HC Deb 24 May 1895 vol 34 cc259-71

"Section two, sub-section one (clause c.) of the Finance Act, 1894, is hereby amended as follows; the description of property marked (c.) shall be construed as if the words in section eleven, sub-section one, of the Customs ant Inland Revenue Act, 1889 'be read as if the word 'twelve' were substituted for the wore 'three' therein, and the said description of 'property shall' were omitted therefrom."

He said he thought he could claim the support and vote of the Chancellor of the Exchequer here with the utmost confidence, because by this Amendment he appealed to right hon. Gentlemen to leave the standard of the right hon. Gentleman the Member for St. George's, and to return to the standard of the right hon. Gentleman the Member for Midlothian. The clause amounted to this: There were two kinds of gift known to the law, the donatio mortis causa and the gift inter vivos, and no doubt one might be made to look very much like the other. It was essential that the deathbed gift should be made in expectation of death, that delivery of the thing to be given should be effected, and that the donor should die of the very illness of which he was lying ill at the time of the gift. All knew what a gift inter vivos was. Some might have received them, others might have made them. In some cases a deathbed gift, for the purpose of evading the duty, might be represented as a voluntary gift inter vivos, and he quite agreed that security should be taken against that, and that, if the facts showed that a gift said to be a gift inter vivos was really a deathbed gift, duty should be charged. What he complained of was that in an act of Parliament the whole thing should be assumed without any examination of the facts. Before 1881 it was a question of fact, and the person who claimed that a particular gift was made inter vivos had to show that that was the case; but in 1881 the right hon. Gentleman the Member for Midlothian, moved by a suggestion of the Inland Revenue authorities, enshrined in an Act of Parliament, the assumption that the gift should be assumed to be a deathbed gift unless it was made more than three months before death. In 1889 the right hon. Gentleman the Member for St. George's gave another turn to this thumbscrew, and required that in order to constitute a gift inter vivos it should have been made, not three, but 12 months before death. He thought that was a very strong thing to do. He might, perhaps, say in extenuation that he did not happen to be in Parliament at the time or he would to the best of his ability have resisted it. He would also point out that the case in 1889 was very different from the case in 1895. There was no graduation and no aggregation in 1889, and thus the action of the right hon. Gentleman the Member for St. George's was much less serious in its effect. He would read the section he proposed to deal with:— Property which would be required on the death of the deceased to be included in an account under Section 38 of the Customs and Inland Revenue Act, 1881, as amended by Secion 11 of the Customs and Inland Revenue Act, 1889, if those sections were herein enacted and extended to real property as well as personal property, and the word 'voluntary' or 'voluntarily,' and a reference to a 'volunteer' were omitted therefrom. This was, he thought, an eminent instance of legislation by allusion and reference, and he commended it to all those who were to serve on the Drafting of Bills Committee. Here was property which would have been included under the Act of 1881; yet not quite that, but the Act of 1881 as amended by the Act of 1889, if something were in that Act which was not in it, and something else were not in it which was in it. That was a most extraordinary Chinese puzzle, and he believed that the Chancellor of the Exchequer himself would find it very difficult to put into one set of words what the clause really meant. It was a wicked thing to put into an Act of Parliament a clause which it was impossible for the vulgar to understand, and next to impossible for the trained lawyer to understand. He hoped that this was the last occasion in which there would be such a monstrosity of legislation. The effect of it seemed to be that it brought into aggregation certain property, such as that under marriage settlements, not hitherto included, and that it required the alienation of that property, or a gift of that property to have been made at least twelve months before the death of the donor, and if not, treated it as if the property had passed on the deathbed. This new practice was another instance of assumption on behalf of the revenue. He proposed by this amendment to return to the practice of 1881, according to which the Government would not in this matter go back for more than three months before death. This, he thought, was a fair limit, generous to the revenue. When a man came into the "valley of the shadow of death," then no doubt any gift he might make did come under the grave suspicion of being a death-bed gift; but three months was a very fair and sufficient period to take for the purpose of assumption. He assumed as an iron rule that every gift within three months was not to be treated as a voluntary gift; but 12 months was a period monstrously too long. Of course, to escape duty, a gift must have been bona fide; it must have been bona fide in the possession and enjoyment of the recipient; and the donor must have been entirely excluded from any kind of participation in the enjoyment. It was indeed going very far to make the assumption of three months. Undoubtedly much property was given away with the intent of defeating the revenue, but ample protection was afforded by going back three months before the death of the donor, especially under the altered circumstances, with the increased stringency and the higher rates of Estate Duty. These things made it very unadvisable to insist upon a longer period.


