HC Deb 02 July 1923 vol 166 cc211-7

For determining the rate of estate duty to be paid on property passing on the death of the deceased, any property so passing which, under a disposition not made by the deceased, passes immediately on the death of the deceased to some person other than the wife or husband or a lineal ancestor or lineal descendant of the deceased, shall not be aggregated with any other property but shall be an estate by itself and the estate duty shall be levied at the proper graduated rate on the principal value thereof.—[Mr. Entwistle.]

Brought up, and read the First time.


I beg to move, "That the Clause be read a Second time."

The object which I seek to obtain by this new Clause is to prevent the aggregation of property which goes to a person under a disposition made other than by the deceased. The Clause will not bring about any great revolution, nor, I think, can the draftsmanship of it be attacked. because it merely seeks to restore the proviso in Section 4 of the Finance Act, 1894, which was repealed, except as regards property in which the deceased had no interest at all, by Section 12 of the Finance Act, 1900. The point which I seek to obtain can, perhaps, be more readily explained by an illustration. Suppose A bequeaths a legacy of £500 to B for life, and after B's death the remainder to C, and suppose that C is no relative whatsoever of B, because this Clause does not apply where he is a relative in the way of a lineal descendant. C has no interest at all in B, and the legacy is merely £500. The Estate Duty on that legacy is not payable out of B's estate, through whose death the Estate Duty is payable, because the executors of B are liable to pay duty only in respect of property of which the deceased is competent to dispose, whereas in this case he is not competent to dispose of this property at all. He has merely a life interest under a disposition made by some other person. We will suppose that B dies a very wealthy person, and leaves as much as £1,000,000, liable to Estate Duty at the rate of 25 per cent. As the executors only have to pay that duty in respect of the property of which he has obtained disposition as regards the legacy of £500—or £100 if you like—C, who has to pay this duty has got to pay it at the rate of duty which applies to the whole of the properties of B, who may be a millionaire. I think the proposition has only to be stated to show hon. Members what an unreasonable position it is. Why should C, who is no relation at all of deceased, and who only gets this one small legacy, be penalised to the extent of having to pay estate duty at the rate of a millionaire? When the point was first brought to my notice I could scarcely credit it. But when I found out that this was the abrogated provision—as it was incorporated in the Section 4 of the Finance Act, 1894—it was obviously an injustice putting this tremendous burden on the remainder when they had no interest in the deceased, but was simply a tenant for life. I wondered how on earth it could be, and I took the trouble to go through the Parliamentary Debates of 1900 when Section 12 was passed which repealed Section 4 except in one small particular. I found out there that the one argument used by the then Solicitor-General was that in Section 4 the one provision that prevents this aggregation does not apply to lineal descendants; therefore the relief was granted purely to collaterals in the Act, passed, I think, in 1900. It was far easier to arouse sympathy on behalf of lineal descendants than on behalf of collaterals. But they missed the whole point that if the proviso as it stood in Section 4, and as it would be restored by my Amendment, was to help lineal descendants just as much as collaterals. It is quite clear, too, from these Debates that the matter was not then very thoroughly considered, and that the House, when it passed that particular Clause, did not appreciate everything that would result.

Let me give an instance that came to my knowledge the other day showing how reasonable is this new Clause. It was a case where, under the disposition of A, the latter bequeathed his property for life to B, after whose death a legacy of £500 went to C and D. B died, and B's executors returned the estate at a certain value; then B's executors discovered, three years after, that they had made a mistake of £100,000. It had to be aggregated with the £500 legacy. That meant that it had to be aggregated with this small £500 legacy, which was the only thing in which C and D had an interest, and the further Estate Duty that had to be paid was at the rate attributable to that £100,000, and it had to be paid on the miserable sum of £500. I am putting this case forward in the interest of those who were concerned only in the £500. Further, it was found that A's executors having distributed the estate had no money out of which they could pay the extra Estate Duty, and so they had to come on to C and D to pay it. When a person had no interest except in the legacy of £500 surely the Estate Duty payable by them should be at the rate appropriate to that sum and not to the whole estate. That was the provision made in Section 4 of the Finance Act of 1894, but under a misapprehension it was repealed by Section 12 of the Finance Act of 1900. I suggest it is only reasonable that that provision should be restored. I do not know what the concession would cost, but I do not think it would be very much. It is a just proposal, and I hope the Financial Secretary will be able to accept it.


