§ Sir DENNIS HERBERTI desire to ask the Chancellor of the Exchequer a question, the answer to which, I think, may assist our proceedings on this Clause. The first Amendment which the right hon. Gentleman proposes to make in the Clause is to substitute in reference to a private company a company of the kind "to which this Part of this Act applies." The whole Clause depends materially upon the kind of company to which the Measure is to apply, and if the Chancellor of the Exchequer could see his way to give some indication as to how he proposes to define hereafter the company to which all this has reference, it may save us considerable time on this Clause.
§ The ATTORNEY - GENERAL (Sir William Jowitt)The Chancellor of the Exchequer has asked me to reply to the question which has been asked by the hon. Member. The hon. Member will see that we set out in Clause 33 the definition of the company to which we intend this Act to apply. Broadly speaking, it is a company which is not controlled by its shareholders, that is to say, where for instance the whole of the effective control of the company is in the hands of some governing director by reason of the powers conferred upon him in the Memorandum or Articles of Association which may be, and frequently is, quite irrespective of any shares in it at all, or else where the company has issued to the public less than 50 per cent. of the shares by which it is controlled. For instance, it not infrequently happens that you may have a company where the sole effective control is vested in the holder of certain management shares. If they have not issued any of these shares to the public, it will be brought into the definition. The effect of the definition, broadly speaking, will be to include all 1798 those companies which are private companies defined by Section 26 of the Companies Act, and to include also those other companies which though not technically private companies within the meaning of the Act would at the same time come within the meaning of the definition we have indicated. I should point out that the fact that the business of the company is carried on by a manager or body of managers would not of itself bring the company within the definition. We exclude companies controlled by shareholders either generally or particular sections of shareholders. A company in which control is reserved to some small class of shareholders will be brought within the Clause by paragraph (2). I hope that that answers the question of the hon. Member.
§ Mr. ARTHUR MICHAEL SAMUELDoes that mean that the right hon. Gentleman throws over the provisions of Clause 33, or does he adopt them as well?
§ The ATTORNEY-GENERALI merely tried to explain what is done by-Clause 33.
§ Sir D. HERBERTI rather gather that the learned Attorney-General may have in mind a definition on the lines which he has explained to us which, perhaps, may not exactly be in the form in which the Clause is at present. I should like to ask him this further rather important question. Does he intend that the companies affected shall cover companies which are registered outside this country?
§ Sir D. HERBERTThe Chancellor of the Exchequer will realise from what I said on the subject some years ago, that I am entirely with him in endeavouring to get at those foreign companies, if possible. I should like to make a suggestion, and I am sure the Chancellor of the Exchequer will realise the importance of it. Will he consider, in order to avoid any possible mistake, whether it will be advisable to introduce a supplementary Resolution at some time or other? I have said that in order to avoid any question being raised at subsequent stages.
§ Sir LAMING WORTHINGTON-EVANSI beg to move, in page 24, line 1799 20, after the word "made," to insert the words "not more than twelve years before his death."
4.0 p.m.
I desire to move this Amendment in the name of my hon. and learned Friend the Member for Altrincham (Mr. Atkinson). I would congratulate the Chancellor of the Exchequer on having given us the White Paper, which includes the Amendments for which we asked the other day. I hope he will realise that our action then was not tomfoolery as he called it, but was something which assisted the Committee in the consideration of these Clauses. The Clause provides that in certain circumstances anyone who has transferred to a certain class of company property in the widest terms, any property, at any time before his death, shall be liable to duty. Suppose there is such a company as that to which the Act refers, and a man who carries on business has capital which he invests, apart from his business—it may be a broker or merchant—and he ventures it in all sorts of ventures throughout his life. After his death his executors will have to inquire into all the transactions that he has entered into during his life, away back to the very beginning of his business transactions, for if at any time prior to his death he transferred any property to the class of company referred to, his estate is liable to duty.
It is quite possible that in some complicated large estates such a search as that, going back year after year, will be a matter of immense expense and will cause an absolutely unknown liability upon the estate—not a liability at which the Chancellor of the Exchequer is aiming, because that type of transaction is not a transaction for the purpose of defeating claims to duty. The Chancellor of the Exchequer is going far wide of that. He is causing this inquiry into the transactions of all sorts and kinds, in order that the executors may find out whether any property had been transferred to any one of these companies. The executors know nothing about it. They would have to search back in order to see whether such a transaction took place.
The Amendment suggests that if a transfer was made not less than 12 years from the death of the transferor it should 1800 be free of duty, but if it were made at any time within 12 years of death, then, if it comes within the charging Clause, it should be liable to duty. The object is to prevent the necessity of unravelling transactions which have nothing whatever to do with any attempt to avoid duty, but which were carried on either in the ordinary course of business or in the ordinary investment of surplus capital. I think that 12 years is too long a period. If I had put the Amendment on the Paper I should have said that three years or five years was long enough, but if the Chancellor of the Exchequer will accept some time limit it seems to me that we ought to agree to it.
§ Mr. A. M. SAMUELI have been in business all my life. I do not regard this Clause as a lawyer. This is what will in trade happen under the Clause. If a man wishes to go into partnership after having made some transfer to a company as foreseen in this Clause, you will have to search all through his records, just as you search through a title when you are selling some property to see whether there is some flaw in it. If a man undertakes to give a guarantee, or undertakes to enter into some commercial contract, or goes into partnership, the people with whom the business is to be carried out will have fear of doing business, because there may be hidden away somewhere some opportunity by which the Revenue may, quite legally, under this Clause, come down upon him for something which will do away with the value of the guarantee. Quite apart from what this Clause is intended to operate upon, the Chancellor of the Exchequer will see the disability that it enforces on the ordinary common or garden business operation.
§ Mr. P. SNOWDENI think that the right hon. Gentleman who moved the Amendment did not quite see the implications of the terms in which the Amendment has been drawn. It refers to 12 years prior to death. That might bring in cases where a company is formed even after the passing of this Act. Suppose that a man died 15 or 20 years after the company had been formed. Then he would be exempt. I do not think that that had occurred to the right hon. Gentleman. I am quite ready to meet 1801 what I believe to be the purpose of this Amendment and that is the case of companies that have been formed a long time ago, say before the War. The reason why the hon. and learned Member for Altrincham (Mr. Atkinson), whose name is Attached to this Amendment, chose 12 years, was probably that it had some connection with the date of the termination of the War. In any case, if I met the right hon. Gentleman who moved the Amendment I do not think it could be done in the terms of the Amendment. It would have to be done by reference to a period prior to the commencement of the Act and not by reference to the date of death.
§ Sir L. WORTHINGTON - EVANSThat would only help now and not in the future.
§ Mr. SNOWDENI am not concerned about the future. I understood that the purpose of the right hon. Gentleman was that we should not go back more than 12 years. Indeed, he pointed out the difficulty of unravelling transactions after so long a period, and the injustice which might be caused, and so forth. If that is his purpose, that we should not have to go back more than 12 years, I am quite prepared to meet him, but on the spur of the moment I would not like to accept the Amendment. Any Amendment accepted would require rather careful consideration.
§ Sir BOYD MERRIMANThere is another point with regard to the length of time, and to it the Chancellor of the Exchequer has not referred. It was one of the points which was in the mind of the hon. and learned Member for Altrincham (Mr. Atkinson), for he had begun to address himself to it when the Committee passed to other business from a similar Amendment the other day. In a later part of the Clause one of the tests taken is the value of the property transferred at the time of the transfer, or at the time of death, whichever is greater, and it is obvious that the longer period you have between those two times, the more chance there may be for some injustice being worked by the transfer of something which had insignificant value at the time of transfer but which in course of time has become of great value and has to be taken into account in the calculations made under the Clause.
1802 I suggest that this question of time is not met by reference to the date at which the company is formed. The point is the date before the death. It is not only, as my right hon. Friend pointed out, that the executors may have to make investigations for many years before a man's death, but that a company with whom he has no connection whatever at the time of his death may have to look back through their books to see whether some person who has died within three years has or has not made a transfer to them at some period, it may be 50 years before. There ought to be some time limit. I do not want to trespass or to be thought to be saying the same thing again, but this does appear to be a convenient opportunity to point out that even now, with all the very substantial Amendments—I do not want to minimise them in the least—which have been made to this Clause, it still covers a great many things which are outside the scope of what we are talking about. It is important to point that out now. After all, the test is whether or not, in a year in which the company happens to make no profit at all, there is someone who happens to die within three years of the transaction and who has received from the company some form of remuneration which is not consideration for a sale or any of the other excepted things.
I think that the learned Attorney-General will agree with me that in that class of transaction would come any remuneration other than that to a man who is an employee of the company, for services rendered or work done or anything of the sort which is not covered by the bona fide sale exemption and the like. If you once get a person in that position, a solicitor, if you like, who is acting for the company and has to be remunerated for services rendered, or a consulting engineer who has received remuneration within three years of his death, and at a time when that remuneration bears the requisite proportion to the profits of the company, if any, the company would have to look back for years and years and see whether at some antecedent time that man had transferred property otherwise than by a transfer which is excepted by the Clause.
Again, I am sure that the learned Attorney-General will agree with me that "property" is the widest term that can 1803 be used in connection with a man's possessions. Obviously, it includes money simply. "Transfer" is the widest word of disposition. Without multiplying instances, I would like to call attention to one specific sort of thing that might happen. A company, as we know, cannot buy its own shares, but it has been held that it is a perfectly legitimate form of transfer to a company if a class of shareholders surrender their shares—assuming that they are fully pail—for the issue of another denomination of shares. Suppose that 20 years before a particular shareholder dies, being one of a class of shareholders who has surrendered to the company his shares in exchange for another denomination of shares, and the company is one of the class indicated. The company would have to be satisfied that no single person who had been a party to that transaction—it might involve hundreds of a particular class of shareholders—had received within three years of his death that form of remuneration which was not excepted remuneration within the Clause. I am giving that as one illustration which I am quite sure is watertight. Having regard to this sort of consideration which still survives in the alteration of the form of the Section, I venture to suggest to the Chancellor of the Exchequer that there should be a very definite, and not too long, time limit.
§ Major NATHANIn connection with this discussion, I want to direct the attention of the Committee to Clause 31, which has a relevance. It defines the obligation which arises upon the death of any transferor in what I will call an offending transfer, to a company in which may be a number of shareholders other than the transferor. Indeed, having regard to the new Clause just placed before the Committee by the Chancellor of the Exchequer, I am not at all sure that the offending transferor can be a shareholder. At all events he will not be a shareholder as a result of the transfer, for if he receives shares in the company as consideration for the transfer, it is not an offending transaction, or it may not be, under the new Clause as revised. You may, therefore, have a company which has no association of any kind whatsoever with the transferor except the fact that he entered into 1804 a transaction which for purposes under this Bill becomes an offending transaction. The Chancellor of the Exchequer suggested that the position would be met if the Clause were restricted in its operation to companies formed after a certain date, say, after the War, as I understand him.
§ Mr. P. SNOWDENNo. Before the end of the War.
§ Major NATHANI am sorry if I misunderstood the Chancellor of the Exchequer. I should have said that a company formed before the end of the War. I do not know whether he means by that the beginning of the War or at the end of the War, but that is immaterial for the purposes of my argument. It is not the date of the formation of the company which is material, but, as the hon. Member for Rusholme (Sir B. Merriman) pointed out, the relevant date is the date of the death of the deceased. I quite appreciate that the right hon. Gentleman is desirous of meeting the point, but I venture to point out that, in fact, he has not done so. Surely it must be a misapprehension of the position to suggest, as the Chancellor of the Exchequer did, that he is not interested in the future. The Chancellor of the Exchequer, if I understand him correctly, said in reply to a question put from the Front Opposition Bench, "I am not interested in the future." But, subject to the sovereignty of Parliament, this Bill will continue in operation, and it may very well be that it might operate in respect of a death, let me say for the sake of example, 15 years hence. If the company in respect of which this Clause may come into operation, is to be a company formed just prior to the War, and if the offending transaction took place upon the formation of that company, there would be a period of 30 years, assuming that during the last three, or one of the last three, of those 30 years, the transferor was receiving some consideration in respect of the offending transaction.
In the course of 30 years shareholdings and shareholders will change, and directors will change, and it may very well be that, at the end of that period of 30 years, there will not be a single shareholder or director who was there at the time the company was formed, and at the time of the offending transaction, or who has any knowledge of the offending 1805 transaction. Yet, under Clause 31 of this Bill, that company is to be responsible for giving notice to the Commissioners of Inland Revenue of the death of a person to whom, indeed, it may have been paying a sum of money, but in regard to whom it may have been entirely ignorant of whether the transaction giving rise to that payment was an offending transaction or not. It may have been a transaction involving payment partly by a sum of money and partly by a contract of service. That is the sort of instance indicated in the White Paper. The transfer of the property in my assumed case has taken place 30 years ago, the property which was the subject of the transfer may have passed from hand to hand through a dozen hands and its identity may have been completely lost. What was an agricultural estate, for instance, may now be a prosperous suburb of a great city. Still, someone who was a transferor 30 years ago to that company, is receiving remuneration for services, let us say, as managing director of the company. He is the only person who has been connected with that company for the whole 30 years. He may have been paid remuneration for services; it may be a pension in respect of services long since ended. But it is a payment being received from the company, and under the terms of this Bill that company therefore would be liable to make the returns under Clause 31, and the company would also be liable under the same Clause to pay duty for that transaction of 30 years ago. That seems to me an intolerable position. It does not seem businesslike, or common sense.
The company in question may have changed its character. It may have begun as a private company and it may have been acquiring other property, or it may now be a manufacturing concern. It may have thought it desirable to rationalise or to amalgamate with some other concern. In 30 years many companies have entirely changed their character. The question of amalgamation may arise. Who is going to amalgamate with a company that may have an unknown liability? How can any person doing business with that company decide what is the value of the assets of that company? It is not merely a question of amalgamation. How can a shareholder 1806 dispose of a shareholding in that company? How can the shares be priced if there is an unknown liability extending over so long a period? A period has been prescribed—a lengthy period, it is true—beyond which no one could be called upon to look, in making researches into the title of property which he is proposing to acquire. When you are dealing with matters of this kind, so vague and difficult to define, which have already taken three sets of Amendments in order to get them into a shape which commends itself to those who are charge of this matter as defining the objects which they have in view, I say not only must there be some period, but that 12 years is far too long a period. For the purpose of ordinary, everyday business, unless you are going to clog the wheels of business, unless you are going to assume that every person who enters into transaction with a company enters into an offending transaction, then I say that four or five years would be long enough.
§ Sir BASIL PETOI venture to suggest again that there are two perfectly separate questions before the Committee One is that which was dealt with by the Chancellor of the Exchequer, namely, how far is this legislation to be retrospective? The Chancellor objected to the terms of the Amendment, because it had a bearing upon future transactions. The original Amendment on the Paper dealt simply with the question of whether this legislation should be indefinitely retrospective or not. It was only this afternoon that the Chancellor of the Exchequer answered a question by the hon. Member for South Kensington (Sir W. Davison) in which he pointed out that a judicial decision favourable to the taxpayer had no retrospective effect. The Chancellor of the Exchequer, in answering the question, said in effect: "When a taxpayer has paid too much and he gets a decision in his favour, it has no retrospective effect at all." When he introduces these Clauses 29 to 34 dealing with perfectly definite subjects, the question of the exasion of taxation by the formation of what is called in the Bill a private company, the Clauses are so widely drawn so as to spread the net that no such offending transaction—I thank my hon. and gallant Friend the Member for North-East Bethnal Green (Major Nathan) for that phrase, which helps to shorten the debate—can possibly 1807 get through the net, then we get into all sorts of difficulties, because we have constantly at every point in this Clause the position that large numbers of ordinary commercial transactions will be interfered with by the passing of these Clauses, in the terms in which they are upon the Paper.
The Chancellor of the Exchequer has offered to consider not making this legislation retrospective beyond the termination of the War, something like 11 years. He says that for the future, it does not matter how long it may be after the transaction which brings the company into the purview of this Clause, he intends to investigate the whole position, and to consider under this Clause whether the company is liable to Estate Duty. That introduces number of grave difficulties. Although I quite appreciate the point of the Chancellor of the Exchequer, when he said he was not concerned with protecting the formation of companies in the future, yet if there is an offending transaction entered into by a company knowing that these Clauses are upon the Statute Book, then if the transferor does not die for 30 years after, the Chancellor says he wants to bring him within the purview of the Act. I think there is a great deal of reason in that suggestion, although I think it requires very strict examination. I suggest that the kind of transaction which is an offending transaction is one where the person who dies, the transferor originally of the property, is continuously in receipt, of income or other benefits from this company, which was created simply in order to escape Estate Duty. Why not limit it in that way, and not leave it open to cover any number of perfectly innocent transactions? Why cover a case where a person has not received any benefit for years from the original transaction? Why not limit it to those cases you really want to hit, where the person who transfers his property receives from the company something which is equivalent to that which he would have drawn from the property? I do not think it is beyond the ingenuity of the Attorney-General and the Chancellor of the Exchequer to do what they want to do and avoid doing injustice in numerous cases.
§ The ATTORNEY-GENERALTo a certain extent I sympathise with the hon. 1808 Member for Barnstaple (Sir B. Peto), but there was a frequent misuse of the word "retrospective" in his speech. There is no retrospective effect in this legislation. It applies only in the event of deaths which take place after the passing of this Bill. It does not apply in any shape or form to deaths which have already taken place, and it is a misuse of the word to call this Clause retrospective when it only applies, admittedly, to deaths which take place after the passing of the Bill. The amount of property which has passed is regulated——
§ Sir B. PETOMay I explain? It is true that the Clause only deals with deaths which take place after the passing of the Bill, but it is retrospective in this sense, that transactions may have been entered into which were perfectly legal at the time, and the Chancellor of the Exchequer now proposes to go back and say that although they were legal when they were entered into, he is going to pass legislation which will make them illegal.
§ The ATTORNEY-GENERALI quite understood that the hon. Member was speaking in that sense, but in that case the word "retrospective" is inapt and inappropriate. Every Estate Duty Act—1894, 1900 and 1910—has always looked at the situation as it existed at the date of death, and the counterpart of this legislation is to be found in all these Statutes. Therefore, while it is true that the amount of property which passes at death may be affected by what is being done, I must protest against the use of the word "restrospective" in that connection. The hon. Member thought that this Bill might apply in a case where a man has ceased for many years to draw any benefit from the company at all. That is a misapprehension, because you have to calculate over the prescribed period, which means, broadly speaking, the last three years, the benefit which the individual gets from the income of the company, and it is only in the case where the individual has been drawing from the company such large sums of money during the last three years of his life that it would amount to more than 30 per cent. of the income of the company—not taking into account any income he gets by way of shares or money on loan—that the Clause applies at all. We have endeavoured to find the outward and visible sign of taxevasion. 1809 We have tried to hedge it about by conditions which will prevent genuine cases being hit, but which at the same time will hit the guilty, and it is to this extent that I find myself in sympathy with the hon. Member for Barnstaple.
Let us assume that our tests are appropriate, and enable us to separate the sheep from the goats; that we are going to hit the tax evader. Where you have a case which is hit by this Bill, and which thereby constitutes a case of tax evasion, why should that case be protected? Why should the individual be exempt, or the company exempt, from the consequences merely because the individual happens to live for 13 or 14 years after? If it is a case of real tax evasion which you are entitled to hit, I cannot see why the fact that the person who has done it continues to live for a considerable number of years afterwards should take him out of the consequences of his act. The hon. and gallant Member for North-East Bethnal Green (Major Nathan) seemed to misunderstand the observations of the Chancellor of the Exchequer. The question between those who are moving this Amendment and the Chancellor of the Exchequer is this: from what date should the period of 12 years be measured. Suppose you measure the 12 years from the passing of this Bill and say that the Act shall not apply to transfers which have been made before 1918. On the last occasion we discussed this it was pointed out that to delve back into the past might involve hardship, and we were asked to accept an Amendment, which the Chancellor of the Exchequer has indicated he is prepared to accept. He proposes that the Bill shall not apply to transfers which were made 12 years ago. I hope that is plain.
What we are asked to do by the Amendment is something quite different. We are asked to say that the Bill shall not apply in cases where the transfer was made more than 12 years before the death. That is perfectly plain. The individual makes his transfer when this Bill has become an Act of Parliament, it is an offending transaction, and because he happens to live for 13 years afterwards he is to escape. I cannot see why he should, and there is no precedent for such an arrangement. With the best will 1810 in the world, my right hon. Friend could not possibly accept such an Amendment. He will endeavour to meet the wishes of the Committee by accepting an Amendment making this Bill apply only in the event of transfers which have been made 12 years before the passing of the Act. That is a real concession which, I hope, will satisfy hon. Members.
§ Mr. O'CONNORI beg to move, as an Amendment to the proposed Amendment, to leave out the word "twelve," and to insert instead thereof the word "three."
I appreciate the force of the argument of the Attorney-General that a, limited period like three years before death might be an undue restriction, but the vice of this Clause is that it brings within its ambit transactions which were perfectly genuine when they were entered in it, and no Amendment has been put down by the Chancellor of the Exchequer to shake our view that all kinds of perfectly genuine transactions are brought within the ambit of this Bill. It is one thing to say that in future you must frame your transactions, if they are genuine, so that they will not land you within the Clauses of this Finance Bill, but it is quite another thing to say that if you have made what is a perfectly bona fide transaction at the time, when you had no reason to anticipate that the legislature would be so stupid as to pass an Act of Parliament making genuine transactions into fraudulent transactions that you are going to be penalised by an Act of Parliament. Let me give what I conceive to be a water-tight case. Take the case of an inventor who has a patent. He disposes of it to a private company, and the conditions of the transfer are that he shall receive a salary for a period of years and afterwards 50 per cent. of the profits of the company. That is a transfer for a consideration. The fact that it is a transfer for consideration does not take it outside the Clause; he still conies within it.
Suppose £1,000,000 is put up in order to finance the working of the patent and that the inventor dies before the company reaches a profit-earning stage. These circumstances are not at all unlikely to arise. Then, notwithstanding the fact that he has transferred the benefit of his idea, the fact that he has received more than the statutory amount of the profits 1811 of the company for himself, the company, that is to say the capitalists who enabled him to commercialise his idea, is mulcted in Death Duties under a law which they could not conceive coming into existence when the transaction took place. That is a typical case. A man may transfer a shop as a gift to his son to set him up in business, and if he owns a farm he might supply the shop with the produce from the farm. If the value of the produce is more than 33⅓ per cent. of the value of the shop, he will come under this Bill. All these transactions can be possibly taken outside the ambit of the law for the future, but as regards the past they are caught by this Clause, which the hon. Member for Barnstaple (Sir B. Peto) is justified in describing as retrospective, and viciously retrospective. Every year you go back you bring in more anomalies and more of those cases which the Government professes they do not want to deal with under this Clause. Therefore, I suggest that its operation should be limited to a retrospective period of three years.
