HC Deb 03 July 1928 vol 219 cc1221-9

"For the purpose of removing; doubts in the assessment of the stamp duty charged by the Stamp Act, 1891, under the heading in the First Schedule to that Act 'Bond Covenant or Instrument of any kind whatsoever' the words 'sum periodically payable' at the end of Sub-section (1) of that heading shall be construed as referring to the sum payable at each of the periods stated in the instrument and not to the aggregate of the sums payable for the period of a year."—[Mr. Withers.]

Brought up and read the First time.


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

It sounds rather a serious mouthful, but in homely language I will try to explain the point. People from time to time enter into covenants and deeds by which one pays another a certain sum periodically for the period of their lives or some other indefinite period. A husband may covenant to pay his wife £1 a day or £5 a day, and the Stamp Duties are regulated and the Stamp Act, 1891. Under that Act it is provided that the sums shall be assessed in the following way: For the term of life, or any other indefinite period, 2s. 6d. for every £5, or any fractional part of the annuity or sum periodically payable. It means that if a man covenants to pay another man during his life, or to pay his wife during her life, or any other indefinite period, £5 per day, he has to pay a Stamp Duty on the deed of 2s. 6d. If it is £35 he will pay 17s. 6d. If it is £140 per month it is £3 15s., and if it is £1,825 per year, the Stamp Duty is £45 12s. 6d. This was the interpretation of the Act laid down in 1896 by the test case, Clifford against the Inland Revenue Commissioners, and it has always been held to be the law up to quite recently. Unfortunately, recently solicitors and others tendering deeds to be stamped on this basis have been told by the Inland Revenue Commissioners that they have changed their practice. I have a letter dated 12th March, 1928, from the Inland Revenue Commissioners, in which they say: It is true that the Commissioners have on previous occasions assessed the duty on the monetary payments in cases similar to the present but they have recently had under review the correctness of their practice. They now consider that securities or periodical payments which are to continue for life and are not liable to be brought to an abrupt conclusion except by death, is a security or annuity within the meaning of the Statute. Under the old practice a man covenanting to pay another £5 a day had to pay a Stamp Duty of 2s. 6d. Now he has to pay a Stamp Duty of £5 12s. 6d. I submit that this is not altogether right. I have been in the House but a short time, but I have heard it laid down with approbation that it is not right by a purely administrative act to impose the new taxation upon the subject. I am moving this Clause in order to raise the question. My suggestion is that the Inland Revenue Commissioners ought to adhere to the old practice or that the Chancellor of the Exchequer should bring in new substantive proposals to meet the situation. My Clause asks that, for the purpose of removing doubts, the old practice should be adhered to, and I hope I have made a rather difficult legal question clear to the Committee.

6.0 p.m.


I agree that this is a very difficult question which the hon. Member has raised, and when the hon. Member's speech appears in the OFFICIAL REPORT we shall examine it most carefully. This is a matter which it is difficult to deal with in discussion here in the ordinary way. As I understand the proposal of the hon. Member it deals with Stamp Duty on bonds and other instruments for securing sums which are payable periodically, and, as I read the suggested New Clause, it proposes that under the heading of "Bond covenant or instrument of any kind whatsoever" in the First Schedule to the Stamp Act, 1891, the words "sum periodically payable" are to be construed as referring to the sum payable at each of the periods stated in the instrument, and not to the aggregate of the sums payable in the year. The hon. Member's argument seems to be that in the case of bonds securing monthly or weekly payments for life, or during a term of years, the Exchequer claims duty, as on an annuity on the total amount payable in each year. If that be so, it appears from my reading of it that the wording of the proposed New Clause would be ineffective for the purpose indicated by the hon. Member, but apart from that we could not support the proposed New Clause. We take a different view. In our view, the fair basis of charge is the yearly amount payable whether that amount is expressed to be payable weekly, monthly or quarterly. We take the view that any alteration in the law should not be in the direction proposed by my hon. Friend, but in the sense which I have expressed. I am sure he will not press his point, and when we have read his speech and examined it we shall be able to come to a better understanding of his point than would be possible by merely debating the proposed new Clause.