said, he should probably waste time if he were to repeat what he had said upon the last Amendment. The case of this Amendment was exactly similar; there was no distinction of principle between the two. The view of the hon. Member for King's Lynn was, that the right hon. Member for Midlothian was wholly wrong in principle when he established the three months' limit, and that the right hon. Member for St. George's, Hanover Square, was much more wrong when he extended it to 12 months, and if he had been in the House he would have defeated both.


The right hon. Gentleman has no right to impute that to me. I said nothing of the kind.


I do not know what is meant by imputation. He was not in the House at the time the changes were made; he is in the House now. What he is proposing by this Amendment is to condemn the limit of 12 months established by the right hon. Member for St. George's, and to affirm the limit of three months, which he thinks to be too long. That is not a sound position. Either the principle is right or it is wrong. He is proposing to take the three months line, but in doing that he is condemning the right hon. Member for St. George's, who thought the three months' limit was too short, and extended it to 12 months. The Amendment is a compliment to the right hon. Member for Midlothian. I agree with both right hon. Members, and think the right hon. Member for St. George's was perfectly right in extending the time when he found three months insufficient.

MR. JAMES LOWTHER (Kent, Thanet)

said, it was hardly fair to charge the hon. Member with having set up an antagonism between the two right hon. Gentlemen. Undoubtedly, both were wrong.


He wishes to restore the three months limit of the right hon. Member for Midlothian.


I offer it to the Government as a compromise.


continued, that the plan of the right hon. Member for Midlothian, although bad, was the lesser of two evils. For himself, he protested against the assumption that those on that side of the House were supposed to have endorsed the change made by the right hon. Member for St. George's, Hanover Square. He, for one, entered a protest against the Budget, which he thought a very bad one, and he had never concealed his opinion. It was one thing to say that gifts made in prospect of death, with the object of evading duty, should be discouraged; but it was another thing to say that exemption should extend to a period of 12 months, during the greater part of which death had not been contemplated. What was to prevent the extension of the period to three years? The arrangement of 1881 went as far as could be justified, and he deprecated the alteration made by his right hon. Friend in 1889.


Not in this House.


I did not conceal my view of the proposal; and what has occurred since has strongly confirmed me in my objections, which were, indeed, widely shared by Members of the Party. This Amendment appears to me to be a reasonable one, and one deserving the attention of the Committee.

*MR. J. G. BUTCHER (York)

said, the answer to the Chancellor of the Exchequer was, that he made a fundamental alteration in the Death Duties last year.


said, that point had been discussed on the last Amendment, in the absence of the hon. and learned Member.


contended that arguments that might have been used in 1889 were no longer applicable, and that the three months' limit of 1881 was now a reasonable one. To extend it to 12 months was to prevent men disposing of their property within a time when, in ordinary circumstances, they could have no idea of death. A man might make a marriage settlement, and his death within a year would bring it under this duty. That would make it not a Death Duty at all, but a duty inter vivos, a duty upon a perfectly fair and bona fide disposition of property during life. He objected last year that these duties would press harshly—and they had pressed harshly—upon all owners of property both large and small. This proposal was to give the Government an opportunity of removing hardships likely to arise by the operation of the Bill. He urged the Government to grant this concession. It was not to enable anyone to evade the Death Duties, but to relieve persons of duties which would not be just.