§ Major GEORGE DAVIESI want to refer to the remarks of the learned Attorney-General. It is quite clear, as he pointed out, that there is a flaw in the Amendment, whether it is 12 years or three years. Under the assumption—and it is a large assumption—that the Clause only catches the guilty, then it is absurd to limit it and enable a guilty person, a deliberately guilty person, because he lives a certain number of years to dodge the clutches of the Chancellor of the Exchequer. There is no question about that, but that brings into greater relief the point that really is behind this Amendment. The difficulty with which we are faced is that we are trying to draw up a piece of legislation which will catch people on account of their motives, and to do that bristles with difficulties. That has formed a barrier which has implanted caution in the breasts of previous Chancellors of the Exchequer, because of the tremendous difficulty of separating sheep from goats.
Although the Chancellor has made some very great advances upon the original Clause—he has realised what an enormous number of sheep he is getting into his goatfold and wishes to reduce them—nevertheless, in this Amendment, he is 1812 still going to catch an overplus of sheep, because, as has been so forcibly pointed out by the hon. and learned Member for Nottingham Central (Mr. O'Connor), there are many cases of legitimate business, and if this Bill goes through unamended, it will cause an enormous upset in absolutely legitimate industry. While I think the Amendment to the Amendment is better than the 12 years, in order not to catch all those sheep, I appreciate the argument of the Attorney-General that there is a great deal to be said in regard to the large number of goats that will go scot free, but surely the Chancellor of the Exchequer, having shown boldness in tackling this thorny problem at all, might undertake, not now, but before the Report stage, to evolve something which will do what we all want, and that is to tax the maximum number of goats and let loose the maximum number of sheep.
§ Mr. ATKINSONI cannot help thinking that three years is too short a period to fix. It has been said that, however carefully you try to frame legislation of this kind, it is impossible to do it only to catch the cases that you desire to catch; inevitably you will catch some innocent cases. Where that is the position, there should be some sort of compromise, and some period should be fixed which seems to be a fair period and to hold the scales justly. Twelve years is a period of time in which even a wrongdoer gets a good title to property. He gets a title if he remains in undisturbed possession of property for 12 years, and the right owner's title has gone, and it seems a reason for trying 12 years here. Treat a company, if you like, as a wrongdoer, but after 12 years it has a vested right. The real reason that actuated me in moving the Amendment was that I wanted the Committee to realise the extraordinary differences there may be between the value of land when transferred and the value that it may have at the time of the death of the transferor, and the longer that period is, the greater becomes the extremes between those two values.
Suppose you have a manager of a company, enjoying a salary of £2,000 a year. It may be that in the last three years of his life his salary may exceed the profits of the company, but supposing his £2,000 1813 just equals the average profits of the last three years, you then arrive at a sum, under this method of calculation, which would amount to half the value of the estate. Under the Amendment of the Chancellor of the Exchequer, that has to be reduced to the value of the property either at the date of transfer or at the date of death, whichever is the higher. Take my case of a manager, who has no proprietary interest in the company, but who, 30 years before, gave a small bit of land for the men employed in the firm, which cost him £200. Years go by, and the value of that land increases enormously, it may be by what the company itself has done. It may have built round the land, and the property has become worth many thousands. In such a case, the sum which is to be deemed to be the value of the property passing on his death will be reduced merely to its value at the time of death, which may be many thousands, whereas the property which he had transferred only cost him £200. This same property enters into the duty that his own estate has to pay for the purpose of fixing the rate or percentage of duty payable, and it seems to me that these are reasons for drawing these two dates as nearly together as possible.
It is impossible to fix a period which is altogether satisfactory, and there bas to be a compromise, but at present the dates might be 30 years apart, and everybody must concede that in such a time what was at first quite a small property may have become of very great value. The same thing may happen even in 12 years, but not to the same extent, and it seems an unanswerable argument that some reasonable period should be put in, otherwise you will have cases of very grave injustice arising. Three years would be altogether admirable from some points of view, but one appreciates the argument of the Attorney-General, when he asked why a wrongdoer should get off because he happened to live over three years. But is not 12 years a reasonable period to take? Does it not hold the scales fairly? I do not think many wrongdoers will escape if you have such a period, and you will be eliminating a great deal of injustice which would arise under the Clause as drawn.
§ Mr. O'CONNOROn a point of Order. In view of your Ruling, Mr. Young, which 1814 has excluded the first Amendment, has not the Committee got into some difficulty? We are, as I understand, trying on this side to press for the Bill not to be made retrospective as from the date when it passes, whereas the Amendment which we are now discussing relates to any period of time after the Bill has come into operation. There is no Amendment before the Committee which gives effect to the argument with which the Amendment was moved. The argument to which we are addressing ourselves is at cross purposes with that of the Attorney-General and the Chancellor of the Exchequer, who are prepared, I understand, to say that the Measure shall not be retrospective beyond the end of the War or some similar period, whereas the purpose of the Amendment is to deal with the period between death and transfer.
§ The CHAIRMANI am not responsible for the Amendment. I selected this Amendment, and hon. Members who support it must know what they are arguing for.
§ Mr. A. M. SAMUELAs the debate has proceeded, it has become more and more certain to a plain man that if the Clause is passed in its present form, without some limitation, there will be a terrible outcry in the country. The country will not stand having this clog put upon normal commercial undertakings or covenants. Whether or not there is a flaw in the Amendment, and whether the period should be three years or 12 years, I do not pretend to know, but what I know for certain is that if this Clause stands as it is, you will hit the very man whom you are trying to protect. You will hit a few scamps, but you will hit a great many more innocent men. That, I am sure, is the last thing which the Chancellor of the Exchequer desires to do, and we are all with him and desire to help him catch the tax dodgers, but we cannot allow commerce to be clogged by a Clause which, in order to catch five men, may injure 50.
Under the Clause as it stands, unless there is, in any case, a limit of time, no man in future will dare to accept the covenant or undertaking of another person, for fear that, at some unlimited period back, there may be found a prior claim by the Revenue relating to a, deceased estate of another person which 1815 has been undischarged——[Interruption.] There will be an amount collectable by the Revenue which was unforeseen by the person who made a contract with the deceased, who may have been a director of a company, with the result that this liability may render the dead man's covenant absolutely valueless. People will be frightened out of their lives from entering into any undertaking with a man whose estate may be penalised in this way.
5.0 p.m.
The Chancellor says "X years after the passing of the Act." The date does not matter as to when the company is formed; the point is the date when the Revenue can make the claim. You give a bankrupt his discharge after a certain number of years, but here the Revenue can go back for an unlimited period and dig up and find something that may impose the deceased's estate an unexpected charge which will render the estate empty of assets. If you buy a house, the first thing you do is to ask your lawyer to look into the title in order to see if there are any easements or other clogs on the title, but you say he need not go back more than 12 years, I think it is, and you take off his shoulder the unlimited period of liability which this Clause is imposing. Who will enter into a contract with anyone with such a liability operating against the other man, which removes the security upon which one party to a civil contract has relied? While you have this Clause operating as now, you are in the position of removing a security upon
§ which one party to a civil contract relied. You are cutting away a security which I may feel I have with another man, because at seine future time there will be a liability stretching back a great many years imposed by the Revenue on the estate of the deceased. At one time the prudent man would not hold bank shares because of the uncalled liability. We know that executors to-day will not do so. No man with sense would hold shares which had an unlimited liability. Yet you are asking, in order to get a few tax-dodgers, under this Clause to put an unlimited liability on every man who enters into a contract such as this Clause touches upon. It is unheard of and unreasonable.
§ Captain CAZALETI understand that the Government are prepared to accept some Amendment on these lines which will limit the number of years in which the Treasury may look in regard to a particular case after the passing of this Bill. That is to say, if we fix the period of the War, this Act will impose a limit of 12 years before this Act comes into operation. But they are not prepared to accept this Amendment or any other Amendment which fixes and limits the period between transfer and death after this Bill comes into operation.
§ Question, "That the word 'twelve' stand part of the proposed Amendment," put, and negatived.
§ Question put, "That the word 'three' be there inserted."
§ The Committee divided: Ayes, 162; Noes, 235.
1819| Division No. 394.] | AYES. | [5.4 p.m. |
| Acland-Troyte, Lieut.-Colonel | Cautley, Sir Henry S. | Elliot, Major Walter E. |
| Ainsworth, Lieut.-Col. Charles | Cayzer, Sir C. (Chester, City) | Eimley, Viscount |
| Albery, Irving James | Cayzer, Maj. Sir Herbt. R. (Prtsmth, S.) | England, Colonel A. |
| Allen, Sir J. Sandeman (Liverp'l., W.) | Cazalet, Captain Victor A. | Erskine, Lord (Somerset, Weston-s. M.) |
| Athoil, Duchess of | Chamberlain, Rt. Hn. Sir J. A. (Birm., W.) | Evans, Capt. Ernest (Welsh Univer.) |
| Atkinson, C. | Christie, J. A. | Ferguson, Sir John |
| Baldwin, Rt. Hon. Stanley (Bewdley) | Churchill, Rt. Hon. Winston Spencer | Fermoy, Lord |
| Beamish, Rear-Admiral T. P. H. | Colville, Major D. J. | Fielden, E. B. |
| Berry, Sir George | Courthope, Colonel Sir G. L. | Fison, F. G, Clavering |
| Betterton, Sir Henry B. | Cowan, D. M. | Foot, Isaac |
| Birchall, Major Sir John Dearman | Cranborne, Viscount | Forestier-Walker, Sir L. |
| Boothby, R. J. G. | Crichton-stuart, Lord C. | Gauit, Lieut.-Col. Andrew Hamilton |
| Bourne, Captain Robert Croft | Croft, Brigadier-General Sir H. | Gibson, C. G. (Pudsey & Otley) |
| Bowater, Col. Sir T. Vansittart | Crookshank, Capt. H. C. | Gilmour, Lt.-Col. Rt. Hon. Sir John |
| Bowyer, Captain Sir George E. W. | Croom-Johnson, R. P. | Gower, Sir Robert |
| Braithwaite, Major A. N. | Culverwell, C. T. (Bristol, West) | Graham, Fergus (Cumberland, N.) |
| Briscoe, Richard George | Dairymple-White, Lt.-Col. Sir Godfrey | Grattan-Doyle, Sir N. |
| Brown, Col. D. C. (N'th'l'd., Hexham) | Davies, Dr. Vernon | Guinness, Rt. Hon. Walter E. |
| Brown, Brig.-Gen. H. C. (Berks, Newb'y) | Davies, Maj. Geo. F. (Somerset, Yeovil) | Gunston, Captain D. W. |
| Buckingham, Sir H. | Davison, Sir W. H. (Kensington, S.) | Hammersley, S. S. |
| Bullock, Captain Malcolm | Dawson, Sir Philip | Hanbury, C. |
| Butler, R. A. | Dixon, Captain Rt. Hon. Herbert | Hannon, Patrick Joseph Henry |
| Cadogan, Major Hon. Edward | Eden, Captain Anthony | Hartington, Marquess of |
| Carver, Major W. H. | Edmondson, Major A. J. | Haslam, Henry C. |
| Henderson, Capt. R. R. (Oxf'd, Henley) | Nathan, Major H. L. | Smith, R. W. (Aberd'n & Kine'dine, C.) |
| Heneage, Lieut.-Colonel Arthur P. | Newton, Sir D. G. C. (Cambridge) | Smith-Carington, Neville W. |
| Hoare, Lt.-Col. Rt. Hon. Sir S. J. G. | Nicholson, Col. Rt. Hn. W. G. (Ptrsf'ld) | Smithers, Waldron |
| Horne, Rt. Hon. Sir Robert S. | O'Connor, T. J. | Somerville, A. A. (Windsor) |
| Howard-Bury, Colonel C. K. | Oliver, P. M. (Man., Blackley) | Southby, Commander A. R. J. |
| Hunter-Weston, Lt. Gen. Sir Aylmer | O'Neill, Sir H. | Spender-Clay, Colonel H. |
| Hurd, Percy A. | Owen, Major G. (Carnarvon) | Stanley, Lord (Fylde) |
| Hurst, Sir Gerald B. | Peake, Capt. Osbert | Steel-Maitland, Rt. Hon. Sir Arthur |
| Jones, Sir G. W. H. (Stoke New'gton) | Percy, Lord Eustace (Hastings) | Stewart, W. J. (Belfast, South) |
| Jones, Henry Haydn (Merioneth) | Peto, Sir Basil E. (Devon, Barnstaple) | Sueter Rear-Admiral M. F. |
| Kindersley, Major G. M. | Pownall, Sir Assheton | Tinne, J. A. |
| King, Commodore Rt. Hon. Henry D. | Pybus, Percy John | Train, J. |
| Knox, Sir Alfred | Ramsay, T. B. Wilson | Tryon, Rt. Hon. George Clement |
| Lamb, Sir J. O. | Ramsbotham, H. | Turton, Robert Hugh |
| Lambert, Rt. Hon. George (S. Molton) | Reid, David D. (County Down) | Vaughan-Morgan, Sir Kenyon |
| Law, Sir Alfred (Derby, High Peak) | Remer, John R. | Wallace Capt. D. E. (Hornsey) |
| Locker-Lampson, Rt. Hon. Godfrey | Rentoul, Sir Gervais S. | Ward, Lieut.-Col. Sir A. Lambert |
| Long, Major Eric | Reynolds, Col. Sir James | Wardlaw-Milne, J. S. |
| Lymington, Viscount | Richardson, Sir P. W. (Sur'y, Ch'ts'y) | Warrender, Sir Victor |
| McConnell, Sir Joseph | Roberts, Sir Samuel (Ecclesall) | Waterhouse, Captain Charles |
| Macpherson, Rt. Hon. James I. | Rodd, Rt. Hon. Sir James Rennell | Wayland, Sir William A. |
| Maitland, A. (Kent, Faversham) | Ross, Major Ronald D. | Wells, Sydney R. |
| Makins, Brigadier-General E. | Ruggles-Brise, Lieut.-Colonel E. A. | Williams, Charles (Devon, Torquay) |
| Margesson, Captain H. D. | Russell, Alexander West (Tynemouth) | Windsor-Clive, Lieut.-Colonel George. |
| Merriman, Sir F, Boyd | Russell, Richard John (Eddisbury) | Withers, Sir John James |
| Monsell, Eyres, Com. Rt. Hon. Sir B. | Samuel, A. M. (Surrey, Farnham) | Wolmer, Rt. Hon. Viscount |
| Moore, Sir Newton J. (Richmond) | Sandeman, Sir N. Stewart | Womersley, W. J. |
| Moore, Lieut.-Colonel T. C. R. (Ayr) | Savery, S. S. | Worthington-Evans, Rt. Hon. Sir L. |
| Morris-Jones, Dr. J. H. (Denbigh) | Shepperson, Sir Ernest Whittome | |
| Morrison, W. S. (Glos., Cirencester) | Skelton, A. N. | TELLERS FOR THE AYES.— |
| Muirhead, A. J. | Smith, Louis W. (Sheffield, Hallam) | Major Sir George Hennessy and |
| Major the Marquess of Titchfield. | ||
| NOES. | ||
| Adamson, Rt. Hon. W. (Fife, West) | Forgan, Dr. Robert | Law, A. (Rossendale) |
| Adamson, W. M. (Staff., Cannock) | Gardner, B. W. (West Ham, Upton) | Lawrence, Susan |
| Addison, Rt. Hon. Dr. Christopher | Gardner, J. P. (Hammersmith, N.) | Lawrie, Hugh Hartley (Stalybridge) |
| Aitchison, Rt. Hon. Craigle M. | George, Megan Lloyd (Anglesea) | Lawson, John James |
| Ammon, Charles George | Gibbins, Joseph | Lawther, W. (Barnard Castle) |
| Arnott, John | Gibson, H. M. (Lancs, Mossley) | Leach, W. |
| Attlee, Clement Richard | Gill, T. H. | Lee, Frank (Derby, N. E.) |
| Ayles, Walter | Gillett, George M. | Lee, Jennie (Lanark, Northern) |
| Baker, John (Wolverhampton, Bilston) | Glassey, A. E. | Lees, J. |
| Baldwin, Oliver (Dudley) | Gossling, A. G. | Lewis, T. (Southampton) |
| Barnes, Alfred John | Gould, F. | Lindley, Fred W. |
| Barr, James | Graham, Rt. Hon. Wm. (Edin., Cent.) | Lloyd, C. Ellis |
| Batey, Joseph | Greenwood, Rt. Hon. A. (Coine) | Logan, David Gilbert |
| Beckett, John (Camberwell, Peckham) | Grenfell, D. R. (Glamorgan) | Longbottom, A. W. |
| Bellamy, Albert | Griffiths, T. (Monmouth, Pontypool) | Longden, F. |
| Benn, Rt. Hon. Wedgwood | Groves, Thomas E. | Lowth, Thomas |
| Bennett, William (Battersea, South) | Grundy, Thomas W. | Lunn, William |
| Benson, G. | Hall, F. (York, W. R., Normanton) | Macdonald, Gordon (Ince) |
| Bentham, Dr. Ethel | Hall, G. H. (Merthyr Tydvil) | MacDonald, Rt. Hon. J. R. (Seaham) |
| Bevan, Aneurin (Ebbw Vale) | Hall, Capt. W. P. (Portsmouth, C.) | MacDonald, Malcolm (Bassetlaw) |
| Bondfield, Rt. Hon. Margaret | Hamilton, Mary Agnes (Blackburn) | McElwee, A. |
| Bowen, J. W. | Harbord, A. | McEntee, V. L. |
| Bowerman, Rt. Hon. Charles W. | Hardie, George D. | McGovern, J. (Glasgow, Shettleston) |
| Brockway, A. Fenner | Harris, Percy A. | McKinlay, A. |
| Brooke, W. | Hartshorn, Rt. Hon. Vernon | MacLaren, Andrew |
| Brothers, M. | Haycock, A. W. | Maclean, Neil (Glasgow, Govan) |
| Brown, C. W. E. (Notts, Mansfield) | Hayes, John Henry | McShane, John James |
| Brown, Rt. Hon. J. (South Ayrshire) | Henderson, Arthur, Junr. (Cardiff, S.) | Malone, C. L'Estrange (N'thampton) |
| Brown, W. J. (Wolverhampton, West) | Henderson, W. W. (Middx., Enfield) | Mander, Geoffrey le M. |
| Burgess, F. G. | Herriotts, J. | March, S. |
| Burton, C. R. (Yorks, W. R. Elland) | Hirst, G. H. (York W. R. Wentworth) | Markham, S. F. |
| Cameron, A. G. | Hoffman, P. C. | Marley, J. |
| Charleton, H. C. | Hopkin, Daniel | Marshall, Fred |
| Chater, Daniel | Horrabin, J. F. | Mathers, George |
| Cluse, W. S. | Hudson, James H. (Huddersfield) | Maxton, James |
| Clynes, Rt. Hon. John R. | Jenkins, W. (Glamorgan, Neath) | Messer, Fred |
| Cocks, Frederick Seymour | John, William (Rhondda, West) | Mills, J. E. |
| Compton, Joseph | Johnston, Thomas | Milner, Major J. |
| Cove, William G. | Jones, F. Llewellyn- (Flint) | Montague, Frederick |
| Daggar, George | Jones, Rt. Hon. Leif (Camborne) | Morgan, Dr. H. B. |
| Dallas, George | Jones, Morgan (Caerphilly) | Morley, Ralph |
| Dalton, Hugh | Jowett, Rt. Hon. F. W. | Morris, Rhys Hopkins |
| Day, Harry | Jowitt, Rt. Hon. Sir W. A. | Morrison, Herbert (Hackney, South) |
| Denman, Hon. R. D. | Kelly, W. T. | Mort, D. L. |
| Dickson, T. | Kennedy, Thomas | Moses, J. J. H. |
| Dukes, C. | Kenworthy, Lt.-Com. Hon. Joseph M. | Muff, G. |
| Duncan, Charles | Kinley, J. | Muggeridge, H. T. |
| Ede, James Chuter | Lang, Gordon | Murnin, Hugn |
| Edwards, E. (Morpeth) | Lansbury, Rt. Hon. George | Noel Baker, P. J. |
| Egan, W. H. | Lathan, G. | Oldfield, J. R. |
| Oliver, George Harold (Ilkeston) | Shield, George William | Vaughan, D. J. |
| Palin, John Henry. | Shiels, Dr. Drummond | Viant, S. P. |
| Paling, Wilfrid | Shillaker, J. F. | Walker, J. |
| Palmer, E. T. | Shinwell, E. | Wallace, H. W. |
| Parkinson, John Allen (Wigan) | Short, Alfred (Wednesbury) | Wallhead, Richard C. |
| Perry, S. F. | Simmons, C. J. | Walters, Rt. Hon. Sir J. Tudor |
| Pethick-Lawrence, F. W. | Simon, E. D. (Mancn'ter, Withington) | Watkins, F. C. |
| Picton-Turbervill, Edith | Sinkinson, George | Watson, W. M. (Dunfermline) |
| Pole, Major D. G. | Sitch, Charles H. | Watts-Morgan, Lt.-Col. D. (Rhondda) |
| Potts, John S. | Smith, Ben (Bermondsey, Rotherhithe) | Wellock, Wilfred |
| Price, M. P. | Smith, Frank (Nuneaton) | Welsh, James (Paisley) |
| Quibell, D. J. K. | Smith, H. B. Lees (Keighley) | Welsh, James C. (Coatbridge) |
| Rathbone, Eleanor | Smith, Rennie (Penistone) | Westwood, Joseph |
| Raynes, W. H. | Smith, Tom (Pontefract) | White, H. G. |
| Richardson, R. (Houghton-le-Spring) | Smith, W. R. (Norwich) | Whiteley, Wilfrid (Birm., Ladywood) |
| Riley, Ben (Dewsbury) | Snell, Harry | Whiteley, William (Blaydon) |
| Ritson, J. | Snowden, Rt. Hon. Philip | Williams, David (Swansea, East) |
| Roberts, Rt. Hon. F. O. (W. Bromwich) | Snowden, Thomas (Accrington) | Williams Dr. J. H. (Llanelly) |
| Romeril, H. G. | Stamford, Thomas W. | Williams, T. (York, Don Valley) |
| Rowson, Guy | Stephen, Campbell | Wilson, C. H. (Sheffield, Attercliffe) |
| Salter, Dr. Alfred | Stewart, J. (St. Rollox) | Wilson, J. (Oldham) |
| Samuel, Rt. Hon. Sir H. (Darwen) | Strachey, E. J. St. Loe | Wilson, R. J. (Jarrow) |
| Samuel, H. W. (Swansea, West) | Strauss, G. R. | Wise, E. F. |
| Sanders, W. S. | Sullivan, J. | Wood, Major McKenzie (Banff) |
| Sandham, E. | Sutton, J. E. | Wright, W. (Ruthergien) |
| Sawyer, G. F. | Thomas, Rt. Hon. J. H. (Derby) | |
| Scurr, John | Thurtle, Ernest | TELLERS FOR THE NOES.— |
| Sexton, James | Tinker, John Joseph | Mr. Charles Edwards and Mr. T. |
| Shaw, Rt. Hon. Thomas (Preston) | Townend, A. E. | Henderson. |
| Sherwood, G. H. | Trevelyan, Rt. Hon. Sir Charles |
§ Question proposed, "That those words, as amended, be there inserted."