I hope my hon. Friend will not withdraw his proposed New Clause. The problem is not as difficult as the Financial Secretary seems to think. Some years ago the meaning of this Clause was interpreted by the Courts and the Courts decided that where there was a bond to secure the payment of periodical sums the Stamp Duty should be levied on the amount payable periodically. If it was an annuity you were to pay on the annual sum; if a monthly payment on the monthly sum, and if a weekly payment on the weekly sum. For a great many years the Board of Inland Revenue were good enough to accept the decision of the Court, but recently they have come to the conclusion that the Courts were wrong, and, instead of taking the course which was open to them of getting another case stated, to see if they would have any better luck, and perhaps going to the Court of Appeal or the House of Lords, they decided to change the law administratively without any reference either to the Courts or to this House. That is the gravamen of our complaint. Surely it is a serious complaint. Surely an administrative Department ought to obey the law as laid down by the Courts. If they think the law ought to be changed, then they ought to go to Parliament to get the law changed. I hope I have made clear the ground of our complaint, and I hope that the Department for which the right hon. Gentleman is responsible will, in the future, obey the law as laid down in the Courts or else come to Parliament to get the law changed. But as long as the Courts have laid down the law, the Minister's Department ought not to try to change it themselves.


I also hope that my hon. Friend will not withdraw the proposed New Clause. It appears to me that the Inland Revenue are endeavouring to force the taxpayer, who comes forward with a document which requires stamping, to take an appeal to the Courts which the Inland Revenue authorities themselves neglected to do after the decision of 1896. The taxpayer in such a situation is faced with these alternatives. The first alternative is to pay the Stamp Duty—which is vastly higher than the duty imposed since 1896 until a recent period. The difference is enormous. Under the decision of 1896 the duty on a weekly payment of £5 was only half-a-crown; but now the Inland Revenue authorities contend that it should be nearly £50. As I say, the first alternative of the taxpayer is to pay a Stamp Duty vastly more than the Stamp Duty imposed in the first instance. The second alternative is to leave the document unstamped because the Inland Revenue authorities decline to accept the lower rate, which as we suggest, is the rate payable under the decision of the Court. In that case, he must go away with his document unstamped and risk all the possible inconveniences and even penalties of such a course. The third alternative is to appeal to the Courts under the Stamp Act to assess the duty. That, in effect, is appealing on behalf of the Board of Inland Revenue who failed to appeal as far back as 1896. It is manifestly unfair.

The decision of 1896 was accepted by the Board of Inland Revenue in that year and faithfully followed until a recent date. Now some zealous, or over-zealous official, having a little time on his hands has gone into the matter, and has concluded that the Court was wrong in that decision, and that the Board should force the issue by declining any longer to impose the old rate of duty. Where is this practice going to end? The Board accepted the lower rate of duty. Now they claim this greatly advanced rate. Is it not possible that they will come forward again and say that the basis which they now propose as the correct one is, altogether wrong? May we not find another zealous official, with time on his hands, going into these questions, and saying that his predecessor was wrong and that there should be a new basis of payment? For all we know, the Board might come forward and say that the duty ought to be based on the principle of succession; that they must find out the age of each person in receipt of payments of this kind and assess the duty on the full value of the succession. Or, they might say that they would like to review these duties, year by year, or month by month, or even week by week.

They might fix the duty on the basis of one year and then make inquiries to ascertain whether the person entitled to the payment was alive at the end of the year and then fix another year's duty and so go on, hoping for the benefit of the taxpayers generally, that the annuitant might live to be as old as Methuselah. If the Inland Revenue authorities were satisfied to follow the decision of the Court in the years following 1896, it is not reasonable for them now to say to the taxpayer who comes forward with a document for stamping, "We are not going to put on Stamp Duty as defined by the Court but a vastly larger sum of duty; and if you do not like it you can take your document away unstamped, or you can appeal to the Court and do that which we were not prepared to do in 1896 and which we cannot do to-day because we have lost our right of appeal against that decision." I am surprised that the Financial Secretary did not understand the proposed new Clause which was so very clearly put forward and I hope my hon. Friend will stand by it.


I wish to support what has been said by the last two speakers. This is not a complicated matter but is simple and straightforward. We are not here discussing the merits of the duty. What we are discussing is the right of the House of Commons. The House of Commons has always been jealous of its privilege as the only body in the country which imposes taxation on the subject. The Mover of the proposed new Clause has just read a letter from the Inland Revenue in which they admit that a certain practice has been followed for some years past in this matter but they claim to alter the practice and in future to impose heavier taxation. There is no question here at all of merits. The House of Commons ought vigorously to oppose the action of any Department of State which arrogates to itself the right of increasing the burdens on the subject, unless the matter has first rums before the House of Commons in a proper and constitutional way. The House of Commons ought to be as jealous of its rights to-day as it was in the past, and ought to resist the imposition of any taxes on the subject, by any by-way or any underhand method, by any Department of State, until the proposal has been thoroughly explained to and sifted by the House of Commons and supported and passed by the House of Commons. I hope my hon. Friend will stand by his proposal which only maintains the law in this respect as it has been for many years past. Unless the Chancellor of the Exchequer is able to give us definite assurances that the law will remain as it has been in the past, and that Government officials will not be allowed to alter it, I hope my hon. Friend will press his new Clause.