I have much pleasure in seconding the Motion.


The hon. and learned Member for South West Hull (Mr. Entwistle) has explained very fairly to the House the object of this Amendment, and at first sight some hon. Members, unacquainted with the history of the provision, may be led to think it is reasonable. But there is one fact which possibly the hon. and learned Gentleman is not aware of in connection with this matter which throws a very different light upon it. The provision he proposes to re-enact was originally embodied in the Act of 1894. The exemption of these collaterals or strangers was much criticised year after year, and finally the Chancellor of the Exchequer, in the year 1899, set up a very strong Committee to consider it. The Committee was composed of Lord Finlay, Lord Loreburn (Sir R. Reid as he then was), Lord Haldane, the right hon. Gentleman the Member for Chelmsford (Mr. Pretyman), and Sir Henry Primrose. That Committee, on a review of the circumstances connected with the Clause and its inception in the Finance Act of 1894, reported unanimously that the Clause operated for the benefit of collaterals and strangers who really had no right to expect a transfer of the property, and although it was really intended to affect the immediate family of the deceased person, it did not operate to protect them. It benefitted strangers and collaterals at the expense of the public revenue. Therefore this strong, impartial, non-party Committee reported against the Clause, and it was accordingly got rid of in the Act of 1900.


Is it not the fact that at the time the Committee reported, settled estate duty was payable, but not on the death of the tenant for life? That has been abolished by the Act of 1916, and it makes a tremendous difference. Settled Estate Duty was not then paid in these cases.


I do not think it really touches the point. The feature of the Committee's Report was that the exemption in the Act of 1894 was intended to protect the immediate family and the lineal descendants of the deceased, whereas it was found in operation to relieve collaterals and strangers of a burden which they should bear. There might be no immediate family and the rest of the estate might go away entirely from the family. The Committee reported in favour of repealing the Section, and it would be a distinctly retrograde step on the part of this House to re-enact a Clause which Parliament deliberately deleted. Although there may be hard cases, as there are in connection with all these duties, I suggest to the House that it should not retrace the step deliberately taken in 1900.


I should like to express my hope that the Financial Secretary will go into this question somewhat more carefully before next year. I think it is perfectly certain that the Committee's Report was arrived at under conditions entirely different from those which now obtain. I want to reinforce what was said by the Mover of

the Amendment by saying that I know, from personal experience, cases of hardship which, on the face of them, are so ridiculous that they might well be embodied in comic opera.

Question put, "That the Clause be read a Second time."

The House divided: Ayes, 120; Noes, 215.