submitted that the great alteration in the law which, rightly or wrongly, was introduced last year had materially altered the circumstances of the case, and the Chancellor of the Exchequer had not attempted to deal with that argument. He submitted that under the circumstances the question of the length of time ought to be considered.


complained that the Chancellor of the Exchequer had not dealt with the legitimate grievances which had been brought forward by the Opposition, of those who had made settlements on the marriage of a daughter, or in some other way, and whom he had brought into his net without the slightest reason for forcing them into that position. He asked the right hon. Gentleman whether he would not consider the point raised by the hon. and learned Member for York as to perfectly bona fide marriage settlements. It was obviously not necessary to cut up settlements such as these by a twelvemonth's rule. Three months would be quite sufficient.


said, he had done his best, and he really could not waste time replying to the arguments adduced on the Second Amendment, which were exactly the same as on the First. He had made as good allowance as he could for the changed state of things since the action of the right hon. Member for St. George's in 1889, and he could not repeat over and over again things he had already said.

The House divided:—Ayes, 110; Noes, 197.—(Divison List No. 104.)

DR. CLARK (Caithness) rose to move the following new clause:— Section 6 of the finance Act, 1894, shall be amended by adding at the end of the clause: Provided that the duty due upon an account of personal property may, at the option of the person delivering the account, be paid within three months after probate has been granted, provided that sufficient security is found for the payment of the said duty, together with interest at the rate of 3 per cent. per annum from the date of the delivery of the said account till payment of the said duty. Under the existing law, while the executors of real estate had eight years in which to pay the duty under the Act, the executor of personal estate had not a single day's grace allowed him. In his opinion some modification of the law was required upon this point. In his Amendment he proposed that the executor of personal estate should be allowed three months in which to pay the duty upon his giving security for the payment of the money at the expiration of that time. Another point was that, whereas the executor of real estate had to pay only 3 per cent. interest on the amount of the duty until it was paid, the executor of personal property had to pay 4 per cent. interest. The present law had operated very harshly in the case of a widow lady whom he knew. Her husband had died at Monte Carlo, and he had left all his property and securities locked up in his office in London. His junior partner had refused to give up possession of any of the property until probate had been obtained, and the executor was called upon to pay £7,500 before probate could be obtained and possession of the property recovered. The result was that the executor and other friends of the lady, including himself, had had to become security to banks for the advance of the £7,500 necessary to enable probate to be obtained He thought that that was a case in which the pledge given by the right hon. Gentleman the Chancellor of the Exchequer last year to relax the strict rule in cases of necessity should have been carried into effect. The right hon. Gentleman had said last year, that in cases where personal property would have to be sold at a ruinous sacrifice in order to pay the Probate Duty, the Commissioners should have power to allow the duty to remain unpaid for a reasonable period. In the case to which he had referred the Commissioners had refused to allow probate to be granted until the £7,500 was paid, and they probably acted under the belief that there was no danger of the property being sold at a ruinous sacrifice. The case in question was made all the harder by the fact that under the deed of partnership the junior partner was allowed three years in which to pay over the share of the deceased partner to the widow. He begged to move the insertion of the new clause.


