HC Deb 07 July 1896 vol 42 cc979-87

(1.) Where, by a disposition of any property an interest is conferred on any person other than the disponer for the life of such person or determinable on his death, and such person enters into possession of the interest and thenceforward retains possession thereof to the entire exclusion of the disponer or of any benefit to him by contract or otherwise, and the only benefit which the disponer retains in the said property, is subject to such life or determinable interest, and no other interest is created by the said disposition, then on the death of such person after the commencement of this Part of this Act, the property shall not be deemed for the purpose of the principal Act to pass by reason only of its reverter to the disponer in his lifetime.

(2.) Where the deceased person was entitled by law to the rents and profits of real property (as defined by Section one of the Succession Duty Act, 1853) of his wife, and has died in her lifetime, such property shall not be deemed for the purpose of the principal Act to pass on his death by reason of her then becoming entitled to the property in virtue of her former interest.

*MR. GIBSON BOWLES moved to insert at the end of Sub-section (1) the words:— Where by a disposition of any property any such interest as above in this section mentioned is conferred on two or more persons, either severally or jointly, or in succession, this section shall apply in like manner as where the interest is conferred on one person.


said he accepted the Amendment.


thought that some explanation of the Amendment ought to be given to the Committee.


said the Amendment did not affect the principle of the clause. Once Clause 14 had been adopted it seemed to him that whether there were several life interests or only one life interest did not matter.


regretted that the Amendment had been accepted by the Government. The clause provided that if a man settled property on his son for life, and if the son died in the father's lifetime, the father would not have to pay the Death Duty on the reversion of the property to him. The Amendment proposed to enlarge that exception. It proposed that if an interest was conferred, not on one son only, but on two or three sons, and that if they should all die in the father's lifetime, the Death Duty should not be paid in like manner as if there had been only one settlement. The acceptance of the Amendment was another proof of the aim of the Government to whittle away the effect of the Finance Act of 1894; and significantly enough the hon. Gentleman who proposed it, declared during the discussion on the Act that the object of his life would be to destroy that Act altogether.


said he did not state that it would be his object to destroy the Bill by whittling it away. He certainly did declare that he looked forward to the time when the House of Commons having returned to its right senses would practically repeal the Bill. But be announced publicly also that he particularly desired that no attack should be made upon the essential principles of the Act at this time; that he thought it would be improper to do so, and he did not think his Amendment assailed the principles of the Act.


said the spirit which animated the proposal was hostile to the Finance Act. The Government were undoubtedly proposing by this Bill to relieve the wealthy classes from some operations of the Finance Act. There was not a single proposal in the Bill for the relief of those who were poor; and the present Amendment was another proposal for the relief of those who were in the enjoyment, or likely to be in the enjoyment of settled property.


said that settlement meant the placing of property out of the owner's control; and one of the effects of parting with property in that way was to protect it against creditors. There could not be a dual possession of property. When property was settled the assumption was that it had been parted with. Under those circumstances he could not conceive the principle of the Estate duty being excepted—why settled property, on unexpectedly reverting to the person to whom it had originally belonged should for that reason be excepted from the operations of the Act.


Order, order! The only question now before the Committee is an Amendment that the benefits of the clause should be extended from one to two or more persons.


said his observations were directed to show that if the principle was bad in the case of one devolution it was still more objectionable in the case of two or more devolutions.

*MR. JOHNSON-FERGUSON (Leicester, Loughborough)

asked whether the Attorney General had considered a point which he had raised on the Second Reading of the Bill, namely, whether this clause did not open a way for the evasion of the Act? Supposing a father wished to enjoy a property for life, and, if possible, to evade the payment of the Death Duty. The father handed the property over he the son, and the son then settled it on the father for life with remainder to himself on the death of his father. By that arrangement, the father could, under the clause, enjoy the property for life, and on his death it would revert to his son free from duty.