Division No. 264.] AYES. [11.47 p.m.
Alexander, A. V. (Sheffield, Hillsbro') Harris, Percy A. Parry, Lieut.-Colonel Thomas Henry
Ammon, Charles George Hayday, Arthur Pattinson, S. (Horncastle)
Attlee, C. R. Hayes, John Henry (Edge Hill) Phillipps, Vivian
Barrie, Sir Charles Coupar (Banff) Henderson, Rt. Hon. A. (N'castle, E.) Potts, John S.
Batey, Joseph Herriotts, J. Pringle, W. M. R.
Benn, Captain Wedgwood (Leith) Hill, A. Riley, Ben
Bennett, A. J. (Mansfield) Hinds, John Ritson, J.
Bonwick, A. Hirst, G. H. Robertson, J. (Lanark, Bothwell)
Bowdler, W. A. Jenkins, W. (Glamorgan, Neath) Royce, William Stapleton
Bowerman, Rt. Hon. Charles W. John, William (Rhondda, West) Saklatvala, S.
Broad, F. A. Johnston, Thomas (Stirling) Salter, Dr. A.
Brown, James (Ayr and Bute) Jones, J. J. (West Ham, Silvertown) Sexton, James
Buckie, J. Jones, Morgan (Caerphilly) Shaw, Hon. Alex. (Kilmarnock)
Burgess, S. Jones, R. T. (Carnarvon) Shaw, Thomas (Preston)
Buxton, Charles (Accrington) Jones, T. I. Mardy (Pontypridd) Short, Alfred (Wednesbury)
Chapple, W. A. Jowett, F. W. (Bradford, East) Sitch, Charles H.
Charleton, H. C. Lansbury, George Snell, Harry
Collins, Pat (Walsall) Lawson, John James Spencer, George A. (Broxtowe)
Cotts, Sir William Dingwall Mitchell Leach, W. Stephenson, Lieut.-Colonel H. K.
Darbishire, C. W. Lee, F. Strauss, Edward Anthony
Davies, Evan (Ebbw Vale) Lees-Smith, H. B. (Keighley) Sullivan, J.
Davies, Rhys John (Westhoughton) Linfield, F. C. Thomson, T. (Middlesbrough, West)
Dudgeon, Major C. R. Lunn, William Thornton, M.
Duffy, T. Gavan M'Curdy, Rt. Hon. Charles A. Turner, Ben
Dunnico, H. MacDonald, J. R. (Aberavon) Waring, Major Walter
Ede, James Chuter Macdonald, Sir Murdoch (Inverness) Watson, W. M. (Dunfermline)
Edge, Captain Sir William M'Entee, V. L. Watts-Morgan, Lt.-Col. D. (Rhondda)
Edwards, C. (Monmouth, Bedwellty) McLaren, Andrew Webb, Sidney
Evans, Ernest (Cardigan) March, S. Westwood J.
Foot, Isaac Marshall, Sir Arthur H. Whiteley, W.
George, Major G. L. (Pembroke) Martin F. (Aberd'n & Kinc'dine, E.) Williams, David (Swansea, E.)
Gosling, Harry Moreing, Captain Algernon H. Williams, Dr. J. H. (Llanelly)
Graham, D. M. (Lanark, Hamilton) Morel, E. D. Williams, T. (York, Don Valley)
Greenall, T. Morrison, R. C. (Tottenham, N.) Wilson, C. H. (Sheffield, Attercliffe)
Grenfell, D. R. (Glamorgan) Mosley, Oswald Wood, Major M. M. (Aberdeen, C.)
Griffiths, T. (Monmouth, Pontypool) Murnin, H. Young, Rt. Hon. E. H. (Norwich)
Groves, T. Murray, John (Leeds, West) Young, Robert (Lancaster, Newton)
Grundy, T. W. O'Grady, Captain James
Hall, F. (York, W. R. Normanton) Oliver, George Harold TELLERS FOR THE AYES.—
Hall, G. H. (Merthyr Tydvil) Paling, W. Mr. Entwistle and Captain
Hamilton, Sir R. (Orkney & Shetland) Parkinson, John Allen (Wigan) Berkeley.
Hardie, George D.
Agg-Gardner, Sir James Tynte Boyd-Carpenter, Major A. Cockerill, Brigadier-General G. K.
