbench pressure for a universal limit continues. Alex Sobel MP's New Clause 69 would establish an annual cap of £1,000,000 on donations to registered political parties.
The broader context here is a system built on permissibility rather than limits. Westminster has historically controlled who may give, not how much they may give, with transparency through registration and reporting doing much of the work. A capped, residence tested regime for overseas electors, plus company checks and a crypto ban, would move England, Scotland, Wales and Northern Ireland closer to a mixed model. The detail on valuation of crypto assets, loans on non-commercial terms, and in-kind support will determine how watertight any ban proves.
Looking to the next election, much turns on timing and transition. Parties plan fundraising rounds months in advance. Agents, the people legally responsible for campaigns, need to know which rulebook applies on polling day. If the Lords amends the residency test, the Commons will have to consider it again, and the Commission will have to update guidance quickly. Until commencement, Mr Farage's legal point stands alongside ministers' policy intent. Both can be true. The law today permits what the government wants the law tomorrow to restrict.