said he did not regard the Amendment as in any way an infringement of the principle of the Finance Act. It was confined entirely to the case in which the interest conferred was for the life of another person or terminable upon his death, and it was to meet the case of property settled by the father upon the son for the son's life. It was their view that the Finance Act was not intended to deal with temporary dispositions of property.


asked in what part of the Act was there protection against the evasion which the hon. Member referred to?


was understood to say in no part of the Act.


said they had no chance at all on that side unless they could influence the Attorney General and the Chancellor of the Exchequer by reason. They were bound to accept the views of the Attorney General upon a point of law, but he hoped he might be excused for trying to place before him what was a serious apprehension on their part. He would put the concrete case of a father and son; the father had certain property which, in the natural course of nature would come to the son. The father and son both wished to evade the Death Duties. The first step in that transaction was that the father handed over absolutely to the son without any reservation at all the whole of his property. After the conveyance had taken place, the son as the absolute owner of the property, conferred a life interest in that property upon the father. The hon. and learned Member then proceeded to read this case into the section. It was not what the Exchequer ought to encourage, and whatever side of the House they sat on they wanted to prevent persons who could afford to command skilled legal opinion in these matters escaping from taxation.


said the hon. and learned Gentleman had stated the case perfectly fairly, but he would repeat that this section did not touch that case. The vice of that particular transaction rested upon the fact that a man might now give his property away absolutely, and provided he did it more than a year before his death the property on his death would escape taxation altogether. This section did not deal with that particular method whereby Estate Duty would be evaded. They had considered the point, and it seemed to them that the section as framed would not in any way alter the existing law in regard to that matter. It might be, however, that the Exchequer ought to go further and endeavour to stop that gap or loop-hole, and in order that there should be no doubt about the matter they were prepared to add these words as a proviso:— Provided that the foregoing sub-section shall not apply where such person or persons taking the said life or determinable interest have at any time prior to the disposition been himself or themselves competent to dispose of the said property.


thought that what the Attorney General had said had been extremely fair, and so far as he could judge it appeared to meet the case. He would ask the right hon. Gentleman to reconsider the matter with a view to determining whether the legal effect of his language travelled beyond what was intended. If that was the case and the Attorney General and the Solicitor General put any Amendments down, so far as he was concerned he would endeavour to be an honest critic. It was the duty of them all, whether they liked the Finance Act or not, to see that in cutting down any part of it they did not cut away more than was intended, and not to allow any advantage to be taken of it by persons who had access to superior skill, and what he would call legal chicanery, at the expense of the community.


expressed his obligation to the hon. and learned Gentleman for the manner in which he had approached these questions. He could assure him that they had been matters of very careful study on the part of himself and his hon. and learned friends. There had been extremely hard cases with which these different sections were intended to deal brought before his notice by the Inland Revenue officials. They had felt themselves bound under the present wording of the Finance Act to exact duty in cases where even the souls of the Revenue officials had revolted against the proceedings. They were as anxious as was the hon. and learned Gentleman that these sections should not be utilised for the evasion of the law, and he could assure him that any suggestions would have the most careful consideration of himself and his hon. and learned Friends.

The proviso suggested by the ATTORNEY GENERAL was then agreed to to the following effect:— Provided that the foregoing sub-section shall not apply where such person or persons, taking the said life interest, or terminable interest, have at any time prior to the disposition been himself, or themselves, competent to dispose of the said property.

MR. LLOYD-GEORGE moved to insert in Sub-section (2) after the word "wife," the following words,— And is not entitled to any other property, real or personal, in his own right which, or part of which, passes on his death to his wife.


opposed the Amendment. The words would go far beyond what was contemplated.

Question put, "That those words be there inserted."

The Committee divided:—Ayes, 59; Noes, 146.—(Division List, No. 316.)