said, that he was always exceedingly glad to remove any of these restrictions that might be regarded, under the circumstances, as being oppressive. The extended time given to executors of real property for the payment of the duty was owing to the difficulty of realising that property, but that difficulty did not attach to personal property—at all events, in nothing like the same degree. The hon. Gentleman, by his Amendment, proposed to effect a very serious change in the law, and to substitute a system of credit for one of ready money. Such a change would involve much risk to the revenue, because how was the Inland Revenue Department to judge of the value of the security which the executor offered? It was quite right that the Commissioners should have the power, in cases where there was exceptional hardship in connection with the realisation of personal estate, to relax the rule and to give a certain amount of credit; but such a discretionary power had been given to the Commissioners by the Finance Act of last year. It must not be supposed that the Inland Revenue Department desired to act harshly in such matters, and, indeed, in some cases they had relaxed the rule so far as to give an executor two years' credit where there had been exceptional difficulty in realising personal estate. The difficulty in the Monte Carlo case, to which the hon. Member had referred, had arisen chiefly from the action of the deceased gentleman's partner, who, from some reason or another, had thought that he was bound not to deliver over possession of the property of the deceased to his executor until probate of the will had been obtained. He hoped that after this explanation the hon. Member would consent to withdraw his proposed clause.


said, that he should be glad to withdraw his clause on the understanding that the right hon. Gentleman would draw up some clause, to be moved upon the Report, which would meet the difficulty he had pointed out.


said, that before the proposed clause was withdrawn, he wished to ask the right hon. Gentleman the Chancellor of the Exchequer how an unfortunate executor of personal estate, who had no ready money at command, was to obtain probate? He could not understand how the right hon. Gentleman could describe it as a ready-money system. It simply meant the driving of the unfortunate executor into the arms of the money-lender. The Chancellor of the Exchequer put the cart before the horse. The hardship was felt by smaller people who did not possess the machinery of the old family lawyer and banker. He hoped the right hon. Gentleman would consider their request to be a just one.

SIR D. MACFARLANE (Argyllshire)

said, it did not appear reasonable on the part of the Chancellor of the Exchequer to say to the executor: Here is a piece of property for which you are responsible, you have to give me a 20th or 25th part of it, and yet you dare not touch it for that purpose. As to the difficulty of obtaining adequate security, he could not conceive that it would be more difficult than it was in the case of the money-lender or the banker. No reasonable person would propose that the Chancellor of the Exchequer should be satisfied with anything less than absolute and complete security. They did not want to lessen the revenue derived from this source, but where it was impossible to find the means, he could not see that it was unreasonable that the Chancellor of the Exchequer should take full and assured security.

MR. W. AMBROSE (Middlesex, Harrow)

supported the Amendment. The practice of requiring payment of Probate in money down operated with great cruelty in many cases. He had known a case where a widow had to go and borrow the money, and was a long time before she could get it. What generally happened was, that the executor got into the hands of a solicitor, who obtained the money for him. There was power to extend the time where there would be a sacrifice of property; but that was comparatively a small matter. If a solicitor or money-lender could advance the money, why could not the Treasury or Inland Revenue authorities take a charge upon the property which should be effectual?


said, he should have been extremely glad to have met hon. Members in regard to this matter, but he was convinced he could not. He was asked to reverse the whole principle on which Probate Duty had been collected now for generations. The custom and principle had been always that Probate Duty should be paid before the property was released. This proposal would reverse this custom suddenly.


said, he had given notice on the Committee Stage several days ago.


said, that was not notice enough of a proposed alteration which would subvert the security of the whole of the Revenue.


said, the Probate was not so old as to extend over so many generations as the right hon. Gentleman implied. It was only within very recent times since it had become a Duty; formerly it was only fees for work done by the Probate Department.

MR. J. H. DALZIEL (Kirkcaldy Burghs)

said, he understood his hon. Friend was not going to persevere with the new clause at the present time, but he sincerely hoped the Chancellor of the Exchequer would give a satisfactory reply when the Report Stage was reached, and, if not, that the opinion of the House would then be taken with regard to it. The case put forward by his hon. Friend was that of a widow who died and left an estate valued at £120,000; before she touched that estate she would have to pay £7,000 which she was obliged to borrow. He thought that in a case like that the Inland Revenue Authorities might have exercised their discretion, and he should be very glad to ascertain the reasons which induced them to refuse to take the security which was admitted to be absolutely substantial.