Alexander, Col. M. (Southwark) Brass, Captain W. Colfox, Major Wm. Phillips
Amery, Rt. Hon. Leopold C. M. S. Bridgeman, Rt. Hon. William Clive Colvin, Brig.-General Richard Beale
Archer-Shee, Lieut.-Col. Sir Martin Brittain, Sir Harry Conway, Sir W. Martin
Ashley, Lt.-Col. Wilfrid W. Brown, Brig.-Gen. Clifton (Newbury) Cope, Major William
Baird, Rt. Hon. Sir John Lawrence Brown, Major D. C. (Hexham) Craig, Captain C. C. (Antrim, South)
Baldwin, Rt. Hon. Stanley Bruton, Sir James Croft, Lieut.-Colonel Henry Page
Balfour, George (Hampstead) Buckingham, Sir H. Crook, C. W. (East Ham, North)
Banbury, Rt. Hon. Sir Frederick G. Butcher, Sir John George Curzon, Captain Viscount
Banks, Mitchell Butler, H. M. (Leeds, North) Davidson, J. C. C. (Hemel Hempstead)
Barlow, Rt. Hon. Sir Montague Butt, Sir Alfred Davies, Alfred Thomas (Lincoln)
Barnett, Major Richard W. Button, H. S. Davison, Sir W. H. (Kensington, S.)
Barnston, Major Harry Cadogan, Major Edward Dawson, Sir Philip
Becker, Harry Campion, Lieut.-Colonel W. R. Dixon, C. H. (Rutland)
Bell, Lieut.-Col. W. C. H. (Devizes) Cayzer, Sir C. (Chester, City) Doyle, N. Grattan
Bellairs, Commander Carlyon W. Cecil, Rt. Hon. Sir Evelyn (Aston) Du Pre, Colonel William Baring
Benn, Sir A. S. (Plymouth, Drake) Cecil, Rt. Hon. Lord H. (Ox. Univ.) Edmondson, Major A. J.
Bennett, Sir T. J. (Sevenoaks) Chadwick, Sir Robert Burton Ednam, Viscount
Betterton, Henry B. Chamberlain, Rt. Hon. N. (Ladywood) Elliot, Capt. Walter E. (Lanark)
Birchall, Major J. Dearman Churchman, Sir Arthur Ellis, R. G.
Bird, Sir William B. M. (Chichester) Clarry, Reginald George Erskine, Lord (Weston-Super-Mare)
Blades, Sir George Rowland Clayton, G. C. Evans, Capt. H. Arthur (Leicester, E.)
Bowyer, Capt. G. E. W. Cobb, Sir Cyril Eyres-Monsell, Com. Bolton M.
Falle, Major Sir Bertram Godfray King, Captain Henry Douglas Robertson-Despencer, Major (Islgtn, W.)
Fawkes, Major F. H. Kinloch-Cooke, Sir Clement Roundell, Colonel R. F.
Fermor-Hesketh, Major T. Lamb, J. Q. Ruggles-Brise, Major E.
Flanagan, W. H. Lane-Fox, Lieut.-Colonel G. R. Russell, William (Bolton)
Ford, Patrick Johnston Lloyd, Cyril E. (Dudley) Russell-Wells, Sir Sydney
Foxcroft, Captain Charles Talbot Lloyd-Greame, Rt. Hon. Sir P. Samuel, A. M. (Surrey, Farnham)
Fremantle, Lieut.-Colonel Francis E. Locker-Lampson, Com. O. (Handsw'th) Samuel, Samuel (W'dsworth, Putney)
Furness, G. J. Lorimer, H. D. Sanderson, Sir Frank B.
Galbraith, J. F. W. Lort-Williams, J. Sandon, Lord
Ganzoni, Sir John Loyd, Arthur Thomas (Abingdon) Sassoon, Sir Philip Albert Gustave D.
Garland, C. S. Lumley, L. R. Scott, Sir Leslie (Liverp'l, Exchange)
Gates, Percy McNeill, Ronald (Kent, Canterbury) Shepperson, E. W.
Gaunt, Rear-Admiral Sir Guy R. Margesson, H. D. R. Shipwright, Captain D.
Gilmour, Lt.-Col. Rt. Hon. Sir John Mason, Lieut.-Col. C. K. Simpson-Hinchliffe, W. A.