§ Sir L. WORTHINGTON-EVANSThe Amendment has now got a blank in it. It now reads "not more than … years." I feel like suggesting that the Government should get the Committee out of its difficulty, the blank is caused because the Government refused to allow three to be inserted, but we cannot leave matters as they are now, and I therefore think that the best thing would be to ask leave to withdraw the Amendment. Accordingly, I beg to ask leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Mr. P. SNOWDENI beg to move, in page 24, line 20, to leave out the word "private."
I think that this Amendment may be accepted without discussion.
§ Sir L. WORTHINGTON-EVANSI would ask the Chancellor of the Exchequer to explain more fully what the Government's intentions are with regard to Clause 33. This Amendment proposes to leave out the word "private," in order to say in the next Amendment "a company to which Part of this Act applies." As the Bill is introduced, the interpretation of private company—the word "private" now being struck out by this Amendment—is in Clause 33, and it is impossible to discuss this Amendment without a reference to Clause 33. The Chancellor explained, I think, that it was 1820 the intention of the Government to make some amendment of Clause 33. There must obviously be some amendment because of the words "private company" now being changed to "company to which this Part of this Act applies." Those words are to refer, in future, to a company so constituted as not to be controlled by its shareholders or any class thereof. Supposing, however, that a company is controlled by its shareholders, but that it has made no issue of shares to the public, is it, then, a company "to which this Part of the Act applies," or not? From the explanation given by the Chancellor of the Exchequer there is a doubt left in my mind as to whether the word in Clause 33 should be "and" or "or," but the question which I now put is this. Supposing that there is a company which is controlled by its shareholders—to make it more complete let us assume that there are five shareholders all holding shares of the same class and all with equal voting rights—and supposing that the capital has been privately subscribed and that shares have never been offered for subscription to the public, is that a company to which "this Part of this Act applies"? It is so at this moment because of Clause 33, which contains the words:
'Private company' includes any body corporate wheresoever incorporated, which either—An enormous number of companies, or syndicates if you like to call them so, carry on business in the City of London, the capital of which are privately subscribed, and, in connection with which, the shape or framework of a company is only taken for the purpose of defining interests and showing how much each contributor is to receive in the ultimate results of the company's transactions. Is a company of that kind one to which the Act applies?
- (i) is so constituted as not to be controlled by its shareholders or by any class thereof; or
1821 - (ii) has not issued to the public more than half of the shares by the holders whereof it is controlled:"
§ The ATTORNEY-GENERALThe Chancellor of the Exchequer indicated with regard to this group of Clauses that he was perfectly willing to consider representations from the other side of the Committee, because this really is a case in which all sides of the Committee have the same interest at heart. They want to detect the guilty and to let off the innocent. Having said that, I wish to add, in reference to what the right hon. Gentleman opposite has said about Clause 33, that we intended that the word "or" should be there, but when we come to that point we shall be perfectly willing to consider the proposition which the right hon. Gentleman has advanced about that and see whether there ought to be some change in the language of the Clause. As at present advised we mean the word "or" to be used there because as the right hon. Gentleman will reailse that there might be a company which was being controlled entirely by the holders of a particular class of shares. That is not an uncommon thing, and we think that such a company as that should be in, but when we come to Clause 33 we are prepared to discuss that matter. With regard to this Amendment, which is all we are discussing at the moment, we think it rather inartistic to use the phrase "private company" in one sense in the Companies Act, where the term has a definite meaning, and to use it in another sense in this Measure, and therefore we think it much better to take out the word "private" and put in the words "to which this Part of this Act applies."
§ Sir L. WORTHINGTON-EVANSI am extremely glad that the Chancellor has withdrawn the word "private," and indeed our Amendments were largely 1822 directed to that very alteration. I only rise again to make it clear that I was not taking the case of a company such as the Attorney-General mentioned which is wrongly controlled from the taxing point of view. I was not taking that case at all, but the case in which all the shareholders of a company had equal rights and equal voting power and where they have not, in fact, issued half the capital or any of the capital to the public. There are many such companies. There are brewery companies, for example, though a less number now than in the old days. In the old days the founders got the ordinary shares and sometimes offered debentures to the public, but the whole of the voting control was with the ordinary shares. Surely it is not intended that a company of that kind is one to which "this Part of this Act applies." Then there is a great motor firm, a very well-known firm, in which the whole of the ordinary shares are held by the original proprietor and have never been offered to the public. Such a company as that would probably, under this definition, as it now stands, come within the Measure, but I cannot believe that that is intended, or is necessary, in order to prevent evasion of Death Duties. What we are discussing after all is not a proposal to alter business procedure in these matters, but a proposal to prevent evasion of Death Duties, and a definition as wide as that which is proposed here, seems to be far outside the necessities of the case.
§ Amendment agreed to.
§ Mr. P. SNOWDENI beg to move, in page 24, line 20, after the word "company," to insert the words "to which this Part of this Act applies."
This Amendment follows upon the Amendment which has just been agreed to by the Committee. As the Attorney-General has just explained, it was felt to be undesirable that we should have a definition of "private company" in the Companies Act and another in this Finance Bill and that is why we propose this change. What the right hon. Gentleman the Member for St. George's (Sir L. Worthington-Evans) said on the previous Amendment, I will bear in mind, and I will deal with the point which he raised when we come to grips with that particular question.
§ Amendment agreed to.
1823§ The CHAIRMANThe next Amendment which I select is that in the name of the hon. and learned Member for Holborn (Mr. Stuart Bevan), in page 24, line 20, to leave out the words "whether directly or indirectly."
§ Sir L. WORTHINGTON-EVANSOn a point of Order. May I submit that the Amendment in my name which proposes to insert the words,
which was at the date of the transfer and has continued always to be, and is at such date a private company,raises a point of substance? We have been talking of companies to which this Part of the Bill applies. The intention of the Amendment is that it should continuously apply and that there should not be any change in the nature of such a company between the date of formation and the date on which this Measure comes into operation. I submit that that is a matter which ought to be discussed.
§ The CHAIRMANAll these Amendments, I am told by the hon. Members who put them down, raise points of substance, and it is very difficult to determine of those which do raise points of substance which are the most important. I will say, however, that I did, not select the right hon. Gentleman's Amendment in this case, because I thought that the Amendment of the Chancellor of the Exchequer covered it. If that is not so, I will call the Amendment.
§ Sir L. WORTHINGTON-EVANSI beg to move, in page 24, line 20, after the words last inserted, to insert the words:
and which was at the date of the transfer, and has continued always to be and is at such date a company to which this Part of this Act applies.I move the Amendment in a slightly different form from that in which it appears on the Paper in order that it may conform to the Amendment of the Chancellor of the Exchequer to which the Committee has already agreed. The object of the Amendment is to see that a private company—using for a moment the old words which we have now changed—must remain a private company in order to continue to be affected by the Bill. A company may change its character. For example, at one time there may be no offer of shares to the public at all. There may at a later date be an offer of 51 per cent. of the shares of the company. 1824 Is it the case that the Bill does not apply to that company in its second stage, but does apply to the company in its first stage? I want to have it made clear what is going happen in such a case as that. I have tried by this Amendment, though I am not sure that I like the words very much, to say that a company shall continue to be a company to which the Act applies. Take the simple case of a company to which at one point the Act does apply, because there has been no offer of shares to the public. A year afterwards there is an offer of shares to the public and the Act does not apply to the company any longer. A transaction, however, has taken place 10 years before. Is that a transaction which is hit by this Measure or is it not? That is the point which I want to have made clear.
§ Mr. LEIF JONESOn a point of Order. May I call attention to the fact that we have passed the word "company" and we have put in the words "to which this Part of this Act applies"? The Amendment as it appears on the Paper is to insert these words after the word "company."
§ Sir L. WORTHINGTON-EVANSI have put the word "and" in the Amendment as I moved it, and that will follow after the words last inserted.
§ The ATTORNEY-GENERALI am afraid that it is impossible for us to accept this Amendment, for it would snake evasion perfectly easy. We should open and advertise a highway for any would-be tax evader. All he has to do is this. Having made his transfer to a private company, all he has to do before he dies is to issue some sort of shares or other to the public. He could make the issue so unattractive that there would not be the smallest chance of the public subscribing, and he would be taken out of the Clause altogether. That would not do. As the Clause is drawn, all that matters is this—was the transfer made to a private company? If so, it matters not that thereafter the private company becomes a public or any other sort of company. We are providing that the transfer is made to a company "to which this Act applies." I venture to think that that is quite plain, and if a person has made a transfer to a company "to which this Act applies," he is within the Clause.
§ Mr. O'CONNORI am not satisfied that the Attorney-General's explanation is right. Is it not a fact that under the definition Clause and under Clause 29, if a company happens to be a private company at the death, it would be assessable to Estate Duty, though it might have been a public company at the date of the transfer? The Clause as amended is going to read "made to a company to which this part of this Act applies, whether directly or indirectly, any such transfer." I am sure that the right hon. Gentleman on this side will be quite satisfied if it were made abundantly clear that the only circumstance which would be dealt with was the circumstance where there had been a transfer to a private company, not a transfer to a public company, which, by altering its constitution subsequently becomes a private company; and it is because we fear that that kind of company might easily be caught, that we want some such words as these. The words that have been suggested are: "which was at the date of the transfer"—that is, at the death of the individual—"a private company."
§ The ATTORNEY-GENERALWhy is it necessary to suggest at the death of the individual? It is at the date of the transfer; the words are plain, but if they are not plain, I will see that they are made plain. But it has to be a private company at the date of the transfer.
§ Major NATHANThere does not seem any ambiguity about these words. The point of time is the date of transfer, and it is the only point of time that is relevant. I did not, however, follow the Attorney-General in his argument, which seemed to proceed on the footing that every company to which an offending transfer is made is a private company under the control of the transferor. If that assumption is well founded, his argument will be well founded also, but you may have an offending transfer to a company with which the transferor has no connection of any kind save that he is the transferor, in the sense that he exercises no control over it either as a shareholder or otherwise. Reference has been made to Clause 33—the definition Clause. Clause 33 includes every private company, and every public company except those where an issue has been made to the public. Of about 113,000 companies on the Joint Stock 1826 Companies Register in this country, this Bill applies to over 90,000. I do not need to quote in support of my assertion the White Paper which was issued by the Financial Secretary. I do not imagine that my statement is challenged, but on page 10 of the White Paper it is stated that the effect of the definition of companies will be to include all private companies——
§ The CHAIRMANI do not think that we can discuss that. If there is anything wrong with Clause 33, we must put it right when we come to it.
§ Major NATHANI was attempting to apply myself to the argument advanced by the Attorney-General, to the effect that not only was the relevant date the date of transfer, but that if the Amendment were accepted, it would be within the power of the transferor to alter the constitution of the company so as to make it, a public company, and therefore take it outside the terms of this Bill. In addressing myself to that argument, I was pointing out that this Bill applies to almost 100,000 of the 113,000 companies registered in this country, and that it is an assumption which I suggest is entirely without justification that the offending transfers would be made necessarily and only to companies which the offending transferor controls. It may be that an offending transfer is made to a private company which becomes a public company, or a private company within the meaning of the Companies Act which becomes a public company, or a public company which has not made an issue of over 50 per cent. of the control shares to the public. If an issue is made, it may not be within the control of the offending transferor to decide or even to have a voice in the decision as to whether that operation should take place or not, and the force of the Amendment seems to me to be that I do not see how, even in the case of an innocent company entering into an offending transfer, an issue to the public is ever to be made if it is always to be subject to the risk of laving to set out in the prospectus that they would have to be liable to an unknown liability to pay an unknown amount of Duty at an unknown date upon the death of an unknown person.
§ Major DAVIESI want to reinforce the consideration that has been put forward 1827 by my hon. and gallant Friend from another point of view. The Attorney-General, in his anxiety to keep his craft watertight, has overlooked this consideration: Under the Clause as we now have it, and as far as the Chancellor of the Exchequer has expressed his willingness to go, it is what we would call retro-active—that is it goes back. Suppose this Measure goes through, and quite innocently a transfer has been made, which becomes an offending action under this Measure, unless some such Amendment as this is accepted, there is no means whereby perfectly innocent people, suddenly finding themselves on the wrong side of the law, concerning which they knew nothing, can put their action right. They make a transfer to a private company under conditions which are offensive to those who pass this legislation; they say, "We will put ourselves right and make this into a public company." Are you going to stop the one way in which a person who is really innocent is to be allowed to purge himself of his fault, and put himself right with the Chancellor and the community?
§ Sir HENRY BETTERTONMay I ask the Attorney-General again to consider this point, for it is really important? The definition of a private company under this Bill is greatly enlarged, and it is a very different corporation from a private company under the Companies' Acts. Therefore it becomes very necessary to be certain that the Bill does what the Attorney-General and the Chancellor of the Exchequer wish.
§ Sir B. MERRIMANThe learned Attorney-General was wrong in saying that the only thing that mattered was whether it was a company to which this Bill applies at the time of the transfer. I agree that the wording we are discussing applies only to the time of transfer, but I disagree with him in saying that that is the only thing that matters. You do not get any guilty transaction unless you have two things happening—a transfer to a company to which this Act applies, and a benefit received from that company within three years of the death. The two things are necessary in order to make the transaction a guilty transaction within the Clause. At the present, there is no limitation of time to the point to which you may go back to look 1828 for your transfer to a company within the meaning of this Act; you may even go back to 1894, when there was no such thing as Estate Duty at all. You may have that end of the transaction in 1894, and the other end of the transaction, the death and receipt of the benefit, sometime now or in the future. What we want to ensure is that the thing to which the transfer was made, and the thing from which the benefit was received, are the same sort of thing, and the Attorney-General never directed his argument to that point at all.
§ Mr. ATKINSONI would like to stress the point which has just been made, and to carry it a step further. If the transfer was made to a company which was not at the time a private company, it would not be touched by the Bill; but supposing the day after the transfer was made to a company it was discovered by the company that they came within this definition and they thereupon said "Let us put ourselves right, let us turn ourselves into a public company." They would then become a company not within this definition, and you would then have a state of affairs about which there could be no complaint. It would be a transfer which at the moment it was made was made to a company which was a private company, but that fault would have been put right, because the company had become one controlled by its shareholders. If, as in that case, the state of affairs which was an essential part of the offence has been put right, why should you continue the penalty? I do not know whether that aspect has been considered.
We can always overcome any practice which is a mere subterfuge or a mere cloak for evasion, but I am citing a case where there has been a real change and not one which appears to be a change on the surface only. The whole point of this Clause is that we are dealing with a case where there is a benefit over and above what the man really ought to get. In the case I have quoted the change has given us a public company with everything above board and controlled by the shareholders, and yet the Government want to keep that case within the terms of the definition, although it is not the type of case at which the Clause is aimed. I hope the Chancellor of the Exchequer will see that there is something in the Amendment. The state of the company which makes the whole transaction a 1829 wrong one ought to be a continuing state, it ought to be the state at the date of the transfer and three years before the date, that is, when the benefit was received. If that state of affairs does not exist at the critical date surely the transaction ought to be outside the Clause.
§ Mr. SMITHERSThe hon. and learned Member for Altrincham (Mr. Atkinson) has shown that the transfer of property to these companies can be rectified within a few days of the transfer if the company find that they come within the ambit of this Bill. I would like to ask the Chancellor of the Exchequer how much money the Exchequer hopes to save by the operation of this Clause. The Chancellor of the Exchequer shakes his head. I do not want to disturb the equanimity that is prevailing but is it purely through vindictiveness? [HON. MEMBERS: "Oh!"] I did not mean to say that. I withdraw. Is the object purely to "go for" certain offenders? I apologise for what I said just now and I withdraw it, but I would like to know whether there is any estimate of the amount of money that would be saved by this Clause. I am speaking on behalf of the Exchequer and in favour of getting any money due, but it is obvious that if we make these irritating laws we shall inevitably make transferors and private companies act in exactly the way which the hon. and learned Member has just said, and we shall lose much more in
§ Income Tax than we could possibly hope to save. I understand that it is only a small amount which can be gained by passing this Clause. Before I sit down I would again apologise for what I said. I did not mean to put it in that way. I meant to inquire whether the intention was simply to go for the wrongdoer without any thought of how much gain there would be to the Treasury.
§ Mr. P. SNOWDENOf course I accept the statement of the hon. Member that he did not mean that this was an act of vindictiveness, though if it were I should be in the company of many of my predecessors who have made an attempt to deal with this legal evasion of Death Duties. It is not wholly a matter of money. When it has been disclosed that there are ways of evading or circumventing the intentions of the Legislature it is the duty of the Legislature to try to stop that practice. Up to the present time there has not been a great number of these cases where the transferor has died, because this is only a recent procedure, but whether the sum of money be large or small it is the duty of the House of Commons to put a stop to evasion. I could not give the hon. Member any estimate of the amount involved.
§ Question put, "That those words be there inserted."
§ The Committee divided: Ayes, 162; Noes, 253.