I think that some of my hon. Friends in their eagerness are spoiling a case in which there is a great deal of substance by overstating it. This is really not a question of over-riding the powers and rights of the House of Commons by departmental action. The powers of the House of Commons in regard to these matters are exercised through the Inland Revenue. The Board carries out the law as a Department of State and the Courts are above the Inland Revenue to see whether it exercises its functions correctly or not. It is true that there has been a change of practice in this matter, but it is a change of practice which is justified in many directions by precedent. I am not now on the merits of this question. I am only saying that in many parts of our system of direct taxation the practice adopted may vary on this side or on that, and that the practice is at the discretion of the Inland Revenue, subject to the Courts always being the ultimate, authority to pronounce upon the propriety or otherwise, or the validity or otherwise, of the actions which the officials take. So we need not go back to Magna Charta or the Bill of Rights in this subject. As a matter of fact, my hon. Friend the Financial Secretary in the course of his remarks, indicated that we were somewhat impressed by some of the points that had been made in this discussion, and that further consideration will be given to this matter before the Report stage. Of course, if we are forced to a Division, and have to vote on the matter, I shall take that as disposing of it.


The right hon. Gentleman, instead of ending, as we hoped he would, with a spirit of conciliation, has practically threatened the Committee, and has told my hon. Friend the Member for Cambridge University (Mr. Withers) and those who hold the same view as he does, that if they stick to the Clause he will not even give consideration to what he knows to be a just cause. That is not the way to get business through the House, and it is not fair to those who have been taking a live interest in the matter. It affects a very large number of people who are annuitants, and those who receive money regularly under legal documents. The simple point that has been put very fairly by those who have supported this new Clause, and who are not Members of the Opposition, but are the right hon. Gentleman's own supporters, has been this: They have asked themselves, and they have asked the Committee, under what authority these Stamp Duties are now being demanded. Anybody speaking for the Treasury must say that they are demanded under the authority of the Stamp Act of 1891. The next question is: Has there been a change? Whatever change there has been, has been made by a decision of the Court in 1896. Whatever was enacted in 1891 was interpreted in 1896, and there has been no new interpretation since 1896. The rule that was followed by the Treasury from 1896 until quite recently was correct. It had the force of law behind it, and what my hon. Friends are asking is that we should not put any of His Majesty's subjects under these changes without the full authority of the law and the Courts that have to interpret the matter. I hope the right hon. Gentleman will not take the attitude that, if the Committee divides on the matter, he will not consider it, and I hope that he will supplement the remarks that he has just made and give consideration to the matter before the Report stage.


I cannot admit that the action taken by the officials was ultra vires or improper. Indeed, I have argued clearly in the opposite sense. At the same time, when a Measure like this, which is full of complicated points, is before Parliament, and I hear arguments used which show that there is anxiety in some particular aspects, then, as I have said, I consider that I may well promise to give further consideration to these points before the Report stage. I do not admit that the action taken by the Government or the officials, who act under the authority of Parliament, has been wrong. It is very probable that the more this matter is ventilated, the more it will be seen that their action has been right in accordance with their authority. I promise to look into the matter, and I hope that I shall be able to give unprejudiced examination to the case, and that I shall not be fortified in the opposite sense by a Parliamentary decision to-night which might well be to reject the contention of my hon. Friend the Member for Cambridge University (Mr. Withers). I hope hon. Members will allow it to go forward to the Report stage without prejudicing it by taking a hasty decision in the matter.


I do not wish to embarrass the right hon. Gentleman. What my hon. Friends want is to have this matter, which is one of substance, considered by the Chancellor of the Exchequer. We wish to give him the opportunity of considering it, and we hope that it will be raised by him again on the Report stage. I therefore beg to ask leave to withdraw the Clause.



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

The following new Clause stood upon the Order Paper in the name of Sir ASSHETON POWNALL: