HC Deb 27 October 1909 vol 12 cc1108-10

When a debt or incumbrance has been incurred or created in whole or in part for the purpose of or in consideration for the purchase or acquisition or extinction, whether by operation of law or otherwise, of any interest in expectancy within the meaning of the principal Act in any property passing or deemed to pass upon the death of a person dying after the passing of this Act, and any person whose interest in expectancy is so purchased, acquired, or extinguished becomes (under any disposition made by, or through devolution of law from or under the intestacy of, the deceased) entitled to any interest in that property, then in determining the value of the estate of the deceased for the purpose of Estate Duty no allowance shall be made in respect of such debt or incumbrance, and any property charged with any such debt or incumbrance shall be deemed to pass freed from that debt or incumbrance:

Provided that—

  1. (a) If part only of such debt or incumbrance was incurred or created for such purpose or as such consideration as aforesaid, this provision shall apply to that part of such debt or incumbrance only; and
  2. (b) If a person whose interest in expectancy in the property so purchased, acquired, or extinguished becomes entitled to an interest in part only of that property, this provision shall apply only to such part of the debt or incumbrance as bears the same proportion to the whole debt or incumbrance as the value of the part of the property to an interest in which he becomes entitled bears to the value of the whole of that property.

Mr. CAVE moved to leave out the words "for the purpose of or" ["in whole or in part for the purpose of or"].

The object of the Clause is that when a life tenant, in order to avoid payment of duty on his own death, purchases the reversion, not paying cash, but giving a charge on the estate or making himself a debtor for the amount of his purchase-money, and then afterwards devises to his successor, that procedure shall not result in evading the duty. That particular point is fully dealt with in other words which I do not propose to move out of the Clause, but if these words remain the Clause will affect a totally different proceeding. Take the case of a man who bonâ fide wishes to buy a reversion upon his own life estate, and to become the owner in fee simple. He, for that purpose, borrows, not from the reversioner, but, say, from bankers, the amount of the purchase-money which is required, and he then, perhaps years afterwards, makes a will devising the estate to the person who has previously been the owner of the interest in expectancy. If these words stand, in that case the person to whom the estate will be devised will have to pay duty, not upon the estate as it comes to him, but upon the estate without deduction of the debt incurred to the bank. In a case of this kind the ordinary rule ought to hold that the debt ought to be deducted from the value of the estate. The real object of the Clause would, I think, be fully effected by the words "in consideration for the purchase or acquisition or extension." You do not want the words "for the purpose of" at all.


I beg to second the Amendment.


My hon. Friend (Mr. Cave), who knows this subject very well, is familiar with the case which this Clause is designed to meet. I have not the least complaint to make of the course which he advises us to take in reference to this matter. I have always held in this House that where the law allows a certain course to be taken you ought to be allowed to take it, but it does not follow that when a hole is discovered in the law you should not try to stop it up. The hon. Member invites us to stop one hole and to leave another open. I will take the simple case of the English tenant for life. The case against which this Clause is directed is the case of a man who in England, being a tenant for life, buys the remainder in fee from his son. He effects the transaction in either of two ways. He may say to his son, "Convey the remainder to me for the value of your expectancy," in which case the hon. Member for Kingston takes no exception to the Clause. The hon. Member asks why a tenant for life who borrows money from an outsider should not get exemption. I will tell him why. Suppose you only stop the first hole and leave the other, the tenant for life would then go to his bankers and borrow from them, or from somebody else, the amount requisite to compensate the expectant heir for his expectancy. He would give a mortgage on the property for the amount, and then he would devise the estate so encumbered to the heir, who would already have got the amount of the encumbrance money. Consequently the heir would have got the property. Therefore the Clause would be absolutely nugatory unless we keep in these words.


The ingenious suggestion of the right hon. Gentleman might be taken advantage of now that he has made it. I beg to withdraw the Amendment.

Amendment, by leave, withdrawn.