1833| Division No. 395.] | AYES. | [5.53 p.m. |
| Acland-Troyte, Lieut.-Colonel | Colville, Major D. J. | Gibson, C. G. (Pudsey & Otley) |
| Ainsworth, Lieut.-Col. Charles | Courthope, Colonel Sir G. L. | Gilmour, Lt.-Col. Rt. Hon. Sir John |
| Albery, Irving James | Cowan, D. M. | Glassey, A. E. |
| Allen, Sir J. Sandeman (Liverp'l., W.) | Cranborne, Viscount | Gower, Sir Robert |
| Atkinson, C. | Crichton-Stuart, Lord C. | Graham, Fergus (Cumberland, N.) |
| Beamish, Rear-Admiral T. P. H. | Croft, Brigadier-General Sir H. | Grattan-Doyle, Sir N. |
| Beaumont, M. W. | Crookshank, Cpt. H. (Lindsey, Gainsbro) | Grenfell, Edward C. (City of London) |
| Berry, Sir George | Croom-Johnson, R. P. | Gretton, Colonel Rt. Hon. John |
| Betterton, Sir Henry B. | Culverwell, C. T. (Bristol, West) | Gritten, W. G. Howard |
| Birchall, Major Sir John Dearman | Cunliffe-Lister, Rt. Hon. Sir Philip | Guinness, Rt. Hon. Walter E. |
| Bird, Ernest Roy | Dalkeith, Earl of | Gunston, Captain D. W. |
| Birkett, W. Norman | Dairymple-White, Lt.-Col. Sir Godfrey | Hammersley, S. S. |
| Bourne, Captain Robert Croft | Davies, Dr. Vernon | Hanbury, C. |
| Bowater, Col. Sir T. Vansittart | Davies, E. C. (Montgomery) | Hannon, Patrick Joseph Henry |
| Bracken, B. | Davies, Maj. Geo. F. (Somerset, Yeovil) | Haslam, Henry C. |
| Braithwaite, Major A. N. | Davison, Sir W. H. (Kensington, S.) | Henderson, Capt. R. R. (Oxf'd, Henley) |
| Briscoe, Richard George | Dawson, Sir Philip | Heneage, Lieut.-Colonel Arthur P. |
| Brown, Col. D. C. (N'th'l'd., Hexham) | Dixon, Captain Rt. Hon. Herbert | Hennessy, Major Sir G. R. J. |
| Brown, Brig.-Gen. H. C. (Berks, Newb'y) | Eden, Captain Anthony | Hoare, Lt.-Col. Rt. Hon. Sir S. J. Q. |
| Buchan, John | Edmondson, Major A. J. | Horne, Rt. Hon. Sir Robert S. |
| Bullock, Captain Malcolm | England, Colonel A. | Howard-Bury, Colonel C. K. |
| Butler, R. A. | Erskine, Lord (Somerset, Weston-s.-M.) | Hudson, Capt. A. U. M. (Hackney, N.) |
| Cadogan, Major Hon. Edward | Evans, Capt. Ernest (Welsh Univer.) | Hunter-Weston, Lt.-Gen. Sir Aylmer |
| Carver, Major W. H. | Ferguson, Sir John | Hurd, Percy A. |
| Cayzer, Sir C. (Chester, City) | Fermoy, Lord | Hurst, Sir Gerald B. |
| Cayzer, Maj. Sir Herbt. R. (Prtsmth, S.) | Fielden, E. B. | Jones, Sir G. W. H. (Stoke New'gton) |
| Christie, J. A. | Fison, F. G. Clavering | King, Commodore Rt. Hon. Henry D. |
| Churchill, Rt. Hon. Winston Spencer | Forestier-Walker, Sir L. | Knox, Sir Alfred |
| Cobb, Sir Cyril | Fremantle, Lieut.-Colonel Francis E. | Lamb, Sir J. Q. |
| Colfox, Major William Philip | Gauit, Lieut.-Col. Andrew Hamilton | Lambert, Rt. Hon. George (S. Molton) |
| Law, Sir Alfred (Derby, High Peak) | Percy, Lord Eustace (Hastings) | Southby, Commander A. R. J. |
| Leighton, Major B. E. P. | Peto, Sir Basil E. (Devon, Barnstaple) | Spender-Clay, Colonel H. |
| Lewis, Oswald (Colchester) | Pownall, Sir Assheton | Stanley, Lord (Fylde) |
| Locker-Lampson, Rt. Hon. Godfrey | Ramsbotham, H. | Steel-Maitland, Rt. Hon. Sir Arthur |
| Locker-Lampson, Com. O. (Handsw'th) | Reid, David D. (County Down) | Sueter, Rear-Admiral M. F. |
| Long, Major Eric | Remer, John R. | Thomson, Sir F. |
| Lymington, Viscount | Rentoul, Sir Gervals S. | Train, J. |
| McConnell, Sir Joseph | Reynolds, Col. Sir James | Tryon, Rt. Hon. George Clement |
| Macquisten, F. A. | Richardson, Sir P. W. (Sur'y, Ch'ts'y) | Turton, Robert Hugh |
| Maitland, A. (Kent, Faversham) | Roberts, Sir Samuel (Ecclesall) | Vaughan-Morgan, Sir Kenyon |
| Makins, Brigadier-General E. | Rodd, Rt. Hon. Sir James Rennell | Ward, Lieut.-Col. Sir A. Lambert |
| Mason, Colonel Glyn K. | Ross, Major Ronald D. | Wardlaw-Milne, J. S. |
| Merriman, Sir F. Boyd | Ruggles-Brise, Lieut.-Colonel E. A. | Warrender, Sir Victor |
| Moore, Sir Newton J. (Richmond) | Russell, Alexander West (Tynemouth) | Waterhouse, Captain Charles |
| Moore, Lieut.-Colonel T. C. R. (Ayr) | Samuel, A. M. (Surrey, Farnham) | Wayland, Sir William A. |
| Morris-Jones, Dr. J. H. (Denbigh) | Samuel, Samuel (W'dsworth, Putney) | Wells, Sydney R. |
| Morrison, W. S. (Glos., Cirencester) | Sandeman, Sir N. Stewart | Williams, Charles (Devon, Torquay) |
| Muirhead, A. J. | Savery, S. S. | Windsor-Clive, Lieut.-Colonel George |
| Nathan, Major H. L. | Shepperson, Sir Ernest Whittome | Withers, Sir John James |
| Newton, Sir D. G. C. (Cambridge) | Skelton, A. N. | Wolmer, Rt. Hon. Viscount |
| Nicholson, Col. Rt. Hn. W. G. (Ptrsf'ld) | Smith, Louis W. (Sheffield, Hallam) | Womersley, W. J. |
| O'Connor, T. J. | Smith, R. W. (Aberd'n & Kinc'dine, C.) | Worthington-Evans, Rt. Hon. Sir L. |
| Oliver, P. M. (Man., Blackley) | Smith-Carington, Neville W. | |
| O'Neill, Sir H. | Smithers, Waldron | TELLERS FOR THE AYES.— |
| Owen, Major G. (Carnarvon) | Somerville, A. A. (Windsor) | Captain Sir George Bowyer and |
| Major the Marquess of Titchfield. | ||
| NOES. | ||
| Adamson, Rt. Hon. W. (Fife, West) | Foot, Isaac | Lansbury, Rt. Hon. George |
| Adamson, W. M. (Staff., Cannock) | Forgan, Dr. Robert | Lathan, G. |
| Addison, Rt. Hon. Dr. Christopher | Gardner, B. W. (West Ham, Upton) | Law, A. (Rosendale) |
| Aitchison, Rt. Hon. Craigle M. | Gardner, J. P. (Hammersmith, N.) | Lawrence, Susan |
| Ammon, Charles George | Gibbins, Joseph | Lawrie, Hugh Hartley (Stalybridge) |
| Arnott, John | Gibson, H. M. (Lancs, Mossley) | Lawther, W. (Barnard Castle) |
| Aske, Sir Robert | Gill, T. H. | Leach, W. |
| Attlee, Clement Richard | Gillett, George M. | Lee, Frank (Derby, N. E.) |
| Ayles, Walter | Gossling, A. G. | Lee, Jennie (Lanark, Northern) |
| Baker, John (Wolverhampton, Bilston) | Gould, F. | Lees, J. |
| Baldwin, Oliver (Dudley) | Graham, D. M. (Lanark, Hamilton) | Lewis, T. (Southampton) |
| Barnes, Alfred John | Graham, Rt. Hon. Wm. (Edin., Cent.) | Lindley, Fred W. |
| Barr, James | Greenwood, Rt. Hon. A. (Colne) | Lloyd, C. Ellis |
| Batey, Joseph | Grenfell, D. R. (Glamorgan) | Logan, David Gilbert |
| Beckett, John (Camberwell, Peckham) | Griffiths, T. (Monmouth, Pontypool) | Longbottom, A. W. |
| Bellamy, Albert | Groves, Thomas E. | Longden, F. |
| Bennett, Capt. Sir E. N. (Cardiff C.) | Grundy, Thomas W. | Lowth, Thomas |
| Bennett, William (Battersea, South) | Hall, F. (York, W. R., Normanton) | Lunn, William |
| Benson, G. | Hall, G. H. (Merthyr Tydvil) | Macdonald, Gordon (Ince) |
| Bentham, Dr. Ethel | Hall, Capt. W. P. (Portsmouth, C.) | MacDonald, Malcolm (Bassetlaw) |
| Bevan, Aneurin (Ebbw Vale) | Hamilton, Mary Agnes (Blackburn) | McElwee, A. |
| Bondfield, Rt. Hon. Margaret | Harbord, A. | McEntee, V. L. |
| Bowen, J. W. | Hardie, George D. | McGovern, J. (Glasgow, Shettleston) |
| Bowerman, Rt. Hon. Charles W. | Harris, Percy A. | McKinlay, A. |
| Brockway, A. Fenner | Hartshorn, Rt. Hon. Vernon | MacLaren, Andrew |
| Brooke, W. | Hastings, Dr. Somerville | Maclean, Neil (Glasgow, Govan) |
| Brothers, M. | Haycock, A. W. | McShane, John James |
| Brown, C. W. E. (Notts, Mansfield) | Hayes, John Henry | Malone, C. L'Estrange (N'thampton) |
| Brown, Rt. Hon. J. (South Ayrshire) | Henderson, Arthur, Junr. (Cardiff, S.) | Mander, Geoffrey le M. |
| Brown, W. J. (Wolverhampton, West) | Henderson, W. W. (Middx., Enfield) | March, S. |
| Burgess, F. G. | Herriotts, J. | Markham, S. F. |
| Buxton, C. R. (Yorks, W. R. Elland) | Hirst, G. H. (York W. R. Wentworth) | Marley, J. |
| Cameron, A. G. | Hirst, W. (Bradford, South) | Marshall, Fred |
| Charleton, H. C. | Hoffman, P. C. | Mathers, George |
| Chater, Daniel | Hollins, A. | Maxton, James |
| Church, Major A. G. | Hopkin, Daniel | Messer, Fred |
| Cluse, W. S. | Horrabin, J. F. | Mills, J. E. |
| Clynes, Rt. Hon. John R. | Hudson, James H. (Huddersfield) | Milner, Major J. |
| Cocks, Frederick Seymour | Hunter, Dr. Joseph | Montague, Frederick |
| Compton, Joseph | Jenkins, W. (Glamorgan, Neath) | Morgan, Dr. H. B. |
| Cove, William G. | John, William (Rhondda, West) | Morley, Ralph |
| Daggar, George | Johnston, Thomas | Morris, Rhys Hopkins |
| Dallas, George | Jones, F. Llewellyn- (Flint) | Morrison, Herbert (Hackney, South) |
| Dalton, Hugh | Jones, Henry Haydn (Merioneth) | Morrison, Robert C. (Tottenham, N.) |
| Day, Harry | Jones, Rt. Hon. Leif (Camborne) | Mort, D. L. |
| Denman, Hon. R. D. | Jones, Morgan (Caerphilly) | Moses, J. J. H. |
| Dickson, T. | Jowett, Rt. Hon. F. W. | Mosley, Lady C. (Stoke-on-Trent) |
| Dudgeon, Major C. R. | Jowitt, Rt. Hon. Sir W. A. | Muff, G. |
| Dukes, C. | Kedward, R. M. (Kent, Ashford) | Muggeridge, H. T. |
| Duncan, Charles | Kelly, W. T. | Murnin, Hugh |
| Ede, James Chuter | Kennedy, Thomas | Naylor, T. E. |
| Edwards, C. (Monmouth, Bedwellty) | Kenworthy, Lt.-Com. Hon. Joseph M. | Newman, Sir R. H. S. D. L. (Exeter) |
| Edwards, E. (Morpeth) | Kinley, J. | Noel Baker, P. J. |
| Egan, W. H. | Knight, Holford | Oldfield, J. R. |
| Elmley, viscount | Lang, Gordon | Owen, H. F. (Hereford) |
| Palin, John Henry. | Sexton, James | Tinker, John Joseph |
| Paling, Wilfrid | Shaw, Rt. Hon Thomas (Preston) | Townend, A. E. |
| Palmer, E. T. | Shepherd, Arthur Lewis | Trevelyan, Rt. Hon. Sir Charles |
| Parkinson, John Allen (Wigan) | Sherwood, G. H. | Vaughan, D. J. |
| Perry, S. F. | Shield, George William | Viant, S. P. |
| Pethick-Lawrence, F. W. | Shiels, Dr. Drummond | Walker, J. |
| Picton-Turbervill, Edith | Shillaker, J. F. | Wallace, H. W. |
| Pole, Major D. G. | Shinwell, E. | Wallhead, Richard C. |
| Potts, John S. | Short, Alfred (Wednesbury) | Watkins, F. C. |
| Price, M. P. | Simmons, C. J. | Watson, W. M. (Dunfermline) |
| Pybus, Percy John | Simon, E. D. (Manch'ter, Withington) | Watts-Morgan, Lt.-Col. D. (Rhondda) |
| Quibell, D. J. K. | Sinkinson, George | Wellock, Wilfred |
| Ramsay, T. B. Wilson | Sitch, Charles H. | Welsh, James (Paisley) |
| Rathbone, Eleanor | Smith, Ben (Bermondsey, Rotherhithe) | Welsh, James C. (Coatbridge) |
| Raynes, W. R. | Smith, Frank (Nuneaton) | Westwood, Joseph |
| Richards, R. | Smith, H. B. Lees (Keighley) | White, H. G. |
| Richardson, R. (Houghton-le-Spring) | Smith, Rennie (Penistone) | Whiteley, Wilfrid (Birm., Ladywood) |
| Riley, Ben (Dewsbury) | Smith, Tom (Pontetract) | Williams, David (Swansea, East) |
| Ritson, J. | Smith, W. R. (Norwich) | Williams, Dr. J. H. (Llanelly) |
| Roberts, Rt. Hon. F. O. (W. Bromwich) | Snell, Harry | Williams, T. (York, Don Valley) |
| Romeril, H. G. | Snowden, Rt. Hon. Philip | Wilson, C. H. (Sheffield, Attercliffe) |
| Rosbotham, D. S. T. | Snowden, Thomas (Accrington) | Wilson, J. (Oldham) |
| Rowson, Guy | Stamford, Thomas W. | Wilson, R. J. (Jarrow) |
| Russell, Richard John (Eddisbury) | Stephen, Campbell | Wise, E. F. |
| Salter, Dr. Alfred | Stewart, J. (St. Rollox) | Wood, Major McKenzie (Banff) |
| Samuel, H. W. (Swansea, West) | Strauss, G. R. | Wright, W. (Rutherglen) |
| Sanders, W. S. | Sullivan, J. | |
| Sandham, E. | Sutton, J. E. | TELLERS FOR THE NOES.— |
| Sawyer, G. F. | Thomas, Rt. Hon. J. H. (Derby) | Mr. T. Henderson and Mr. William |
| Scrymgeour, E. | Thurtle, Ernest | Whiteley. |
| Scurr, John | Tillett, Ben |
§ Mr. CHARLES WILLIAMSI beg to move, in page 24, line 20, to leave out the words "whether directly or indirectly."
I move this Amendment in order to find out what is meant by this Clause. These words occur later in the Clause, and they are no doubt intended to have some particular meaning. What we are trying to find out is precisely how far the Government mean to go by the use of the word "indirectly." I will not go into the arguments at any great length, and I will content myself by pointing out that you could go a great distance by the use of the word "indirectly," and we feel that we should have a statement of the exact legal position. Perhaps the Attorney-General will explain how far the transfer is affected by the word "indirectly" under this part of the Clause.
§ The ATTORNEY-GENERALIt would not be possible for the Government to accept this Amendment without opening up the Clause to a large amount of evasion. Here we are dealing with the case of a deceased person who has made a transfer to a private company directly or indirectly. Unless we insert the word "indirectly" it will be perfectly easy for people to evade the Act by the simple process of making the transfer to the private company through some intermediary so as to dodge the provisions of the Act.
§ Mr. A. M. SAMUELI would like to see the word "indirectly" left out because I do not know exactly what it means. I am told that it has no definite meaning in law. [An HON. MEMBER "Yes, it has!"] At any rate it has no such meaning in common sense, and it leaves the question undecided. The word "indirectly" means uncertainty of the widest kind, and it is a well known canon of national finance that taxation must be clearly defined. May I suggest the insertion of the words "where a deceased person has transferred to a private company." There is no certainty about the (word "indirectly," which is contrary to the ordinary financial procedure of the Treasury.
§ Sir B. PETOI wish to put one or two questions to the Attorney-General. Up to the present this discussion has been carried on mainly by the legal Members of the House. The Attorney-General has told us that these words are necessary, because otherwise the door would be open widely to evasion. If what is meant is a transfer to a private company through an intermediary what necessity is there for introducing the word "indirectly"? The words of the Sub-section are:
made to a private company, whether directly or indirectly, any such transfer.The Clause does not say how the transfer is to be made, and I want to know from the Attorney-General how, if the 1835 words "whether directly or indirectly" were left out, it would really open the door to evasion.
§ The ATTORNEY-GENERALI have already explained that if these words were left out it would open the door widely to evasion.
§ Mr. ATKINSONI think the introduction in this Clause of the word "indirectly" creates nothing but confusion. If the transaction happens to be a transfer by an agent it is covered, and if it is a transfer to an agent it is covered. In law anything you do through your agent you do through yourself, and anything which is done by an agent is covered by the Clause. The word "indirectly" has no meaning in law, and it would place the Court in an extremely difficult position. How do you transfer anything to a company indirectly? The meaning of doing anything directly is quite clear in the eyes of the law, but what does indirectly mean? We have to attach some meaning to it, but I think it would be much better if we used a plain straightforward word. We might make the Clause read "made to a private company by or through trustees." The words "whether directly or indirectly" create confusion, and do not bring in any persons who would otherwise be omitted.
§ Sir GERALD HURSTSome words of the kind objected to are necessary. This Clause deals with transfers made by any person to a private company. If the person is deceased and the transfer has been made to a trustee or nominee it would be easy to say that it has not been a transfer by the deceased to a private company. If the Government wish to bring in the case of a transfer to a trustee or nominee, then it is necessary to widen the words, and this point could be met by making the Clause read "either directly or by means of an agent, trustee or nominee." There must be some words added to meet the case of transfers to a private company by way of an intermediary.
§ Major DAVIESIf the words "whether directly or indirectly" are left in you are going to land yourselves into a state of uncertainty. Under the Clause as it stands it will be very difficult indeed to trace undertakings which may have 1836 changed hands several times before reaching the private company.
§ Sir KINGSLEY WOODI have been wondering whether, in order to meet the difficulty, it would be possible, instead of using the word "indirectly," to use the words "by agent," or some similar words. I do not think that anyone in any part of the Committee desires to see this Clause destroyed by some unfair method, but, on the other hand, we want to be careful not to put a word so full of danger as the word "indirectly" into a Clause of this kind if we can possibly avoid it. I should like to ask the Attorney-General, who has been very patient and courteous, whether he has anything else in his mind that he wants to provide against. If he has not, I think he will agree that we want to avoid the use of the word "indirectly," if that be possible, and I suggest that some other words might be found which would meet the case of a man endeavouring to avoid taxation by the use of some third person.
§ Mr. BIRKETTIn my view, the words "directly or indirectly," or some equivalent words, are necessary here for the reasons mentioned by the Attorney-General, but the real difficulty in connection with these words has scarcely yet been faced. Sub-section (3) of Clause 31 says that:
Where on the death of any person a claim for duty arises by virtue of any of the provisions of the two last preceeding sections, the company concerned shall notify the commissioners of Inland Revenue of the death of the said person.The first thing that I would like to ask the Attorney-General is, how is the company upon whom the obligation rests to know whether the transfer was made directly or indirectly? That seems to me to be a problem of very grave difficulty, and I can conceive that the company in such circumstances would be in a position of intense difficulty. The second and subsidiary point in connection with the same matter is this: Assuming the case which has just been cited, in which three or four persons have been acting as intermediaries before the property reaches the company, upon the death of which person does the obligation rest upon the company? These seem to me to be two matters of some difficulty which arise in connection with these words, and I shall be glad to know whether the Attorney-General has considered them.
§ The ATTORNEY-GENERALI cannot say that I have had occasion to consider the last point put by the hon. and learned Member for East Nottingham (Mr. Birkett), but the Clause says that it is on the death of any person that a claim for duty arises, and that person can only be the transferor.
§ Mr. BIRKETTThe point is, how is the company to know when the obligation is upon it?
§ The ATTORNEY-GENERALI am sorry that I misunderstood the hon. and learned Member. I thought he was raising the question of the person upon whose death a claim for duty arises. With regard to the question as to how the company is to know, if the company does not know it cannot comply with the obligation, but the consequences of noncompliance only ensile if the company wilfully fails to do this, that or the other thing. If the company does not know, and, in consequence, does nothing, it is under no penalty at all. That point arises under a later Clause, and perhaps it might be more conveniently discussed then.
With regard to the remarks of the right hon. Gentleman the Member for West Woolwich (Sir K. Wood), as to the use of the word "indirectly," I say frankly that I had not anticipated that there would be any controversy about the use of the word "indirectly," because, although I have not actually looked up the Acts, I think I am right in saying that the phrase "directly or indirectly" will be found to be dotted up and down the Income Tax Acts, the Finance Acts, and I think also the Estate Duty Acts; and, if that be so, it would be very odd to have some other phrase in this Measure. I will, however, look up the Acts and see whether I am right as to the use of the word "indirectly" in other Finance Statutes. If it turns out that it is so used, I think the right hon. Gentleman will agree that it is probably better to stick to a phrase which has been used, and which, probably, has been judicially interpreted, than to adopt some new phrase which, so far as I know, has never been used before in this connection.
§ Mr. TURTONI hope that the Attorney-General will not only look at the Income Tax law, but also at the general 1838 law of the land, with regard to these words. In answer to my hon. Friend the Member for Farnham (Mr. A. M. Samuel), he said that these words have a legal meaning, but there was a case some time ago in which the words were "whether directly or indirectly interested," and the judge in that case held that those words had no import at all in regard to the word "interested," and conveyed nothing more than if they had been omitted. Therefore, I would ask the Attorney-General to omit them in this case also.
§ Mr. C. WILLIAMSAs far as I personally am concerned, I think that perhaps I must be satisfied with the Attorney-General's promise to look into the full legal aspect of this matter. I have been somewhat confused between the various legal definitions on this point, and the various legal gentlemen who have talked about it, but I am still convinced that these words are entirely unnecessary, although I agree that we do not want to leave any loophole. If I might try to persuade the Committee to give me leave to withdraw the Amendment now——
§ Mr. WILLIAMSIf the Committee cannot give me leave to withdraw, I will postpone my remarks until another time, in the hope that some other words to the same effect may be accepted.
§ Mr. CHURCHILLIt seems to me that the Attorney-General went a considerable distance in admitting the validity of the objections which have been raised on this side of the Committee when he promised to consult the text of the various Finance Acts to see how far the expression "directly or indirectly" was in common usage. In order to bring this matter to a point at which we can take a Division, I would ask the Attorney-General whether and in what way he would fall short of his aim in this Clause if for the word "indirectly" there were substituted the words "or by agent or nominee," as suggested by my hon. and learned Friend the Member for Moss Side (Sir G. Hurst). Why are the words "or by agent or nominee" not exhaustive in themselves for the purpose which the Government have in view? To what extent do they fall short of the desire and intention of the Government? The 1839 Attorney-General has not told us, but he has indicated that he would examine the other Statutes with regard to the use of the word "indirectly." He has shown that he recognises that there are some difficulties attaching to the word "indirectly" which would be avoided by the adoption of a more precise definition. I suggest to the Attorney-General that he should tell us whether the words we suggest would meet his case, or, if not, in what way they fall short of what he has in mind as the main effective practical purpose of the Clause.
In any case we shall take note of his undertaking to examine the text of other Acts. The phrase, "whether directly or indirectly" certainly has a familiar smack about it, but in this particular Clause we want a very precise definition, because the Government are endeavouring to stop an abuse, and they have to thread their way most carefully through a tangle of phenomena so as to select that abuse and eradicate it without damaging the vast growth of perfectly legitimate organisms and practices on which a very large proportion of our business and commercial activity depends, and on which much of the structure of our City finance has been erected. I invite the Attorney-General to choose a precise and limited definition, instead of opening the door vaguely and widely to all sorts of matters which cannot at this moment be accurately foreseen. If he is able to hold out the hope that such a definition may possibly be ready on Report, and that he will be able to meet us on Report, we shall be thankful, but, in order to jog his memory on the matter, and in order to have a quite definite record of this transaction and discussion so far upon the Journals of the House, we shall feel bound to resist the insertion of the word "indirectly," because we would much prefer a precise and positive limited definition.
§ Mr. SMITHERSThe Attorney-General, at the beginning of his reply to this Amendment, said that he must have the word "indirectly" because otherwise the door would be left open and a method of evasion would be advertised. The Chancellor of the Exchequer, before he went out a few minutes ago, owned to the Committee 1840 that he did not know how much money was going to be saved, or won, to the Exchequer by the passing of this Clause. I have told the Chancellor of the Exchequer before across the Floor of the House that, if in my professional capacity in the City I can help him to catch any tax dodgers, or to put him up to any of these dodges, I shall be perfectly willing to do so, and I think that the whole Committee is agreed upon that point; but by making these regulations you are telling the taxpayers of this country that if they do one thing they are breaking the law, while if they do another thing they are not breaking the law. I can tell the Attorney-General and the Financial Secretary, and I think that this is very important from a national point of view, for the good of the whole community and the collection of taxes, that these irritating Clauses are, to my knowledge, already driving money out of the country, and, although they close this door, they are opening a dozen others. I do beg the Attorney-General to realise the harm that he is doing to the collection of taxes.
There is one other point with regard to the word "indirectly." The case has been suggested to me of, say, the owner of an estate who transfers property to an insurance company because he has to raise money for certain purposes for some years in order to keep his estate going. He cannot pay off his debt, and the property falls in. That insurance company sells the property to a private company or to an individual, and eventually it gets to a private company. Is a case of that kind, going through an insurance company, a transfer of property by an individual to a private company indirectly? It raises enormous difficulties in insurance companies' actuarial bases because, if there is an unknown claim for Death Duties on the death of the transferor, if the borrower of the money cannot pay it makes it much more difficult for the insurance company to arrive at an actuarial basis to dispose of their property when there may or may not be a claim upon it on the death of the original transferor, of whom they have no personal knowledge whatever.
§ Viscount WOLMERI should like to put one case to the Attorney-General which I do not think has been mentioned. 1841 Up to now we have been considering the case of a man, A., transferring to a company, C., by B. Let us take the case of B., who transfers to the company, C. B. is the principal that we are thinking about—the man whose property we want to tax. He transfers directly to a company. He has previously purchased the property from A. in a straightforward and ordinary manner. When A., who had nothing to do with the company, dies, it may be held that the property is transferred through B., although it has been a perfectly ordinary transaction, whereas if the Government would only accept the words suggested by my hon. and learned Friend, there would be no question of B. being an agent. It seems to me that unless the Government make the definition much more precise the may get into serious difficulties.
§ Mr. A. M. SAMUELWe desire to help the Attorney-General. We are in favour of his attempt to stop tax-dodging, but we want words more definite. We do not like the word "indirectly." If the Amendment can be withdrawn, I will move to leave out the word "indirectly" and to substitute the words "by agent or nominee."
§ The DEPUTY - CHAIRMAN (Mr. Dunnico)It is impossible to allow the Amendment to be withdrawn, because leave has been refused. It must be negatived.
§ Viscount WOLMERIf the words are struck out, my hon. Friend can move to insert the others.
The DEPUTY CHAIRMANThe hon. Gentleman suggested withdrawing the Amendment. The Committee refused to allow it to be withdrawn.
§ Mr. CHURCHILLCould we not move down to the words "directly or" and then we could insert the alternative and completing words, "agent or nominee"?
§ The ATTORNEY-GENERALI hope the right hon. Gentleman will not move
§ that. I have given an undertaking that I will look into the matter. I find I am right. I have several illustrations of the words "directly or indirectly." I will discuss this with the expert advisers, who know much more about it than I do, and if there is the smallest doubt that the case the Noble Lord has put could be said to be within this, I will see that other words are used, but I think it is plain that, where you have an out-and-out sale by A. to B., both individuals, and then a sale from B. to a company, no one could possibly say that A. had transferred to the company directly or indirectly. You must find a case where B., a middleman, is some kind of agent or nominee. But I want to guard myself against it being supposed that that is an exhaustive catalogue. For instance, a trustee or a factor or something of that kind ought to come in. I should not like on the spur of the moment to accept a definition, nor do I on the spur of the moment want the Committee to understand that I am going to assent to the word "indirectly" here. All I say is that I will discuss it with those who advise me and, if there is any ambiguity, or any possibility of the word being construed so as to cover the case that the Noble Lord put, I think we ought to add some other words.
§ Mr. CHURCHILLIn view of what the Attorney-General has said, we really cannot carry the matter any further at this stage, and we ought simply to record our strong preference for a precise definition in the sense of "trustee" or "nominee" being inserted. Although we are not pressing the Amendment on the Committee in its actual form as sought to be moved by my right hon. Friend, nevertheless that is the principle for which we shall vote.
§ Question put, "That the words proposed to be left out stand part of the Clause."
§ The Committee divided: Ayes, 277; Noes, 164.
1845| Division No. 396.] | AYES. | [6.40 p.m. |
| Adamson, Rt. Hon. W. (Fife, West) | Attlee, Clement Richard | Bellamy, Albert |
| Adamson, W. M. (Staff., Cannock) | Ayles, Walter | Bennett, Capt. Sir E. N. (Cardiff C.) |
| Addison, Rt. Hon. Dr. Christopher | Baker, John (Wolverhampton, Bilston) | Bennett, William (Battersea, South) |
| Aitchison, Rt. Hon. Craigle M. | Baldwin, Oliver (Dudley) | Benson, G. |
| Alpass, J. H. | Barnes, Alfred John | Bentham, Dr. Ethel |
| Arnott, John | Barr, James | Bevan, Aneurin (Ebbw Vale) |
| Aske, Sir Robert | Batey, Joseph | Birkett, W. Norman |
| Bondfield, Rt. Hon. Margaret | Hutchison, Maj.-Gen. Sir R. | Pole, Major D. G. |
| Bowen, J. W. | Isaacs, George | Potts, John S. |
| Bowerman, Rt. Hon. Charles W. | Jenkins, W. (Glamorgan, Neath) | Price, M. P. |
| Brockway, A. Fenner | John, William (Rhondda, West) | Pybus, Percy John |
| Brooke, W. | Johnston, Thomas | Quibell, D. J. K. |
| Brothers, M. | Jones, F. Llewellyn- (Flint) | Ramsay, T. B. Wilson |
| Brown, C. W. E. (Notts, Mansfield) | Jones, Henry Haydn (Merioneth) | Rathbone, Eleanor |
| Brown, Ernest (Leith) | Jones, Rt. Hon Leif (Camborne) | Raynes, W. R. |
| Brown, Rt. Hon. J. (South Ayrshire) | Jones, Morgan (Caerphilly) | Richards, R. |
| Brown, W. J. (Wolverhampton, West) | Jowett, Rt. Hon. F. W. | Richardson, R. (Houghton-le-Spring) |
| Buchanan, G. | Jowitt, Rt. Hon. Sir W. A. | Riley, Ben (Dewsbury) |
| Burgess, F. G. | Kedward, R. M. (Kent, Ashford) | Ritson, J. |
| Buxton, C. R. (Yorks, W. R. Elland) | Kelly, W. T. | Roberts, Rt. Hon. F. O. (W. Bromwich) |
| Cameron, A. G. | Kennedy, Thomas | Romeril, H. G. |
| Charleton, H. C. | Kinley, J. | Rosbotham, D. S. T. |
| Chater, Daniel | Knight, Holford | Rowson, Guy |
| Church, Major A. G. | Lambert, Rt. Hon. George (S. Molton) | Salter, Dr. Alfred |
| Clarke, J. S. | Lang, Gordon | Samuel, Rt. Hon. Sir H. (Darwen) |
| Cluse, W. S. | Lansbury, Rt. Hon. George | Samuel, H. W. (Swansea, West) |
| Clynes, Rt. Hon. John R. | Lathan, G. | Sanders, W. S. |
| Cocks, Frederick Seymour | Law, A. (Rossendale) | Sandham, E. |
| Compton, Joseph | Lawrence, Susan | Sawyer, G. F. |
| Cove, William G. | Lawrie, Hugh Hartley (Stalybridge) | Scrymgeour, E. |
| Cowan, D. M. | Lawson, John James | Scurr, John |
| Daggar, George | Lawther, W. (Barnard Castle) | Sexton, James |
| Dallas, George | Leach, W. | Shaw, Rt. Hon. Thomas (Preston) |
| Dalton, Hugh | Lee, Frank (Derby, N. E.) | Shepherd, Arthur Lewis |
| Davies, E. C. (Montgomery) | Lee, Jennie (Lanark, Northern) | Sherwood, G. H. |
| Day, Harry | Lees, J. | Shield, George William |
| Denman, Hon. R. D. | Lewis, T. (Southampton) | Shiels, Dr. Drummond |
| Dickson, T. | Lindley, Fred W. | Shillaker, J. F. |
| Dudgeon, Major C. R. | Lloyd, C. Ellis | Shinwell, E. |
| Dukes, C. | Logan, David Gilbert | Short, Alfred (Wednesbury) |
| Duncan, Charles | Longbottom, A. W. | Simmons, C. J. |
| Ede, James Chuter | Longden, F. | Sinkinson, George |
| Edwards, C. (Monmouth, Bedwellty) | Lowth, Thomas | Sitch, Charles H. |
| Edwards, E. (Morpeth) | Lunn, William | Smith, Ben (Bermondsey, Rotherhithe) |
| Egan, W. H. | Macdonald, Gordon (Ince) | Smith, Frank (Nuneaton) |
| Eimley, Viscount | MacDonald, Malcolm (Bassetlaw) | Smith, H. B. Lees (Keighley) |
| Evans, Capt. Ernest (Welsh Univer.) | Macdonald, Sir M. (Inverness) | Smith, Rennie (Penistone) |
| Foot, Isaac, | McElwee, A. | Smith, Tom (Pontefract) |
| Forgan, Dr. Robert | McEntee, V. L. | Smith, W. R. (Norwich) |
| Gardner, B. W. (West Ham, Upton) | McGovern, J. (Glasgow, Shettleston) | Snell, Harry |
| Gardner, J. P. (Hammersmith, N.) | McKinlay, A. | Snowden, Rt. Hon. Philip |
| George, Megan Lloyd (Anglesea) | MacLaren, Andrew | Snowden, Thomas (Accrington) |
| Gibbins, Joseph | Maclean, Neil (Glasgow, Govan) | Sorensen, R. |
| Gibson, H. M. (Lancs, Mossley) | McShane, John James | Stamford, Thomas W. |
| Gill, T. H. | Malone, C. L'Estrange (N'thampton) | Stephen, Campbell |
| Gillett, George M. | Mansfield, W. | Stewart, J. (St. Rollox) |
| Glassey, A. E. | March, S. | Strauss, G. R. |
| Gossling, A. G. | Marcus, M. | Sullivan, J. |
| Gould, F. | Markham, S. F. | Sutton, J. E. |
| Graham, D. M. (Lanark, Hamilton) | Marley, J. | Thomas, Rt. Hon. J. H. (Derby) |
| Graham, Rt. Hon. Wm. (Edin., Cent.) | Marshall, Fred | Thurtle, Ernest |
| Granville, E. | Mathers, George | Tillett, Ben |
| Gray, Milner | Matters, L. W. | Tinker, John Joseph |
| Greenwood, Rt. Hon. A. (Colne) | Maxton, James | Townend, A. E. |
| Grenfell, D. R. (Glamorgan) | Messer, Fred | Trevelyan, Rt. Hon. Sir Charles |
| Griffith, F. Kingsley (Middlesbro' W.) | Milner, Major J. | Vaughan, D. J. |
| Griffiths, T. (Monmouth, Pontypool) | Montague, Frederick | Viant, S. P. |
| Groves, Thomas E. | Morgan, Dr. H. B. | Walkden, A. G. |
| Grundy, Thomas W. | Morley, Ralph | Walker, J. |
| Hall, F. (York, W. R., Normanton) | Morris, Rhys Hopkins | Wallace, H. W. |
| Hall, G. H. (Merthyr Tydvil) | Morris-Jones, Dr. J. H. (Denbigh) | Wallhead, Richard C. |
| Hall, Capt. W. P. (Portsmouth, C.) | Morrison, Herbert (Hackney, South) | Walters, Rt. Hon. Sir J. Tudor |
| Hamilton, Mary Agnes (Blackburn) | Morrison, Robert C. (Tottenham, N.) | Watkins, F. C. |
| Harbord, A. | Mort, D. L. | Watson, W. M. (Dunfermline) |
| Hardie, George D. | Moses, J. J. H. | Watts-Morgan, Lt.-Col. D. (Rhondda) |
| Harris, Percy A. | Mosley, Lady C. (Stoke-on-Trent) | Wellock, Wilfred |
| Hartshorn, Rt. Hon. Vernon | Mosley, Sir Oswald (Smethwick) | Welsh, James (Paisley) |
| Hastings, Dr. Somerville | Muff, G. | Welsh, James C. (Coatbridge) |
| Haycock, A. W. | Muggeridge, H. T. | West, F. R. |
| Hayes, John Henry | Murnin, Hugh | Westwood, Joseph |
| Henderson, Right Hon. A. (Burnley) | Nathan, Major H. L. | White, H. G. |
| Henderson, Arthur, junr. (Cardiff, S.) | Naylor, T. E. | Whiteley, Wilfrid (Birm., Ladywood) |
| Henderson, Thomas (Glasgow) | Noel Baker, P. J. | Williams, David (Swansea, East) |
| Henderson, W. W. (Middx., Enfield) | Oldfield, J. R. | Williams, Dr. J. H. (Llanelly) |
| Herriotts, J. | Oliver, P. M. (Man., Blackley) | Williams, T. (York, Don Valley) |
| Hirst, G. H. (York W. R. Wentworth) | Owen, Major G. (Carnarvon) | Wilson, C. H. (Sheffield, Attercliffe) |
| Hirst, W. (Bradford, South) | Owen, H. F. (Hereford) | Wilson, J. (Oldham) |
| Hoffman, P. C. | Palin, John Henry. | Wilson, R. J. (Jarrow) |
| Hollins, A. | Palmer, E. T. | Wise, E. F. |
| Hopkin, Daniel | Parkinson, John Allen (Wigan) | Wood, Major McKenzie (Banff) |
| Horrabin, J. F. | Perry, S. F. | Wright, W. (Rutherglen) |
| Hudson, James H. (Huddersfield) | Pethick-Lawrence, F. W. | |
| Hunter, Dr. Joseph | Picton-Turbervill, Edith | TELLERS FOR THE AYES.— |
| Mr. Paling and Mr. William Whiteley. |
| NOES. | ||
| Acland-Troyte, Lieut.-Colonel | Ferguson, Sir John | Nield, Rt. Hon. Sir Herbert |
| Ainsworth, Lieut.-Col. Charles | Fermoy, Lord | O'Connor, T. J. |
| Albery, Irving James | Fielden, E. B. | O'Neill, Sir H. |
| Allen, Sir J. Sandeman (Liverp'l., W.) | Fison, F. G. Clavering | Ormsby-Gore, Rt. Hon. William |
| Amery, Rt. Hon. Leopold C. M. S. | Forestier-Walker, Sir L. | Peake, Capt. Osbert |
| Ashley, Lt.-Col. Rt. Hon. Wilfrid W. | Fremantle, Lieut.-Colonel Francis E. | Percy, Lord Eustace (Hastings) |
| Atkinson, C. | Galbraith, J. F. W. | Peto, Sir Basil E. (Devon, Barnstaple) |
| Balfour, George (Hampstead) | Gauit, Lieut.-Col. Andrew Hamilton | Pownall, Sir Assheton |
| Beamish, Rear-Admiral T. P. H. | Gibson, C. G. (Pudsey & Otley) | Ramsbotham, H. |
| Beaumont, M. W. | Gilmour, Lt.-Col. Rt. Hon. Sir John | Reid, David D. (County Down) |
| Berry, Sir George | Glyn, Major R. G. C. | Remer, John R. |
| Betterton, Sir Henry B. | Gower, Sir Robert | Reynolds, Col. Sir James |
| Birchall, Major Sir John Dearman | Graham, Fergus (Cumberland, N.) | Richardson, Sir P. W. (Sur'y, Ch'ts'y) |
| Boothby, R. J. G. | Greaves-Lord, Sir Walter | Roberts, Sir Samuel (Ecclesall) |
| Bourne, Captain Robert Croft | Greene, W. P. Crawford | Robinson, Sir T. (Lancs, Stretford) |
| Bowater, Col. Sir T. Vansittart | Grenfell, Edward C. (City of London) | Rodd, Rt. Hon. Sir James Rennell |
| Boyce, H. L. | Gretton, Colonel Rt. Hon. John | Ruggles-Brise, Lieut.-Colonel E. A. |
| Bracken, B. | Gunston, Captain D. W. | Russell, Alexander West (Tynemouth) |
| Braithwaite, Major A. N. | Hall, Lieut.-Col. Sir F. (Dulwich) | Samuel, A. M. (Surrey, Farnham) |
| Briscoe, Richard George | Hammersley, S. S. | Sandeman, Sir N. Stewart |
| Brown, Col. D. C. (N'th'l'd., Hexham) | Hanbury, C. | Savery, S. S. |
| Brown, Brig.-Gen. H. C. (Berks, Newb'y) | Hannon, Patrick Joseph Henry | Shepperson, Sir Ernest Whittome |
| Buchan, John | Haslam, Henry C. | Skelton, A. N. |
| Bullock, Captain Malcolm | Henderson, Capt. R. R. (Oxf'd, Henley) | Smith, Louis W. (Sheffield, Hallam) |
| Butler, R, A. | Heneage, Lieut.-Colonel Arthur P. | Smith, R. W. (Aberd'n & Kinc'dine, C) |
| Cadogan, Major Hon. Edward | Hennessy, Major Sir G. R. J. | Smith-Carington, Neville W. |
| Carver, Major W. H. | Herbert, Sir Dennis (Hertford) | Smithers, Waldron |
| Cayzer, Sir C. (Chester, City) | Hoare, Lt.-Col. Rt. Hon. Sir S. J. G. | Somerville, A. A. (Windsor) |
| Cayzer, Maj. Sir Herbt. R. (Prtsmth, S.) | Howard-Bury, Colonel C. K. | Southby, Commander A. R. J. |
| Churchill, Rt. Hon. Winston Spencer | Hudson, Capt. A. U. M. (Hackney, N.) | Spender-Clay, Colonel H. |
| Cobb, Sir Cyril | Hunter-Weston, Lt.-Gen. Sir Aylmer | Stanley, Lord (Fylde) |
| Cockerill, Brig.-General Sir George | Hurd, Percy A. | Steel-Maitland, Rt. Hon. Sir Arthur |
| Colfox, Major William Philip | Hurst, Sir Gerald B. | Tinne, J. A. |
| Colman, N. C. D. | Jones, Sir G. W. H. (Stoke New'gton) | Titchfield, Major the Marquess of |
| Colville, Major D. J. | King, Commodore Rt. Hon. Henry D. | Train, J. |
| Courthope, Colonel Sir G. L. | Knox, Sir Alfred | Tryon, Rt. Hon. George Clement |
| Cranborne, Viscount | Lamb, Sir J. Q. | Turton, Robert Hugh |
| Crichton-Stuart, Lord C. | Law, Sir Alfred (Derby, High Peak) | Vaughan-Morgan, Sir Kenyon |
| Crookshank, Capt. H. C. | Leighton, Major B. E. P. | Ward, Lieut.-Col. Sir A. Lambert |
| Croom-Johnson, R. P. | Lewis, Oswald (Colchester) | Wardlaw-Milne, J. S. |
| Culverwell, C. T. (Bristol, West) | Locker-Lampson, Rt. Hon. Godfrey | Warrender, Sir Victor |
| Cunliffe-Lister, Rt. Hon. Sir Philip | Locker-Lampson, Com. O. (Handsw'th) | Waterhouse, Captain Charles |
| Daikeith, Earl of | Long, Major Eric | Wayland, Sir William A. |
| Dairymple-White, Lt.-Col. Sir Godfrey | Lymington, Viscount | Wells, Sydney R. |
| Davies, Dr. Vernon | McConnell, Sir Joseph | Williams, Charles (Devon, Torquay) |
| Davies, Maj. Geo. F. (Somerset, Yeovil) | Maitland, A. (Kent, Faversham) | Windsor-Clive, Lieut.-Colonel George |
| Davison, Sir W. H. (Remington, S.) | Makins, Brigadier-General E. | Winterton, Rt. Hon. Earl |
| Dawson, Sir Philip | Margesson, Captain H. D. | Withers, Sir John James |
| Dixon, Captain Rt. Hon. Herbert | Mason, Colonel Glyn K. | Wolmer, Rt. Hon. Viscount |
| Duckworth, G. A. V. | Merriman, Sir F. Boyd | Womersley, W. J. |
| Eden, Captain Anthony | Monsell, Eyres, Com. Rt. Hon. Sir B. | Wood, Rt. Hon. Sir Kingsley |
| Edmondson, Major A. J. | Moore, Sir Newton J. (Richmond) | Worthington-Evans, Rt. Hon. Sir L. |
| Elliot, Major Walter E. | Morrison, W. S. (Glos., Cirencester) | |
| England, Colonel A. | Muirhead, A. J. | TELLERS FOR THE NOES.— |
| Erskine, Lord (Somerset, Weston-s.-M.) | Newton, Sir D. G. C. (Cambridge) | Sir Frederick Thomson and Captain |
| Everard, W. Lindsay | Nicholson, Col. Rt. Hn. W. G. (Ptrsf'ld) | Sir George Bowyer. |
§ Mr. CHURCHILLI beg to move, "That the Chairman do report Progress, and ask leave to sit again."
I venture at this stage to ask for some enlightenment from the Chancellor of the Exchequer or whoever is representing the Government in the conduct of this Measure at this moment as to the wishes of the Government and their intentions in regard to progress to-day. I would ask the Government to let us know whether they want to sit up very late to-night or not, because many arrangements have to be made for the convenience of Members and the officials of the House and so on, and generally it would be convenient to know what are the wishes of the Chancellor of the Exchequer. I hope that 1846 we shall be able to avoid a lengthy sitting, and that the Government will not ask the Committee to make an undue effort on this occasion. We have now no less than three consecutive days of the Finance Bill, and it is most desirable that we should not enter upon the very intricate Clauses 29 and 30 and right on to Clause 33 under conditions when the Committee will be exhausted and when many of our leading luminaries will not be shining but perhaps exhausting themselves, in view of the great responsibilities of their labours on the following day. From every point of view, it is desirable that these extremely complex and technical Amendments should not be taken during all-night sittings.
1847 There is no doubt that one all-night sitting has a tendency to lead to another. Tempers are aroused, interest is excited, cheers are met by counter-cheers, gibes and retorts are met by counter-gibes and retorts, and discussions of the highest propositions may well be discoloured, distorted and distracted if we get beyond the normal hours of life and labour which long custom has rendered appropriate and convenient. I would ask the Attorney-General, as I gather that he has now received an instruction from the highest authority and is able, therefore, to give a clear and independent opinion upon the matter, what are his wishes? It is very pleasant to have the Committee under the leadership of the Attorney-General, because although many of the propositions with which he has to deal are so unpalatable to us, he always handles them in such a suave and amiable manner that one really feels pricks of conscience and compunction when one has to intervene. I hope, therefore, that he will be able to say that we shall be able to get away before midnight, or very shortly afterwards, and that we may resume this very intricate Clause to-morrow afternoon.
§ The ATTORNEY-GENERALWith the threat that many of the leading luminaries may cease to shine, and that the right hon. Gentleman the Member for Epping (Mr. Churchill) may have pricks of conscience, I feel that I ought to respond, as far as possible, to what he has said. I agree with him that there is nothing to be gained by any section of the Committee through any heat being engendered in these discussions. After all, these Clauses are really treated as non-party Clauses. They are Clauses which the right hon. Gentleman himself forecast in making his Budget speech in 1927 or 1928, and it is obvious that there is a gap to be closed, and we are entitled to rely upon the help of all sections of the Committee in closing the gap. I agree that we do not want to go on sitting all night. Practically the only information I have from the Chancellor of the Exchequer, who cannot be here at the moment, is that he is most anxious to make some progress with the Clause and this group of Clauses. He says he considers that the Committee ought to allow him to get to the end of Clause 29, and 1848 he does not desire to go further than that. If we really confine our speeches and make them comparatively short, we shall have ample time for a full and adequate discussion of Clause 29, and I ask the Committee to agree to finish Clause 29.