On the question "That Clause 14 stand part of the Bill,"


said he objected to the clause on a very broad ground—namely, that it placed no limit on the settlements in the case of personalty. He contended that some limit should be fixed. It was not seldom that one saw persons who were engaged in all sorts of speculative occupations in the Bankruptcy Court to-day, and very shortly afterwards living in luxury and splendour. [Laughter.] How was that done? Why, the men had made settlements of what they had on their wives, living upon them. [Laughter.] There ought to be some limit fixed in regard to personalty that would be covered by the clause in question. Let the limit be £500 or any other amount, or if the Attorney General preferred, lot the limit be on the principle of percentage. This clause, however, permitted not only personalty, to any extent to be settled, but realty also, and to that he objected altogether. Five-eighths of the land in England was under settlement at the present time, and one of the effects of this was that the Government had had to bring in a Bill to relieve landlords of a part of their taxation. Under other and ordinary circumstances the land might have been distributed in many other hands, and have been more advantageously utilised for the country. ["Hear, hear," and laughter.] He repeated that he objected altogether to settlements in regard to realty, and he thought every Radical ought to agree with him in that view. He thought that settlements altogether did great harm. They kept out of the market large quantities of land, and consequently had the effect of raising the price of land. But they did even more harm than that. Their tendency was to throw property into the same families for generation after generation, and thus to create a landed aristocracy, and a landed aristocracy was a thing to which he thoroughly objected. [Laughter.] Under those circumstances he must, as a Radical with strong views in regard to matters connected with land, challenge a vote on the clause.


said he had only one or two observations to make. He thought the clause was much to wide. The Chancellor of the Exchequer had stated that several cases had been brought to the notice of the Treasury during the present financial year in which the Act had operated harshly. But the right hon. Gentleman did not give a single case, and if there were such cases he thought one or two of them should be stated by way of illustration and con- firmation. In his opinion the clause was weak in the fact that it opened the door of possible evasion much too widely, and the result would be that cases would evade payment of the duty which ought not to escape. What very often happened in the case of a man who engaged in business speculation? He settled certain property which he had acquired upon his wife for life, and subsequently upon his children, with a sort of reversion to himself. Matters had been made worse by the Amendment of the hon. Member for King's Lynn, because that Amendment extended the operation of the clause. As the clause stood originally, it would have been confined to the case where a person settled property either upon his wife or son; but now a man could settle property upon his wife, divide the reversion between his children, and consequently evade the payment of his just debts. It was unfair that encouragement should be given to settlements which were fraudulent in their intent.


said the hon. Gentleman had missed the central point of the clause. The hon. Member referred to the case of a creditor who could not get at property because it was in settlement; but he had entirely overlooked the fact that this clause did not deal with such property—it never touched property until it had come back to the settlor, and was, therefore, no longer protected by the settlement from the creditor. The clause was a discouragement of those fraudulent settlements which seemed to be so very well known on the other side of the House. ["Oh!"] He confessed he believed such settlements were extremely rare. [A laugh.] He believed the commercial honesty of this country was great—[renewed laughter]—and that settlements such as the hon. Member had referred to were not often made. But the clause had nothing to do with settlements; it did not come into operation until a settlement had ceased to exist.


did not think the hon. Member for Lynn Regis quite understood the point. It was quite true that if property reverted to a man his creditors could seize it. It often happened that a man became bankrupt while the property was in the hands of his wife or children, and that, after he had settled with his creditors, the fee simple reverted to him. That was the point the hon. Gentleman had not solved. He knew the way in which settlements were worked. Settled property was extremely difficult to manage, and entailed a great loss, not only on the community at large, but on the life-owner of the property itself. What they objected to was that the land should be tied up, not for the protection of the ordinary holder of the property, but for the man who was a spendthrift or a fool. Fortunately, in this country the aristocracy had not such a number of fools and spendthrifts in their ranks that they should take especial care to preserve the interests of their children. Any clause that encouraged the settlement of property in the way this clause did was a real injury to the people who had landed estates, and was only giving the sons of fools and spendthrifts an advantage over the sons of ordinary people, who really suffered a great loss by it.

Question put, "That Clause 14, as amended, stand part of the Bill."

The Committee divided:—Ayes, 175; Noes, 75.—(Division List, No. 317.)

Clause, as amended, ordered to stand part of the Bill.

Clause 15,—