*MR. J. G. WEIR (Ross and Cromarty)

expressed his surprise that the Chancellor of the Exchequer should have given as the reason for not making this alteration that the system had been in existence for generations. He thought the Leaders of the Liberal Party were reformers. It was often a very difficult matter for the executor to get the money to pay the Probate Duty. A case had come under his notice within the last two months where a considerable loss would have ensued if he himself had not come to the rescue.

MR. HARRY FOSTER (Suffolk, Lowestoft)

said, those who had listened to the Debate must be satisfied that the hon. Member had made out a good case. The Chancellor of the Exchequer did not attempt to deny the grievance, he only objected in general terms that if the Amendment were carried the authorities at Somerset House would find great difficulty. He had not told them, however, what the difficulty would be. He could not see what difficulty the revenue authorities could have in the matter. They knew the value of the estate, and were therefore in a better position than anybody else to take security in respect of their claim.


said, that if the Chancellor of the Exchequer had held out the slightest hope that he would make the powers of the Inland Revenue authorities more elastic he would have withdrawn his proposal.


said, the Commissioners had absolute power, but they found, upon examination of the case to which the hon. Member had referred, that it was not a case in which that power should be exercised.


said, if that was not a case in which the power should be exercised, the law and the procedure were both very bad indeed.

MR. J. CHAMBERLAIN (Birmingham, W.)

said, the Chancellor of the Exchequer's position was that no hope was to be held out that the present practice of the Inland Revenue Department would in any degree be changed.


said, he was satisfied that the discretionary power which he gave the department last year, and of which they had only had experience for eight months, was sufficient for the purpose.


said, the concrete case before the Committee appeared to be one in which that discretionary power ought certainly to be used. It was the case of a person who had to receive after probate an estate which the Inland Revenue Department itself valued at £120,000, and the Chancellor of the Exchequer said if that estate was to be accepted as security for £7,000 all the principles on which the probate duty had been collected for generations would be reversed, and millions of the public money would be put at hazard.


said, that whether this particular case was rightly decided or not was a question by itself. But the clause proposed would upset the whole principle upon which the probate duty was collected by doing away with the necessity of paying in the first instance. It was the generality of the Amendment to which he objected.


said the Amendment seemed to him to secure the Revenue by providing that sufficient security must in all cases be given. When they were collecting a tax which varied from 3 to 8 per cent. the capital on which that was levied must surely be sufficient security for the percentage. The revenue was to determine the amount which it was to receive. It was only to give credit for three months, receiving three per cent. interest during that time, and for that credit it was to have a security which might be from 16 to 33 times the value of the amount due. How was it possible in these circumstances that the Revenue could lose a single farthing? The Revenue officials seemed to have a stereotyped way of dealing with these matters, and they made taxes, obnoxious at any time, still more obnoxious by the way they were administered. He hoped they might have some promise from the Chancellor of the Exchequer that he would deal with this matter.

MR. CYRIL DODD (Essex, Maldon)

said, that formerly the Commissioners had power in special cases to enlarge the time for the payment of the duty, but by the Act of last year this was altered, the words being: Where the Commissioners are satisfied that the estate duty leviable in respect of any property cannot without excessive sacrifice be raised at once, they may allow payment to be postponed. The Commissioners seemed to have construed that to mean sacrifice to the property itself. If the Chancellor of the Exchequer would restore the former provision he believed the whole difficulty would be met. What was wanted was that the Commissioners should have a somewhat freer hand.

MR. F. G. BANBURY (Camberwell, Peckham)

could not see that the Revenue would run any risk through the acceptance of the Amendment. It would be in the judgment of the Commissioners to define what "sufficient security" was. But, on the other hand, the executor would not benefit very much, because if he had to give security he could go to a banker and fund the money in that way.

The Committee divided:—Ayes, 151; Noes, 198.—(Division List No. 105.)

Two other Amendments on the paper having been ruled out of order the schedule was agreed to, and amid cheers the Bill was reported.