§ Sir K. WOODI think that it is a most unreasonable request on the part of the learned Attorney-General. This Clause is one of the most important Clauses which we have to consider. It is true that there is no party controversy with regard to it, but the learned Attorney-General admitted that this is probably the most difficult and certainly one of the most technical Clauses which the Committee have had to consider. Now that the Chancellor of the Exchequer has entered the Chamber, he may be able to say something with regard to this matter and that his suggestion is not one in which he would desire to persist. We have already had considerable evidence of the necessity of a careful scrutiny of these Clauses. It may be that to a certain extent they are necessary, but we want to have proper time to consider whether they go beyond the necessities which, in many cases, the Government properly desire. The Chancellor of the Exchequer ought to reconsider the matter.
§ Sir HERBERT SAMUELMany of my hon. Friends have taken a very keen interest in the details of this Clause, and they are of the opinion that it would not be unreasonable to conclude Clause 29 to-day, and as far as they are concerned they are ready to fall in with the suggestion.
§ Mr. P. SNOWDENI thank the right hon. Gentleman for what he has said and his supporters for the very reasonable attitude they have taken up. I have no complaint whatever to make about the character of the discussion this afternoon. It has been confined strictly to the matters which have been put forward, but we ought to make a great effort to get to the end of Clause 29 this evening. I have no desire, especially in this weather—and I am sure the opinion is shared by every Member of the Committee—to have another all-night sitting. I cannot say anything more at the moment except that I really do want to get to the end of Clause 29 to-night. I think that if the Committee will concentrate discussion upon the material 1849 points we shall be able to do so without the sacrifice of anything really essential in our discussions.
§ Sir L. WORTHINGTON-EVANSNo one can complain of the discussion in Committee to-day. It has been most businesslike, and I do not think that an unnecessary word has been said on any Amendment. Our desire is to continue the discussion in exactly the same way, but I very much doubt if it is possible to get to the end of Clause 29. I should be very glad if we could do so. The Chancellor of the Exchequer has 10 or 12 Amendments. Most of them are agreed Amendments in one sense, but they are not agreed Amendments in another sense, because in some directions they do not go far enough. As we have seen in the discussions on Amendments to-day, the Attorney-General has given two undertakings, one to consider further whether the word "directly" or the word "indirectly" is the word or whether some other word should be adopted, and the other to consider a point in connection with the Amendment dealing with the period of 12 years. My point is, that where the Chancellor of the Exchequer is moving Amendments and where we are moving Amendments—and several of our Amendments are of real importance—it is impossible to say whether such Amendments would take half an hour or an hour. The Chancellor of the Exchequer will be very well advised to let us go on in the spirit in which we started today's discussions with a view of trying to get as much of the Clause as possible. I must again warn him that I do not think we can get to the end of Clause 29 by 12 o'clock; if we can, so much the better.
§ 7.0 p.m.
§ Mr. O'CONNORWe have not had a general discussion on the Clause owing to the Ruling of the Chair, and we have not had a preliminary opportunity of discussing the principles of this Clause. The Government have tried to do what they want to do by an entirely improper method. Nothing that they can do in the way of alteration can make the Clause right. For that reason, it might well be that at the end of all the Amendments the Clause may not be at all like the Clause which appears on the Paper. There will be, therefore, a necessity for a wide discussion on the Clause standing part, and we 1850 ought to have some assurance now that that discussion will not take place when everybody is tired out.
§ Mr. CHURCHILLI do not propose to put the Committee to the trouble of dividing on this Motion. I recognise it is difficult for the Chancellor of the Exchequer at this moment to say where he will stop. The Clause is very technical and there are a great many Amendments introduced by the Government. Our attitude must be determined by the action of the Government in regard to some Amendment which some hon. Friends on this side intend to propose. Perhaps we might ask the Chancellor the same question again about 10 o'clock this evening, or somewhere about that time, and he will be more able to judge what it is fair to ask of the Committee on behalf of the Government. Therefore, I ask leave of the Committee to withdraw the Motion.
§ Motion, by leave, withdrawn.
§ Sir B. PETOI beg to move, in page 24, line 22, at the end, to insert the words:
the whole or part of the property so transferred is retained and held by the company at the death and amounts to not less than thirty per cent. of the total assets of the company at the death; and.In the discussion this afternoon the question of the limitation of the period of time was considered by the Committee. I ventured to point out that if there was no limitation in time, some alternative should be introduced, and, speaking quite generally, I admit that I introduced the wrong kind of alternative. The Amendment I am moving introduces two limitations. It says:the whole or part of the property so transferred is retained.That is the first limitation the Amendment proposes. It is not reasonable that the Clause should apply to the whole of a property transferred 30 years before it ceased to be any part of the property of the company. Let me take the second limitation. The Amendment goes on to say:and amounts to not less than 30 per cent. of the total assets of the company at the death.These words imply that the transfers were substantial at that time, and that they consisted of 30 per cent. of the assets transferred. I want the Attorney-General 1851 to apply the general principle which he and the Chancellor of the Exchequer will be prepared to apply to these transactions. Everybody knows that this Clause aims at the transference of landed property to a company in order to be able to evade taxation. That implies that the company is an ad hoc company created for the purpose of this transaction. It is quite obvious that at least 30 per cent. of the assets would consist of the property transferred. Supposing a landed estate were developed for hotels and things of that kind. It seems to me that the company, if it were a company of the kind that this Clause indicates, would still be in possession of the whole or some part of the property or interest in the property so transferred at the time of death, and so I say that in the limitation proposed by this Amendment I am not proposing to do anything which will assist people to get round or through this Clause and the other Clauses that go with it. I am trying to limit the operation of the Clause in respect of the cases which are aimed at.These Clauses are designed on very wide lines, and we have, among other things, to see how we can get them more precise, and put in restrictions and limitations where these are justified and where they will not enable the tax-dodger to escape the sums due by him to the Treasury under the legislation. But we want to make it possible also that the Clause shall not cover a number of transactions which are not at all aimed at. It does not matter at what age a person may form such a company, and how many years he may live after that has been done. It is very desirable that some such words as those used in the Amendment should be introduced, and I want to give the Attorney-General another reason why it seems to me to be essential. The Amendment is really designed to secure, among other things, that the Clause shall operate only on transfers to a company which still holds the property at death and the value of the property is substantial. What does it aim to exclude? As drafted, the Clause is so wide that it will affect property transferred many years before. Secondly, and, I think, equally important, as the Clause is drafted, any 1852 transfer of property even of the smallest value is sufficient to bring it under the operation of this Clause.
Supposing the secretary of a company decided to give an armchair to the managing director, that would be a transfer of property. It would not, presumably, be for a cash consideration, but of his own volition, perhaps because he had a good year. Then afterwards, if in any of the last three years the secretary's salary amounted to 30 per cent. of the total income of the company, this transaction would bring that company within the purview of the Clause. The main principle remains that a very trifling transfer of property is sufficient. The Attorney-General shakes his head. I will give him another case. Would the transfer to a managing director of a company of 10 acres of land for a playing-field bring him in? The Attorney-General says "No." That shows the advantage of moving an Amendment of this kind, even if I am not a legal Member of this House, because I am moving it to get for myself, the Committee and the public outside some information as to where this Clause begins and ends. We want to know where the limitations are. The Clause says:
On the death after the commencement of this Act any person who has, whether before or after that date—There are no limits. It does not say it has got to be a transfer of £100,000 of landed property, or £50,000, or even £1,000. Therefore, why not 10 acres of land or a chair for the managing director? The Attorney-General ought to tell us whether there is such a limitation in the actual wording of the Clause. If the Attorney-General will accept the words of my Amendment, it will provide that, at any rate, 30 per cent. of the total assets of the company consists of this property transferred to-day. I think it is only reasonable that we ought to say that some substantial part of the property transferred Should be there at the time of the death. The company may or may not be a perfectly genuine one, designed originally for the development and improvement of the estate. Its operation might practically come to an end by the disposal of the property, and 1853 the assets realised by the disposal of the property might become a part of the general estate of the deceased and liable to Estate Duty. And yet we should have these Clauses still operating. For these reasons, I hope that other hon. Friends of mine will be able to put this from a legal point of view far better than I have who have never had any experience in these matters, thank God! I do not mean any disparagement of the legal profession. I mean that when you are not a member of the legal profession, you are generally better off the less you have to do with it. I hope that the Attorney-General will see that either in these words or some others proposed by the Chancellor of the Exchequer, he will be able to accept an Amendment of this limiting nature.(i) made to a private company, whether directly or indirectly, any such transfer as is specified in Sub-section (2) of this section;
§ The ATTORNEY-GENERALI followed with interest the examples which the hon. Member gave, but when I look at the Clause as it was originally drafted, I am not sure that the whole of his illustrations of the arm-chair and the cricket ground are not without point. Reference to the Amendment that the Chancellor now proposes to put down will show him that the companies to which transfer of these goods is to be made, are private companies, and therefore his armchair would not come into it at all. In regard to the acres of playing-fields, I think it is quite true that it is in the Bill, but he will find in the White Paper proviso (a) which in substance comes to this, that the amount on which Estate Duty is payable is the amount of the property transferred, and nothing more. Broadly speaking, the effect of proviso (a) is to limit the amount on which the duty is payable to the property transferred.
There has been a good deal of misapprehension about this. This Clause only applies where you have a transfer made to a company to which this Bill applies, what I call a private company. It does not apply to transfers made to such companies if the consideration, whatever the consideration was, was a consideration which went to the transferor. In an ordinary commercial case, if a person sells a thing, he generally gets a consideration himself and it is outside the Clause altogether. Supposing you find a case of a man transferring property to a private company, and 1854 not himself getting a consideration. That is a suspicious circumstance. You go on and you find this, that he is by way of benefits—and observe, in benefits I exclude altogether anything he gets from shares, or by way of benefits other than capital he gets on his shares, or money lent, or repayment of purchase price, or anything of that sort—enjoying such a large proportion of the company's income as to make the amount, even with the Amendments that the Chancellor has put down, average more than 30 per cent. over the three years. Have we not got all the reasons for suspecting the very thing we are seeking here to stop, namely, a case in which a man, in order to avoid Death Duties, makes over property to some private company upon the terms that he may substantially continue to enjoy the income of the property, or the benefits of the company during his life, and yet on his death, pay nothing? We claim that we have set out all these requirements, and we think that we have provided amply—perhaps too amply—for the genuine, legitimate case.
Now with regard to these Amendments. Take a simple case, where a transfer is, say, £50,000 in 5 per cent. War Loan to a private company. He does not get all the consideration himself. The consideration is, perhaps, paid to his son, and then you find that this man, the transferor, is perhaps getting from the company by way of a salary for being general managing director a sum which amounts to the whole income of the company, including all the income which he gets from this block of shares. Is it to be suggested that the company shall get out of this thing altogether by the simple device of selling out their holding in War Loan and re-investing it in Consols? That is the effect of the hon. Member's Amendment. All you have got to do is to switch over, transfer your holding into some other form. If we are going to accept an Amendment of that sort, we might as well give up trying to do anything at all. You leave open so wide a gap that everybody will try to get through it. Even in the case of property, if you have a tax-evader, why should not the Clause apply? We cannot accept this Amendment without making the whole Clause impossible, and preventing any chance of stopping up this gap—a gap 1855 which is being publicly advertised as being a method which can be adopted for avoiding the effect of the charge, and, therefore, unless he tried to stop it, any Chancellor would be neglecting his duty.
§ Sir B. MERRIMANBefore the Attorney-General sits down, will he allow me to ask him to reconsider his answer in one respect. He said that a transfer, where the consideration went wholly to the transferor, was not within the Clause, and he said something to the same effect on another occasion. I should like to know whether it is not the fact that the answer applies only in the case of that particular form of transfer which can be described as a sale. It is not true of any transfer which is not actually a, sale, such as an exchange, or anything of that sort. It does not apply to a transfer which is a gift. It does not apply, for example, to a premium paid for instruction and does not apply indeed to any other form of payment which is payment in respect of a service. If I am right about that, it is important to bear that point in mind, when it is being said that as long as the transferor receives the full consideration himself he does not come within the Clause at all.
§ The ATTORNEY-GENERALI think it is quite right. The Clause to which I particularly referred—not, indeed, because it bears very closely on the Amendment., but because the hon. Member gave such pathetic illustrations in regard to the armchair, the plot of ground, and so on—does deal with bona fide sales and with gifts.
§ Sir B. MERRIMANI asked about other things than gifts.
§ The ATTORNEY-GENERALCertainly, the other things also.
§ Mr. ATKINSONIt is very easy to take an extreme case, and then say you want an Amendment to cut that out. What we are trying to do is to say that the words adopted by the Government do include cases just as extreme the other way. There has been no answer given to the case of the playing-field. That is a gift. The Attorney-General agreed that that is so. If it has been given by a legitimate employé, a man getting nothing out of the company except what he earns, a salary, the Attorney-General 1856 will agree that the salary might actually exceed 30 per cent. of the income. There may be no income. If he is employed by the cotton industry of Lancashire, you would have great difficulty in finding any income, because they are losing money. The position of the paid employé is there. If a man is getting £1,000 a year, and that £1,000 exceeds the average of the income of the company, anything that that man may give to the company in the whole of his life comes into this Clause. Take the case of his giving a playing-field 30 years before his death, and that that playing-field 20 years before his death was sold by the company because it was no longer of use to him. Under this Clause as it stands, that playing-field would become liable to duty. The Attorney-General says, "Well, at any rate you will not be paying more than the value of the playing-field." Supposing the people to whom it was sold 20 years ago have turned it into a very valuable asset? It is that value which is to fix the amount which this unfortunate company is to pay. Although it may have been sold 20 years before, and, by the purchasers, turned into an asset of extreme value, this company is going to be taxed in respect of that land.
I should have thought that the Government might at any rate have accepted the first part of the Amendment—"the whole or part of the property so transferred is retained." If the company have sold part of it to someone else—where it is property like land, which originally cost very little—and it has come into the hands of somebody else, and is very valuable, it is grossly unfair to say that the company should pay duty on it. Take another case, which is quite a common one. Suppose a patent has been transferred to a company, not sold out and out, and which has produced income. Suppose the patent has expired and is in nobody's hands, what is the position then? Are they to pay duty upon it? Take property which has been destroyed by fire. If it has been transferred, what about that? There are so many points that one would have thought that the Government would have considered it an essential part of a liability to duty that the property has been retained in the hands of the company.
§ Mr. CROOM-JOHNSONI desire to reinforce the arguments to which the 1857 Committee has just listened. It is perfectly plain, first, that a gift of property may be subject to a claim for duty by the Crown in after years, and, secondly, that the benefit which the individual is getting from the company, if it exceeds 30 per cent. of the income of the company, may be an income he is receiving for services rendered by him to the company and in respect of which he is receiving no more than an adequate remuneration; that is really not the intention of this Clause. These points demand further consideration. May I give a further illustration of the sort of thing that may happen? Take the illustration of playing-fields, given to the public by the secretary of a company who has been receiving during the last three years of his life a sum of money which amounts to more than one-third of the company's income. It may be that years before the property may have been sold unwillingly by the company. It may have been acquired by some public utility company under compulsory powers; the whole thing may have passed completely out of the charge of the company. Nevertheless, they may find themselves compelled to pay the salary of the secretary which he bargained for when he entered the service of the company. I hope that this and other points will receive more consideration than has hitherto been given them.
§ Sir WALTER GREAVES-LORDMay I make a suggestion to the Attorney-General? Everyone is in agreement that where there has been a transfer of any substantial property to a company and there still remains in the company something which represents that property, that there is a reason for holding on to the right to attach duty to that property, but while it is necessary to safeguard against that, surely some steps must be taken to safeguard the company against being held liable to pay duty upon something which is quite different to property they once held. They have parted with the actual thing and got something totally different. You have to safeguard against a mere change of property for the purposes of evasion, and at the same time take care that you are not actually penalising the company and charging it upon something which it has not got.
§ Sir B. MERRIMANI see the difficulty of the Attorney-General, and I want to make a suggestion as to whether it is not 1858 possible to put this Amendment, which is one of substance, in a form in which it will be acceptable. The real vice at which we are aiming in this Amendment is that there is no sort of connection whatever, for the purposes of this Clause, between the original transfer at the one end and the receipt of the benefit at the other, which attracts the duty; and so long as you have that state of things you are bound to produce absurdities. Take the case of a man who pays a premium to a firm of engineers for instruction, that is money transferred for purposes other than sale or for the other things which are to be excepted. Entirely unconnected with that transaction, years afterwards, he may not even he in the service of the company, but he receives a fee at a time when the company is making a loss. There is no sort of connection between the two transactions and nothing remotely concerning the evasion of Death Duty; yet the company would be liable for Death Duty in the case of the man's death. The Attorney-General says only to the amount of the premium. I do not care whether it is only 2d., it is absurd that the company should be liable to Death Duty in the case of that man. There is no essential connection between the two transactions and therefore this absurdity arises. I see the difficulty that by transferring property colourably you may escape Death Duty. Why should not some form of words be adopted to make it plain that the company must still hold either the original subject matter of the transfer or something which can be identified as its proceeds. I do not want to tie the Attorney-General to any exact form of words at the moment, but I think we should see in the hands of the company either the original thing transferred or something which really represents it before the Clause should apply. I make that suggestion in the hope that a reasonable solution may be reached.
§ Captain BOURNEI desire to reinforce the remarks of the hon. and learned Member for Rusholme (Sir B. Merriman) and also to press upon the Attorney-General the desirability of putting some proportion between the amount of the transfer and the assets of the company. The real difficulty in this Clause is that it is intended to meet what is commonly 1859 known as the one-man company formed for the purpose of avoiding Death Duty. Listening to the Attorney-General I gather that it will cover companies not formed for that purpose but companies whose main object is legitimate trade, and some of us are doubtful as to whether some of these companies will not find themselves under a liability which nobody wants to put on their shoulders and which would be a very onerous burden. The case of a managing director of a company who draws his salary and who has made a transfer of land for a recreation ground and rooms, which are purely for the benefit of the company, will come under this Clause. There is no intention of avoiding Death Duty, and the property will remain an asset of the company, which is a trading company. I have the case of such a company in my mind at present. It is unreasonable that such a company should be liable to Death Duty on this property on the death of a managing director. It was never intended to avoid Death Duty and when he made the transfer it was solely with the purpose of helping the business of the company. I hope that the Chancellor of the Exchequer will consider this point and similar points.
§ Sir D. HERBERTI desire to put a case, not an uncommon one, which if the Attorney-General is going to meet us I hope he will consider. There are a number of businesses in Lancashire which were once very prosperous. The original owner decided to retire at a comparatively early age and as the managers had made the business successful he decided to make it over to them. They had worked their way up to a position where they were entitled to become partners and in a semi-philanthropic way he made over the business to them and retired. Then came the dark days, when the company made no profits. They got into deep waters. They go back to the founder of the business, now an old man, and ask him to help them. They agree to pay him a salary of £1,000 a year to try and bring back the business. The Attorney-General tells me that such a company would not come under this Clause, but I think that the company would come within the Clause in respect of the whole of its assets, as the entire business had been transferred.
§ The ATTORNEY-GENERALThat is a transfer of the business, and is outside the Clause altogether.
§ Sir D. HERBERTPerhaps that is the answer to the point: but take another type of company—certain building development companies. You are leaving out of the exemption all companies whose main business is connected with land.
§ Mr. CHURCHILLI should like to ask whether the Attorney-General would be able to accept the Amendment if the words "or the identifiable proceeds thereof" were inserted after the word "transferred"? That would make the point quite clear and would assert that definite continuity of identity in the property throughout the period of time. Some of the cases which have been put by hon. Members above and below the Gangway—difficult cases—have not been in any way met by the explanation of the Attorney-General. He answered the first case put by the hon. Member for Watford (Sir D. Herbert), but he did not deal with the second point in connection with building development companies. I trust we shall have some answer to these points. It makes one very uncomfortable to see these important Clauses passing line by line on to the Statute Book, knowing that they are leaving behind them at every stage many unconsidered cases of difficulty and hardship, which will be fought out in many wrangles in the law courts, and then will come back to this House, after an interval, in a further crop of legislation. Cannot the Attorney-General rid us at any rate of some of these difficulties?
§ The ATTORNEY-GENERALIf I did not answer all the points raised by hon. Members opposite, might I point out to them that the instances of hard cases which have been given are instances that arise really on line 20, page 25 of the Bill? It may be that we ought to have taken out the playing fields, the arm chair, and so on, but they do not seem to arise in the least at this point, and so far as this Amendment is concerned, however good those cases may be, this is altogether the wrong medicine to apply. It is an unworkable Amendment, and I do not think it is practicable, because you have cast upon them the kind of principle of following assets and trying to see exactly into what shape or 1861 form particular transactions have gone. When we come to page 25, we shall have to discuss these other matters, but I suggest that the late Solicitor-General's suggestion is not practicable.
§ The DEPUTY-CHAIRMANI had very grave doubts myself in regard to those remarks being in order on this Amendment.
§ Sir D. HERBERTThe Attorney-General referred to the courts having difficulty in tracing out transactions, but does not this Amendment show how how wrongly the scheme of this Clause is conceived? Here is an Amendment in which we are trying to prevent any question of having to go into the past, by making it a condition that the property, or a substantial part of it, shall still be in the possession of the company. I want to make that remark because I agree with what the Attorney-General says about many of the previous remarks more properly coming under Amendments on the next page, but when we get there we shall probably find that we have such a difficult arrangement to deal with in the first part of the Clause that we cannot do anything much there. I regret that the Chancellor of the Exchequer and the Attorney-General did not, instead of merely issuing a White Paper showing certain Amendments, take the opportunity of redrafting the Clause and of dealing at the same time with the later Clauses, which are all in this part of this Bill.
§ Mr. ATKINSONThe point I put, which is strictly germane to the Amendment, has not been answered, and that is the case of the transferred property having been sold by the company, and developed and made valuable by the purchaser.
§ Mr. O'CONNORMight I also urge that there is more in this Amendment than would appear from the remarks of the Attorney-General? The vice of the Clause is that it takes a fictitious way of deciding what is the capital value of a man's estate at death. It makes an assumption which is not tenable. It assumes that if you get an income Y, and have in fact transferred property X, the income Y that you receive comes from the capital X, and that in order to find out what X is, you have to take a multiple 1862 of Y. That is fundamentally unsound, and the virtue of the Amendment is that it gives some way of going to the company and trying to estimate what is the actual cash value of the estate which exists at the death.
Supposing a man has an invention for the production of artificial silk, and all that he owns is a patent. He does not sell it to a private company, but transfers to the company his interest in the patent. That thereupon comes within the Clause, because it is not a bona fide sale for full consideration, it is not a transfer incidental to the transfer of a bona fide business, and it is not a transfer of property under the next Clause. He transfers this patent, and the consideration that he receives is an agreement to pay him a salary for a period of years. He receives a salary of, let us say, £1,000 a year, and he has a right to receive it, but the company, into which a great deal of capital has been put, finds a better patent and desires to get rid of this onerous obligation. It reduces his remuneration to, say, £500 a year, adopts another patent, and scraps his. There you have the complete disappearance of the original asset which this man transferred to the company, and if, at the date of his death, the company has made a loss, so that he is receiving a salary which is greater than a third of the profits of the company, which are, on the hypothesis, nil, then that private company is levied in Death Duties on the value of an asset which has entirely ceased to exist.