Goff, Sir R. Park Mercer, Colonel H. Skelton, A. N.
Gould, James C. Milne, J. S. Wardlaw Smith, Sir Allan M. (Croydon, South)
Greaves-Lord. Walter Mitchell, W. F. (Saffron Walden) Smith, Sir Harold (Wavertree)
Gretton, Colonel John Mitchell, Sir W. Lane (Streatham) Somerville, A. A. (Windsor)
Guinness, Lieut.-Col. Hon. W. E. Moore-Brabazon, Lieut.-Col. J. T. C. Somerville Daniel (Barrow-in-Furness)
Hacking, Captain Douglas H. Murchison, C. K. Stanley, Lord
Hall, Lieut.-Col. Sir F. (Dulwich) Nall, Major Joseph Stott, Lt.-Col. W. H.
Hall, Rr-Adml Sir W. (Liv'p'l, W. D'by) Nesbitt, Robert C. Sueter, Rear-Admiral Murray Fraser
Halstead, Major D. Newman, Colonel J. R. P. (Finchley) Sugden, Sir Wilfrid H.
Hamilton, Sir George C. (Altrincham) Newman, Sir R. H. S. D. L. (Exeter) Sutherland, Rt. Hon. Sir William
Hannon, Patrick Joseph Henry Newson, Sir Percy Wilson Sykes, Major-Gen. Sir Frederick H.
Harmsworth, Hon. E. C. (Kent) Newton, Sir D. G. C. (Cambridge) Thompson, Luke (Sunderland)
Harrison, F. C. Nicholson, Brig.-Gen. J. (Westminster) Thomson, F. C. (Aberdeen, South)
Harvey, Major S. E. Nicholson, William G. (Petersfield) Tillett, Benjamin
Hawke, John Anthony O'Neill, Rt. Hon. Hugh Tryon, Rt. Hon. George Clement
Henn, Sir Sydney H. Ormsby-Gore, Hon. William Tubbs, S. W.
Hennessy, Major J. R. G. Paget, T. G. Turton, Edmund Russborough
Herbert, Dennis (Hertford, Watford) Parker, Owen (Kettering) Wallace, Captain E.
Hilder, Lieut.-Colonel Frank Pease, William Edwin Ward, Col. L. (Kingston-upon-Hull)
Hiley, Sir Ernest Pennefather, De Fonblanque Watts, Dr. T. (Man., Withington)
Hogg, Rt. Hon. Sir D. (St. Marylebone) Penny, Frederick George Weston, Colonel John Wakefield
Hohler, Gerald Fitzroy Percy, Lord Eustace (Hastings) Wheler, Col. Granville C. H.
Holbrook, Sir Arthur Richard Perkins, Colonel E. K. White, Lt.-Col. G. D. (Southport)
Hood, Sir Joseph Perring, William George Whitla, Sir William
Hopkins, John W. W. Philipson, Mabel Windsor-Clive, Lieut.-Colonel George
Hopkinson, A. (Lancaster, Mossley) Pownall, Lieut.-Colonel Assheton Winterton, Earl
Houfton, John Plowright Pretyman, Rt. Hon. Ernest G. Wise, Frederick
Hudson, Capt. A. Privett, F. J. Wolmer, Viscount
Hume, G. H. Raine, W. Wood, Major Sir S. Hill- (High Peak)
Hurd, Percy A. Rees, Sir Beddoe Woodcock, Colonel H. C.
Inskip, Sir Thomas Walker H. Remer, J. R. Worthington-Evans, Rt. Hon. Sir L.
Jenkins, W. A. (Brecon and Radnor) Remnant, Sir James Yerburgh, R. D. T.
Jephcott, A. R. Rhodes, Lieut.-Col. J. P.
Jodrell, Sir Neville Paul Richardson, Sir Alex. (Gravesend) TELLERS FOR THE NOES.—
Joynson-Hicks, Sir William Richardson, Lt.-Col. Sir P. (Chertsey) Colonel Leslie Wilson and Colonel
Kelley, Major Fred (Rotherham) Roberts, Samuel (Hereford, Hereford) Gibbs.

Question, "That the Clause be read a Second time," put, and agreed to.