That seems to be a perfect case of the ridiculous state of affairs into which this fictitious method of constituting an asset has driven the Chancellor of the Exchequer and the Attorney-General. If the hon. and learned Gentleman can find a flaw in my case, I shall be glad to know what it is. You may have an asset transferred which had a value at the time of transfer, and which has no value at death, and nevertheless the private company may find itself mulcted in an enormous amount of Death Duties on account of something which is not an asset at all, and they have to be paid by wholly different people who have no interest in the death of the person in question.
§ Mr. ATKINSONCannot we have an answer?
§ The ATTORNEY-GENERALThe only reason the hon. and learned Gentleman does not get an answer is not because these cases are difficult to answer, but because, in my view, they are wholly inappropriate here. The proper point at which to raise these questions is when you are discussing page 25 of the Bill. It does not seem to me the least germane at the present point to deal with such things as patents, and that is why I do not propose to answer the questions which have been put.
§ Sir D. HERBERTI make no complaint of this experience, but I wanted to hand in a manuscript Amendment, and I was told that there was very little chance of any manuscript Amendment being called. There is the position to which we object. We find an obvious flaw in the Clause, and we have no end of examples quoted, which the Attorney-General really cannot answer, and then we are told that the time to amend the Clause is later on, but we have not got those Amendments down there. Where are we? We shall have to move to recommit the Clause.
§ Sir B. PETOI moved this Amendment in order to put some limitations clearly into the Clause, so that the Clause should apply to cases which it is intended to meet and not cover a number of other cases. The Attorney-General now tells us that he will not answer any more questions with regard to individual cases put from this side, because this is the wrong place in the Clause at which to put such a limiting provision as this. He says that if you want to exclude patents, you should put them into a sort of catalogue towards the end of the Clause as things to which the Clause does not apply, but in my opinion that is not good Parliamentary practice. If you want to put in a limiting condition, you had better put it for clarity at the commencement of the Clause, and make it somewhat general, and not in the form of a mere list of things that you do not propose to cover. If the Attorney-General will not accept my words, he cannot dispute that some words ought to be there, although he says they ought to be, not there, but in another part of the Clause. I do not agree that this is not the right place in which to put a limiting provision, and I think we ought to divide upon my Amendment.
§ The DEPUTY-CHAIRMANI should like to explain to the Committee that many Amendments in the early part of a Clause may have a vital bearing on something later in the Clause, and it is very difficult for the Chair to determine whether there is not a vital connection between an Amendment desired to be moved at one place and something which appears later. If one allows a certain amount of latitude, it is due to the fact that it is very difficult to rule a speech out of order without being unfair.
§ Sir ARTHUR STEEL-MAITLANDWe all appreciate the very difficult position, in a technical matter like this, in which you, Mr. Dunnico, or anyone in the Chair is placed in endeavouring to appreciate the bearing of these Amendments, and there is no one in the Committee who does not realise the scrupulous fairness with which you wish to act. It is really a question of whether the Attorney-General is right in saying that a later stage in the Clause is the place at which such a point as that which was put by my hon. and learned Friend the Member for Nottingham, Central (Mr. O'Connor) should be raised, because it is quite clear that, quite apart from the difficulty of putting down manuscript Amendments, it does not seem right or proper that when an instance was given showing the unworkability of the Clause with regard to one particular kind of property, we should be told that the point at which to raise that was elsewhere, and that we should put in a further Sub-section in addition to those which the Chancellor has introduced, excluding that particular kind of property. It is clear that what my hon. and learned Friend gave was only an instance. It might refer to quite a number of different kinds of property, and the real fault is not that it does not provide for a patent of which the value may disappear, but that it does not provide for a number of such things. It is not that it has not enumerated all the different kinds of property to which this might refer, but that the basis on which the assets are calculated at the beginning of the Clause is both fictitious and unscientific.
§ Mr. STUART BEVANWill the learned Attorney-General be good enough to read Sub-section (1, i) of Clause 29, with the additional words which constitute 1865 the Amendment, and, having read the Clause incorporating that Amendment, turn to Sub-section (2), paragraphs (a), (b), and (c), and see whether, the two being read together, violence is done by one to the other? I submit that Clause 29, Sub-section (1, i) is the place for these words.
§ 8.0 p.m.
§ The ATTORNEY-GENERALI do not doubt for a moment that this is the right point at which to raise this Amendment. In the course of debate I am asked many questions, I am asked, for instance, about the transfer of an armchair, about the transfer of some business of a benevolent gentleman in Lancashire who gave most of his business to his employés, about some inventor who transferred his patent, and so on. Then I am asked, "Are we going to have a reply to these questions?" No doubt these are very difficult, but the only observation I made was that it seemed to me that now was not the time to reply to these questions, I do not doubt that the Amendment is in the right place.
§ Mr. BEVANI am sorry if I misunderstood the Attorney-General. The cases which were cited were an indication of the Clause as it stands and cases which properly fall to be taken, and they were cited to substantiate the case made for the Amendment.
§ Mr. BRACKENI hope the Attorney-General will really address himself to the point put forward by the hon. and learned Member for Central Nottingham (Mr. O'Connor). This is a very important question which affects the whole newspaper industry and many publishing businesses where copyrights are transferred. It often happens that copyrights are transferred when one publishing business buys another or when one newspaper buys another. It is a vital matter, and I hope the Attorney-General will do something to answer the point put to him.
§ Sir W. GREAVES-LORDWith all respect, the Attorney-General is really sliding off from the real principle. I do not say it offensively. It is quite true that in the course of the discussion a number of illustrations have been put and a number of types of property have been referred to. The hon. and learned Gentleman is fortunate enough to find 1866 that one of these types is dealt with in the Sub-section which deals with transfers. Anyone putting an illustration on the earlier part of this Clause must select some type of property, but he selects it only as a type. The principle we are trying to get the hon. and learned Gentleman to pay some attention to is this: We agree that while nothing should be done by way of substituting something else for the thing given, before we have a right to levy the duty the thing which has been transferred, or something which substantially represents it, should still exist.
§ Mr. SMITHERSI am very anxious to take this subject away from detail and to get back to the point which we on these benches really maintain, that we are against the principle altogether. The Attorney-General says our Amendment is unworkable. I maintain that our Amendment would make an unworkable Clause a little more workable. I take it that when the Government drafted this part of the Clause they had in mind the transfer of a single piece of property to a private company for the evasion of Death Duty, but in trying to catch that tax-evader they are really going much too far. I must give an example as typical of the large section of business which I think would be hit by this Clause. Suppose five or six people without any desire to avoid Estate Duty put up £2,000 each to form a small trust company to develop some part of this country or the Empire. This Clause stops such development. We are seeking that 30 per cent. of the transferred property shall be still identifiable. But the companies I have in mind change their securities weekly, and even daily.
The Attorney-General himself gave an example showing that it would be quite easy to evade this Clause if a man had £50,000 of war stock and transferred it to 2½ per cent. Consols. If it were done with that motive, yes. But I know trust companies which deal almost daily, and the change of security is not made in an attempt to avoid the Duty but in an attempt to make profit for the company. If five people put up money for a small private trust they would transfer £10,000 worth of securities. At the end of a few years that original property might be quite unidentifiable. I honestly believe that this Clause will hit genuine business. 1867 I know a company which dealt in stocks and shares and made some money on an original investment by five or six people of about £2,000. It finished up by developing some land in South America. How are you to trace the proportion of the original gift? I understood the Attorney-General to say that it was not fair to put on the courts the trouble of tracing this out. If the original transfer is not identifiable, how are you going to levy Estate Duty?
§ Mr. CHURCHILLSurely we are going to have some reply from the Attorney-General to the important point made by the hon. and learned Member for Altrincham (Mr. Atkinson) about alteration in the value of a property after it had been transferred to a company, and the consequential incidence of the burden of taxes on the transferee. We are surely in a very unsatisfactory position. He tells us that this is the right place to insert this Amendment. Naturally that is so, otherwise, Mr. Chairman, you would not have allowed it to be inserted. In support of the Amendment we adduced a series of homely illustrations, the armchair, the playing fields, the Lancashire business man, all these simple illustrations which were designed to translate this extremely technical matter into terms which could be appreciated by the general public. The hon. and learned Gentleman when he answers tells us that here is the right place to raise the Amendment, but it is not the right place for him to answer the arguments adduced. The proper place will be in Section (2) after paragraph (c). That is not at all satisfactory. What we want to know is, how are the Government meeting these definite objections? Are our fears unsound? Is there no ground for supposing that these difficulties will occur, and why is that so? That is what we want him to tell us, and we have not been told, I think it
§ is profoundly unsatisfactory. Take the point of my hon. and learned Friend the Member for Altrincham (Mr. Atkinson). I hope he will press the point again before we take a Division in order that we may clearly show that there is a ghastly and gaping flaw in the Clause which the Government are proposing.
§ Mr. ATKINSONI will repeat the question. Is the company to be liable for property with which it has parted 20 years ago when it was worth very little, and when it has been made a property of great value to the people to whom it was transferred?
§ Mr. CHURCHILLMay we not have an answer to that question. Is it a bona fide anxiety and a real dilemna proposed to the Government? It will not take long to give an answer if an answer exists. If there is an answer, let the Attorney-General not grudge those few words.
§ The ATTORNEY-GENERALI gave the answer at the time. I said that copyright was clearly out of the Clause. With regard to this point, it arises on a later Amendment to be moved by my right hon. Friend which says, in page 24, line 39, after the word "that," to insert the words:
(a) the sum computed as aforesaid shall be reduced by the amount, if any, by which the principal value of the subject of the transfer at the date of the transfer or the principal value thereof at the date of the death, whichever is the greater, is shown to the satisfaction of the Commissioners of Inland Revenue to fall short of the said sum,I mention it because I think there is no relation whatever to the point that we are now discussing. That is the answer.
§ Question put, "That those words be there inserted."
§ The Committee divided: Ayes, 136; Noes, 265.
1871| Division No. 397.] | AYES. | [8.14 p.m. |
| Acland-Troyte, Lieut.-Colonel | Bourne, Captain Robert Croft | Churchill, Rt. Hon. Winston Spencer |
| Ainsworth, Lieut.-Col. Charles | Bowyer, Captain Sir George E. W. | Cockerill, Brig.-General Sir George |
| Albery, Irving James | Bracken, B. | Colfox, Major William Philip |
| Allen, W. E. D. (Belfast, W.) | Braithwaite, Major A. N. | Colman, N. C. D. |
| Atholl, Duchess of | Brass, Captain Sir William | Courthope, Colonel Sir G. L. |
| Atkinson, C. | Brown, Col. D. C. (N'th'l'd., Hexham) | Cowan, D. M. |
| Baldwin, Rt. Hon. Stanley (Bewdley) | Brown, Brig.-Gen. H. C. (Berks, Newb'y) | Crichton-Stuart, Lord C. |
| Balfour, George (Hampstead) | Cadogan, Major Hon. Edward | Croft, Brigadier-General Sir H. |
| Beamish, Bear-Admiral T. P. H. | Carver, Major W. H. | Crookshank, Capt. H. C. |
| Bevan, S. J. (Holborn) | Cayzer, Maj. Sir Herbt. R. (Prtsmth, S.) | Croom-Johnson, R. P. |
| Birchall, Major Sir John Dearman | Chadwick, Capt. Sir Robert Burton | Culverwell, C. T. (Bristol, West) |
| Bird, Ernest Roy | Chamberlain, Rt. Hn. Sir J. A. (Birm., W.) | Daikeith, Earl of |
| Dairymple-White, Lt.-Col. Sir Godfrey | Hurst, Sir Gerald B. | Sandeman, Sir N. Stewart |
| Davies, Dr. Vernon | Jones, Sir G. W. H. (Stoke New'gton) | Shepperson, Sir Ernest Whittome |
| Davies, Maj. Geo. F. (Somerset, Yeovil) | Kindersley, Major G. M. | Skelton, A. N. |
| Davison, Sir W. H. (Kensington, S.) | King, Commodore Rt. Hon. Henry D. | Smith, Louis W. (Sheffield, Hallam) |
| Dawson, Sir Philip | Knox, Sir Alfred | Smith, R. W. (Aberd'n & Kinc'dine, C.) |
| Dixey, A. C. | Law, Sir Alfred (Derby, High Peak) | Smith-Carington, Neville W. |
| Dixon, Captain Rt. Hon. Herbert | Leigh, Sir John (Clapham) | Smithers, Waldron |
| Duckworth, G. A. V. | Lewis, Oswald (Colchester) | Somerville, A. A. (Windsor) |
| Edmondson, Major A. J. | Llwellin, Major J. J. | Somerville, D. G. (Willesden, East) |
| Elliot, Major Walter E. | Locker-Lampson, Com. O. (Handsw'th) | Southby, Commander A. R. J. |
| England, Colonel A. | Long, Major Eric | Spender-Clay, Colonel H. |
| Everard, W. Lindsay | Macdonald, Capt. P. D. (I. of W.) | Stanley, Lord (Fylde) |
| Fielden, E. B. | Maitland, A. (Kent, Faversham) | Steel-Maitland, Rt. Hon. Sir Arthur |
| Fison, F. G. Clavering | Makins, Brigadier-General E. | Stuart, Hon. J. (Moray and Nairn) |
| Ford, Sir P. J. | Merriman, Sir F. Boyd | Sueter, Rear-Admiral M. F. |
| Forestier-Walker, Sir L. | Monsell, Eyres, Com. Rt. Hon. Sir B. | Thomson, Sir F. |
| Fremantle, Lieut.-Colonel Francis E. | Morrison, W. S. (Glos., Cirencester) | Titchfield, Major the Marquess of |
| Galbraith, J. F. W. | Nicholson, O. (Westminster) | Turton, Robert Hugh |
| Gibson, C. G. (Pudsey & Otley) | O'Connor, T. J. | Wallace, Capt. D. E. (Hornsey) |
| Glyn, Major R. G. C. | O'Neill, Sir H. | Ward, Lieut.-Col. Sir A. Lambert |
| Gower, Sir Robert | Percy, Lord Eustace (Hastings) | Wardlaw-Milne, J. S. |
| Graham, Fergus (Cumberland, N.) | Peto, Sir Basil E. (Devon, Barnstaple) | Waterhouse, Captain Charles |
| Greaves-Lord, Sir Walter | Pownall, Sir Assheton | Wayland, Sir William A. |
| Greene, W. P. Crawford | Purbrick, R. | Wells, Sydney R. |
| Grenfell, Edward C. (City of London) | Ramsbotham, H. | Wilson, G. H. A. (Cambridge U.) |
| Gunston, Captain D. W. | Rawson, Sir Cooper | Windsor-Clive, Lieut.-Colonel George |
| Hacking, Rt. Hon. Douglas H. | Reid, David D. (County Down) | Winterton, Rt. Hon. Earl |
| Harvey, Major S. E. (Devon, Totnes) | Remer, John R. | Wolmer, Rt. Hon. Viscount |
| Haslam, Henry C. | Reynolds, Col. Sir James | Womersley, W. J. |
| Henderson, Capt. R. R. (Oxf'd, Henley) | Richardson, Sir P. W. (Sur'y, Ch'ts'y) | Worthington-Evans, Rt. Hon. Sir L. |
| Hennessy, Major Sir G. R. J. | Ruggles-Brise, Lieut.-Colonel E. A. | |
| Herbert, Sir Dennis (Hertford) | Russell, Alexander West (Tynemouth) | TELLERS FOR THE AYES.— |
| Howard-Bury, Colonel C. K. | Salmon, Major I. | Captain Margesson and Sir Victor |
| Hudson, Capt. A. U. M. (Hackney, U.) | Samuel, A. M. (Surrey, Farnham) | Warrender. |
| Hurd, Percy A. | Samuel, Samuel (W'dsworth, Putney) | |
| NOES. | ||
| Adamson, Rt. Hon. W. (Fife, West) | Dudgeon, Major C. R. | Hirst, W. (Bradford, South) |
| Adamson, W. M. (Staff., Cannock) | Dukes, C. | Hoffman, P. C. |
| Addison, Rt. Hon. Dr. Christopher | Duncan, Charles | Hollins, A. |
| Aitchison, Rt. Hon. Craigle M. | Ede, James Chuter | Hopkin, Daniel |
| Alpass, J. H. | Edge, Sir William | Horrabin, J. F. |
| Ammon, Charles George | Edwards, C. (Monmouth, Bedwellty) | Hudson, James H. (Huddersfield) |
| Arnott, John | Edwards, E. (Morpeth) | Hunter, Dr. Joseph |
| Aske, Sir Robert | Egan, W. H. | Hutchison, Maj.-Gen. Sir R. |
| Attlee, Clement Richard | Eimley, Viscount | Isaacs, George |
| Ayles, Walter | Evans, Capt. Ernest (Welsh Univer.) | Jenkins, W. (Glamorgan, Neath) |
| Baker, John (Wolverhampton, Bitston) | Foot, Isaac | John, William (Rhondda, West) |
| Barr, James | Forgan, Dr. Robert | Johnston, Thomas |
| Batey, Joseph | Gardner, B. W. (West Ham, Upton) | Jones, F. Llewellyn- (Flint) |
| Bellamy, Albert | Gardner, J. P. (Hammersmith, N.) | Jones, Henry Haydn (Merioneth) |
| Benn, Rt. Hon. Wedgwood | George, Megan Lloyd (Anglesea) | Jones, Rt. Hon. Leif (Camborne) |
| Bennett, Capt. Sir E. N. (Cardiff C.) | Gibbins, Joseph | Jones, Morgan (Caerphilly) |
| Bennett, William (Battersea, South) | Gibson, H. M. (Lancs, Mossley) | Jowett, Rt. Hon. F. W. |
| Benson, G. | Gill, T. H. | Jowitt, Rt. Hon. Sir W. A. |
| Bentham, Dr. Ethel | Gillett, George M. | Kelly, W. T. |
| Bevan, Aneurin (Ebbw Vale) | Glassey, A. E. | Kennedy, Thomas |
| Birkett, W. Norman | Gossling, A. G. | Kenworthy, Lt.-Com. Hon. Joseph M. |
| Bondfield, Rt. Hon. Margaret | Gould, F. | Kinley, J. |
| Bowerman, Rt. Hon. Charles W. | Graham, D. M. (Lanark, Hamilton) | Knight, Holford |
| Brooke, W. | Gray, Milner | Lang, Gordon |
| Brothers, M. | Greenwood, Rt. Hon. A. (Colne). | Lansbury, Rt. Hon. George |
| Brown, C. W. E. (Notts, Mansfield) | Grenfell, D. R. (Glamorqan) | Lathan, G. |
| Brown, Ernest (Leith) | Griffith, F. Kingsley (Middlesbro' W.) | Law, Albert (Bolton) |
| Brown, Rt. Hon. J. (South Ayrshire) | Griffiths, T. (Monmouth, Pontypool) | Law, A. (Rosendale) |
| Brown, W. J. (Wolverhampton, West) | Groves, Thomas E. | Lawrence, Susan |
| Buchanan, G. | Grundy, Thomas W. | Lawrie, Hugh Hartley (Stalybridge) |
| Burgess, F, G. | Hall, F. (York, W. R., Normanton) | Lawson, John James |
| Buxton, C. R. (Yorks. W, R. Elland) | Hall, G. H. (Merthyr Tydvil) | Lawther, W. (Barnard Castle) |
| Cameron, A. G. | Hall, Capt. W. P. (Portsmouth, C.) | Leach, W. |
| Charleton, H. C. | Hamilton, Mary Agnes (Blackburn) | Lee, Frank (Derby, N. E.) |
| Chater, Daniel | Harbord, A. | Lee, Jennie (Lanark, Northern) |
| Church, Major A. G. | Hardie, George D. | Lees, J. |
| Clarke, J. S. | Harris, Percy A. | Lewis, T. (Southampton) |
| Cluse, W. S. | Hartshorn, Rt. Hon. Vernon | Lindley, Fred W. |
| Cocks, Frederick Seymour | Hastings, Dr. Somerville | Lloyd, C. Ellis |
| Compton, Joseph | Haycock, A. W. | Logan, David Gilbert |
| Cove, William G. | Hayes, John Henry | Longbottom, A. W. |
| Daggar, George | Henderson, Arthur, Junr. (Cardiff, S.) | Longden, F. |
| Dallas, George | Henderson, Thomas (Glasgow) | Lowth, Thomas |
| Day, Harry | Henderson, W. W. (Middx., Enfield) | Macdonald, Gordon (Ince) |
| Denman, Hon. R. D. | Herriotts, J. | MacDonald, Rt. Hon. J. R. (Seaham) |
| Dickson, T. | Hirst, G. H. (York W. R. Wentworth) | MacDonald, Malcolm (Bassetlaw) |
| Macdonald, Sir M. (Inverness) | Paling, Wilfrid | Smith, W. R. (Norwich) |
| McElwee, A. | Palmer, E. T. | Snell, Harry |
| McEntee, V. L. | Parkinson, John Allen (Wigan) | Snowden, Rt. Hon. Philip |
| McGovern, J. (Glasgow, Shettleston) | Perry, S. F. | Snowden, Thomas (Accrington) |
| McKinlay, A. | Pethick-Lawrence, F. W. | Sorensen, R. |
| Maclean, Sir Donald (Cornwall, N.) | Pole, Major D. G. | Stamford, Thomas W. |
| Maclean, Neil (Glasgow, Govan) | Potts, John S. | Stephen, Campbell |
| McShane, John James | Price, M. P. | Stewart, J. (St. Rollox) |
| Malone, C. L'Estrange (N'thampton) | Pybus, Percy John | Sullivan, J. |
| Mansfield, W. | Quibell, D. J. K. | Sutton, J. E. |
| March, S. | Ramsay, T. B. Wilson | Thomas, Rt. Hon. J. H. (Derby) |
| Marcus, M. | Raynes, W. R. | Thurtle, Ernest |
| Markham, S. F. | Richards, R. | Tinker, John Joseph |
| Marley, J. | Richardson, R. (Houghton-le-Spring) | Townend, A. E. |
| Marshall, Fred | Riley, Ben (Dewsbury) | Vaughan, D. J. |
| Mathers, George | Ritson, J. | Viant, S. P. |
| Matters, L. W. | Roberts, Rt. Hon. F. O. (W. Bromwich) | Walkden, A. G. |
| Maxton, James | Romeril, H. G. | Walker, J. |
| Messer, Fred | Rosbotham, D. S. T. | Wallace, H. W. |
| Milner, Major J. | Rowson, Guy | Wallhead, Richard C. |
| Montague, Frederick | Russell, Richard John (Eddisbury) | Watkins, F. C. |
| Morgan, Dr. H. B. | Salter, Dr. Alfred | Watson, W. M. (Dunfermline) |
| Morley, Ralph | Sanders, W. S. | Watts-Morgan, Lt.-Col. D. (Rhondda) |
| Morris, Rhys Hopkins | Sandham, E. | Wellock, Wilfred |
| Morris-Jones, Dr J. H. (Denbigh) | Sawyer, G. F. | Welsh, James (Paisley) |
| Morrison, Herbert (Hackney, South) | Scrymgeour, E. | Welsh, James C. (Coatbridge) |
| Morrison, Robert C. (Tottenham, N.) | Scurr, John | West, F. R. |
| Mort, D. L. | Sexton, James | Westwood, Joseph |
| Moses, J. J. H. | Shaw, Rt. Hon. Thomas (Preston) | White, H. G. |
| Mosley, Lady C. (Stoke-on-Trent) | Shepherd, Arthur Lewis | Whiteley, Wilfrid (Birm., Ladywood) |
| Mosley, Sir Oswald (Smethwick) | Sherwood, G. H. | Williams, David (Swansea, East) |
| Muff, G. | Shield, George William | Williams, Dr. J. H. (Llanelly) |
| Muggeridge, H. T. | Shiels, Dr. Drummond | Williams, T. (York, Don Valley) |
| Murnin, Hugh | Shillaker, J. F. | Wilson, C. H. (Sheffield, Attercliffe) |
| Nathan, Major H. L. | Shinwell, E. | Wilson, J. (Oldham) |
| Naylor, T. E. | Short, Alfred (Wednesbury) | Wilson, R. J. (Jarrow) |
| Newman, Sir R. H. S. D. L. (Exeter) | Simmons, C. J. | Wood, Major McKenzie (Banff) |
| Noel Baker, P. J. | Sinclair, Sir A. (Caithness) | Wright, W. (Rutherglen) |
| Oldfield, J. R. | Sinkinson, George | Young, R. S. (Islington, North) |
| Oliver, George Harold (Ilkeston) | Sitch, Charles H. | |
| Oliver, P. M. (Man., Blackley) | Smith, Ben (Bermondsey, Rotherhithe) | TELLERS FOR THE NOES.— |
| Owen, Major G. (Carnarvon) | Smith, Frank (Nuneaton) | Mr. A. Barnes and Mr. William |
| Owen, H. F. (Hereford) | Smith, Rennie (Penistone) | Whiteley. |
| Palin, John Henry. | Smith, Tom (Pontefract) |
§ Sir D. HERBERTI beg to move, in page 24, line 27, to leave out from the word "computed" to the second word "the" in line 28.
The Chancellor of the Exchequer has apparently put down an alternative proposal to this and the succeeding Amendments in my name but I am not sure that I do not prefer the form of words in my own Amendments.
§ Mr. P. SNOWDENThis is a case of "six of one and half a dozen of the other." The Amendments which I intend to propose would, I think, achieve the purpose which the hon. Gentleman has in mind and I think my Amendments have the advantage of being simpler in form than the hon. Gentleman's. I can assure him that they amount to the same thing in the end.
§ Sir D. HERBERTI agree with the right hon. Gentleman in that and I agree also that his Amendments are simpler in form than mine but I venture to suggest that the result of my Amendments taken together would be a much simpler 1872 passage in the Clause than the passage as the right hon. Gentleman proposes to amend it. However, I do not propose to fight over that point and in the circumstances I ask leave to withdraw my Amendment on the understanding that the right hon. Gentleman will move his Amendments which are to the same effect.
§ Amendment, by leave, withdrawn.
§ Mr. P. SNOWDENI beg to move, in page 24, line 31, to leave out the word "any," and to insert instead thereof the words "the average."
This is a change which, I think, everybody desires.
§ Amendment agreed to.
§ Further Amendment made: In page 24, line 32, leave out the word "exceed," and insert instead thereof the word "exoeeds."—[Mr. P. Snowden.]
§ Brigadier-General CLIFTON BROWNI beg to move, in page 24, line 32, to leave out the word "thirty," and to insert instead thereof the word "fifty."
1873 I want to ask why the Chancellor has selected the arbitrary figure of 30. What is the object of it, and why has it been selected instead of 40 or 50 per cent.? The 30 per cent. will cause great unfairness to and penalise the poor company and the poor estate, and advantage the rich estate and the rich company. If you take the example of an estate of a company of £10,000, which can afford to pay as managing director—the transferor perhaps—£1,000, it escapes coming under this Clause, because the benefit does not exceed 10 per cent. If you take a poor company with £1,000 that pays its manager £400, that comes under this Clause because it is over 30 per cent. If the percentage is made higher, it will not penalise the smaller companies so much as the lower percentage.
§ Mr. P. SNOWDENI agree that the figure of 30 per cent. is an arbitrary figure, and so must be any other figure that we might select. We fixed it at 30 per cent. because we thought it a reasonable figure, but if there be any strong desire for a change in favour of any other figure, I will consider it. It is not for me to suggest an alternative, but if the Opposition can make out a case for selecting a figure which is stronger than the case for 30 per cent., I shall be glad to consider it.
§ Sir D. HERBERTI am not particularly keen on this Amendment, but I want to put a point to the Chancellor of the Exchequer which will show that this Clause is based on a wrong scheme. One of the men at whom he wants to get is the man who owns a very large family property, and transfers it to a company and takes practically the benefit of the whole occupation and use of that property, and does it in such a way that he escapes taxation. Will not that man, if a wealthy man, be able to get out of this, whatever the figure is, because he will have large investments besides? If the property he transfers to the company is worth £50,000, he is a man who can probably transfer to that same company without any inconvenience to himself £200,000 of War Loan or gilt-edged securities, and by that means it seems to me the Clause will remain ineffectual.
§ Sir A. STEEL-MAITLANDThe Chancellor is quite right in saying that 50 is quite as arbitrary a figure as 30, and what is wrong in this Clause is the 1874 fact that, whatever the figure, it will be an arbitrary figure, and it is really difficult to know what the figure ought to be. If there be any sum which is justifiable at all, whether it be 30, 40 or 60 per cent., for the transferor to receive from the company to which the property is transferred, how are you going to measure whether it is within the bounds of what is justifiable? This is one of the fundamental questions in the Clause. This is the first time we get to it. It raises the relation which there is between the sum that the transferor gets by way of what is called the annual benefit and the amount which is being transferred, and that is measured by the annual income of the company. I am not at all sure whether the proper place on which to discuss this is on the 30 per cent., which represents the upper part of the fraction, or whether it is on the annual income of the company by which it is divided, and which represents the lower part of the fraction. The main question, however, is how can we judge whether benefit is justified. The answer to that question very largely depends on whether the person who is the transferor is doing anything in return for the benefit or not. If he is doing nothing in return for it, it is not really justifiable at all. On the other hand, if he is doing quite a considerable amount in return for it in actual work in connection with the management, it may be that there is a considerable sum which he deserves to get. In a case like that, it is possible that the annual income of the company, as defined later on in this Clause, may be so small or almost negligible that a reasonable benefit will exceed any fraction of it however large.
The difficulty about discussing the matter at this point is that to a great many of those interested in these companies it is fundamental to know whether an allowance is to be made for remuneration in return for work done. There is an Amendment later directly raising the question of remuneration to which a number of us attach importance, and another Amendment re-defining annual income so that, in effect, the benefit which the transferor retanis would be defined in a fairer way, as we think, than it is by the words "annual income." I do not want to prolong the discussion 1875 unduly, and I would ask the Chancellor at this point whether he proposes to make any allowance, in this matter of benefit, for remuneration in return for actual work done by the transferor. As yet we have had no statement from him on that. He promised to consider reasonable suggestions, and I think that is an eminently reasonable suggestion, and one to which no exception could be taken. We would like an answer to that point, because it will determine our action with regard to these other Amendments.
§ Mr. SMITHERSThe 30 per cent. which we are discussing is related to income—the total income of the company. May I put this case as an illustration? It is one I know about. A certain estate which we will say, for the sake of argument, amounts to £100,000, is heavily in debt. The family want to save the estate, and for that reason they have all gone away to the Colonies or engaged in work. They have put in a man to manage the estate and hope in a few years to pull the estate round. What is the total income as defined here? Is it the total income of the company from rents and other sources of income less any interest on mortgage? The man who manages that estate must be taken as being a capable man and must be paid a salary in proportion to the responsibilities of an estate of £100,000, although the income of the estate may, owing to debt charges and the like, be very small for the next 10 or 12 years. I would like to thank the Chancellor for the suggestion he kindly made just now. It is not easy at this moment to make up our minds exactly how the figure of 30 or 50 might be varied to fall in with his suggestion that be would consider if some other way could be found, but I put that case to him of a large estate, with a small income on account of debt interest and so on, but requiring a well paid manager and what would be regarded as the total income in that case. Would it be possible for him to reconsider the position and let us make a further suggestion on Report stage? I only say that for myself. I have no authority to speak for my hon. Friends.
§ Mr. P. SNOWDENThe point which the hon. Member for Chislehurst (Mr. Smithers) has raised is in substance, I 1876 think, the point which the right hon. Gentleman himself raised, as to whether the salary of a transferor who is really doing work on behalf of the company will be taken into consideration or not. I am not in a position to give any reply to that, but I can assure both the right hon. Gentleman and the hon. Member that they shall have a reply later. In regard to the question of 30 per cent. or 40 per cent., as I said I have no objection to considering another figure. The reason why we fixed on 30 as the figure was because we felt that unless the transferor was going to get at least 30 per cent. out of the gross income of the transaction it is hardly likely that he would ever take part in such a transaction. I am quite agreeable to fix the figure at 40.
§ Sir B. MERRIMANFifty?
§ Mr. SNOWDENForty is the figure in the Amendment.
§ Sir B. MERRIMANNo, it was the Amendment to insert 50 that was moved.
§ Mr. SNOWDENAs a matter of fact, from the financial point of view it does not make very much difference. I want to meet hon. Members wherever it is possible to do so without making a breach in the building we are constructing, and I will consent to the figure.
§ Mr. SMITHERSCan the Chancellor of the Exchequer answer my question as to how he defines "total income"? Is it the total gross income or the total income less mortgage interest or other fixed charges which may come upon the income and not come as benefit to the transferor?
§ Sir A. STEEL-MAITLANDI am very glad the Chancellor is ready to meet us over this, but then there is also this question of the actual salary. This question comes up on two separate occasions afterwards. It comes up on Subsection (2), on the proposed deduction from the benefit of sums received as a reasonable remuneration, and it comes up again on Sub-section (3) on the question just raised by my hon. Friend of a re-definition of total income in a way which we think is fairer. There are arguments on these points which we would like to adduce, because they are fundamental questions in the case of some companies. 1877 "Total income" as at present defined is in some cases almost non-existent, so many deductions have been made, and, as the Chancellor of the Exchequer fully understands, in such cases there is very little difference between 30 or 50 or 60 per cent. because practically the income does not exist. What we are anxious to know is whether we can expect a salary proportionate to the work done. That is not an unreasonable request. If the Chancellor thinks he can really meet us on that point I do not want to raise a discussion in detail now, but unless the Chancellor thinks he can meet us we must stress the point, if not now at any rate on subsequent occasions on this Clause, because we have arguments, which we think are absolutely convincing on their merits, that such an exception should be made.
§ Amendment agreed to.
§ Further Amendment made: In page 24, line 37, leave out the words "greatest of the said proportions," and insert instead thereof the words, "the same proportion as the said average proportion."—[Mr. P. Snowden.]
§ The FINANCIAL SECRETARY to the TREASURY (Mr. Pethick-Lawrence)I beg to move, in page 24, line 39, after the word "that," to insert the words:
This Amendment contains concessions made to the taxpayer which carry the position a very long way to ensure that the taxpayer's estate is not mulcted beyond the amount that it strictly ought to be for the purpose of ensuring that the Death Duties are paid. Paragraph (a) subtracts from the value of the estate the difference between the principal value of the subject of the transfer at the date of the transfer, and the principal value at the date of death, whichever is the greater. In other words, 1878 it reduces the assets of the company to the greater of the two figures. Paragraph (b) ensures that by no contrivance of the working out of the Clause is the value of the property taken twice for the purpose of the same estate. The object of this proposal is not to tax the property twice over. If there is anything in the Clause which leads to the assumption that the same property could; be counted twice, this proviso ensures that it cannot arise.
- "(a) the sum computed as aforesaid shall be reduced by the amount, if any, by which the principal value of the subject of the transfer at the date of the transfer or the principal value thereof at the date of the death, whichever is the greater; is shown to the satisfaction of the Commissioners of Inland Revenue to fall short of the said sum; and
- (b) notwithstanding anything in this section, the value of any property or any interest in property shall not be taken into account, directly or indirectly, for the purpose of assessment of estate duty more than once on the same death; and
- (c)."
§ Mr. ATKINSONI must oppose this Amendment. Although I welcome this proposal up to a point, and agree with the object it has in view, the way it is carried out is thoroughly unfair. What was the position of affairs before this Amendment? It was that the amount of property on which the company would have to pay Estate Duty had no relevance whatever to the transferred property. Supposing someone was getting a salary exceeding the assets of the company, the whole assets would be liable to Estate Duty. That was the position before this Amendment. Obviously that was a position which was not intended. It must have been an oversight, because it is so unfair.
The Financial Secretary may call this Amendment a concession, but it has always been understood that a change would have to be made. Now the Government cannot make up their mind whether you are to take the value of the property at the date of the transfer or at the date of the death. It is a case of "Heads I win, tails you lose, and we will take the highest, whichever it is." What is the right date at which to take the principal value? Is it the date of transfer or the date of death? Sometimes what is proposed may not be in favour of the company, but I think the Government ought to make up their minds which is the right date to take, because there can be only one right date. The date of transfer is the time when the man has parted with his property.
I have an Amendment on the Paper dealing with this point, but when I raised the question about an hour ago the Attorney-General told me that the right time to raise the point was when the Clause we are discussing came up for discussion. The case I put on that occasion I will put again. A company has received certain property. When it was transferred 1879 to the company it was worth £200. It proved to be of no value to the company, and within a few months it was sold to somebody else for the same consideration, and that happened 20 years ago. Twenty years later the man died, and the people to whom it was sold developed the property, and it is now worth £10,000. Under this Clause, what happens? It does not matter whether the transferred property is in the possession of the company at the time of the death. The value to be taken in this case would be the value at the date of death, and, therefore, this company, which sold the property 20 years ago for £250, is made to pay duty on £10,000 in connection with a property that it has not seen or heard of for 20 years, and which someone else has developed and made of value. Can anyone suggest that that is fair?
The Chancellor of the Exchequer the other night, in announcing what Amendments he was going to accept, said that he had an open mind, and that if anyone could satisfy him that any injustice was being worked, or that the object he had in view was not being carried out, he would be inclined to be very conciliatory. I would ask him to consider this Amendment, and see if it is really fair. I submit that it ought to be limited to one date, and I think personally that the date of transfer would be the right date. Why should there be two options, and why should the choice depend upon what suits the Government best? How can that be fair or reasonable? The case I have cited shows how unfairly it operates in the case of property which has been transferred by a company to someone else who has made it of value. That is a case which must constantly occur. It is not an artificial case it is not something which exists merely in somebody's imagination. There are several Amendments on which we can discuss the precise points in detail, but we are now dealing with the Amendment as a whole. Its main feature is to give the Government the option of choosing the higher value, and I say as strongly as I can that that will not operate fairly in dealing with a property which a company may have parted with for a small sum, because the company might be made to pay on a very large sum in respect of property which they had not seen or heard of for many years.
§ Mr. LEIF JONESI may be wholly wrong, but it seems to me that the hon. and learned Member for Altrincham (Mr. Atkinson) is under a misapprehension. I thought that this Amendment was proposed for the benefit of the taxpayer, and that the two valuations were to be deducted from the computed sum. The Amendment says that:
the sum computed as aforesaid shall be reduced by the amount, if any, by which the principal value of the subject of the transfer or the principal value thereof at the date of death, whichever is the greater.Therefore, the greater the value is, the better for the taxpayer.
§ Mr. ATKINSONNo; the greater it is, the smaller is the sum by which it falls short.
§ 9.0 p.m.
§ Mr. A. M. SAMUELI have understood all along that the Chancellor of the Exchequer would be willing to consider any point we might make that was reasonable, and, as he knows, we are not obstructing in this matter, but want to help him to get revenue where it is being withheld by unworthy methods. I do not think that the Government should have two options, but my view is that the date of valuation should be the date of death. If there had been no attempt by the taxpayer to transfer the property to a company, then the valuation of the property would be made at his death, and, therefore, the value at death should be taken, as that is the normal position. There is, however, another reason. In a large number of businesses, the personality and skill of the proprietor is of great value in relation to the earning power of the business. Take the case of many of the people in Bond Street, or the people who are experts in Mincing Lane. The earning power of their businesses depends, not only on their personality in regard to obtaining clients or customers, but also on their skill and judgment, and, therefore, I think it is not right to take the value at the date of transfer, when the person is alive and can administer the business, with all the advantage attaching to his personality. When a man has passed away, the value of his property which is to be taxed is greatly reduced by that fact, since one of the assets of his business was his personality and his power to deal with the merchandise in 1881 which he was trafficking. For that reason I think that the Government ought to make up their mind to allow the property to be valued as at the normal occasion, namely, at the date of his death, when the assets which he leaves would have suffered by the loss of his abilities and personality. Many a business is worth a great deal less on the death of its proprietor, because of the inherent value of his ability to earn profits for the concern while he was in full possession of his vigour.
§ Mr. SMITHERSI should like to ask a question which I think will clarify the position. We are now discussing what is to be the liability to Estate Duty on a certain proportion of a man's property, and we have had two opinions, one by my hon. and learned Friend the Member for Altrincham (Mr. Atkinson), and the other by the right hon. Gentleman the Member for Camborne (Mr. Leif Jones). I should like to ask which of these two gentlemen is right. Is it better that the taxpayer should be allowed to make a larger deduction from the amount, or that the Government should have the choice? Should the choice between the two amounts, arrived at respectively at the date of transfer and at the date of death, be the choice of the taxpayer or the choice of the Government?
§ Mr. PETHICK-LAWRENCEI think there is some misapprehension with regard to this question of property. The case put to me was this: Property is transferred to a company, which sells it for, say, £250, and subsequently it becomes very much more valuable. The question is whether the company then become liable for this very much larger sum over which they have had no control, perhaps, for 20 years. That is not the intention of the Clause at all. The intention is not to follow the actual piece of property, but to value the property in a different sense which is in the hands of the company. Supposing a man transfers to a company a piece of land, and the company sells it 10 years afterwards for £1,000, and with the £1,000 purchase some other property. It is the property remaining in the hands of the company, as I understand it, which will be taken and not the actual piece of property which has gone elsewhere. That, as I understand it, is the intention of the 1882 Clause and, if that is not made clear, my right hon. Friend will look into it to see that the intention is fulfilled.
§ Sir B. MERRIMANThat raises a point under paragraph (b) which I wanted to put. The hon. Gentleman has given an illustration of a transfer to a company. "A" has transferred to the company. The company has sold the property afterwards for £1,000. You are no longer concerned with the original property. You are concerned with the proceeds in the hands of the company. Assume that all that happens within three years of the death. "A" gave that property to the company and the company has sold it within the same three years for £1,000, and then duty falls to be payable based upon the £1,000 in the hands of the company. Paragraph (b) is intended to provide that the property shall not be taken into account twice over in respect of the same death. Will paragraph (b) in those circumstances avoid it being taken into account twice on the same death? In connection with the company, you are concerned with the £1,000, according to what has been stated, in the hands of the company, but "A" has parted with the land itself within three years of his death as a gift. Would not that property be part of the estate? In those circumstances it is clearly a case that has to be considered and, on the explanation which has been given us, a case in which you have somehow to avoid the property being taken into account twice in connection with the same death.
§ Mr. LEIF JONESI understand that paragraph (a) is put in for the benefit of the taxpayer. The sum computed is to be reduced by a certain sum, therefore the larger the reduction, the better for the taxpayer.
§ Mr. PETHICK-LAWRENCEI think not. It is the other way round.
§ Mr. LEIF JONES"Whichever is the greater." Is it not to the advantage of the taxpayer?
§ The ATTORNEY-GENERALBy the amount by which the principal value of the subject of the transfer falls short. That is to say, the transferred property is in a different situation from the other property. The larger the value of the transferred property, the smaller the value of the non-transferred.
§ Mr. A. M. SAMUELThis is likely to give rise to a lot of litigation. I am not nearly so old a Member of the House as the right hon. Gentleman, and I have had very great difficulty in understanding it. What a comment on the drafting of the Clause!
§ Brigadier-General CLIFTON BROWNI beg to move, as an Amendment to the proposed Amendment, in line 2, to leave out the words:
at the date of the transfer or the principal value thereof.The object of this and a subsequent Amendment is to do what my hon. and learned Friend the Member for Altrincham (Mr. Atkinson) asked the Chancellor to do—to make up his mind whether he wanted these duties on death or when the property was transferred. My hon. and learned Friend rather suggested that it would be better for the Government to have it on transfer. My Amendment lays down that it shall be at the date of death. I am sure "whichever is the greater" ought to come out, whatever decision they come to. It is a fair thing, and the best business arrangement, both to the Treasury and to the person who has to pay Death Duties, that duty should be paid at the date of death.
§ Mr. P. SNOWDENI am quite prepared to accept the object which the hon. and gallant Gentleman has in view, and to make it the date of death, but I am rather doubtful about accepting the exact words of the Amendment. I think it achieves what hon. Members opposite are anxious to achieve much better than the similar Amendment in the name of the hon. and learned Gentleman. If the Committee would agree to leave it at that for a moment, we will consider between now and Report the exact words which will give effect to it.
§ Mr. ATKINSONOne of the main objections I had to taking the date of death was because of the unfair operation with regard to property which had been parted with by the company and had been developed and made more valuable. The Financial Secretary told us the intention was not to follow the value of the transferred property, but to concentrate on that which had taken its place. The wording of the Amendment will certainly need alteration to accomplish the purpose, because the words are, 1884 "by which the principal value of the subject of the transfer," so that some words will have to be inserted to deal with the point. On the assumption that between now and Report some method will be devised of accomplishing the desire of the Chancellor on this point, I am willing not to move my further Amendment and to accept what has been offered by the Chancellor. It meets my main point that you get rid of the option altogether and concentrate on the one date.
§ Mr. SMITHERSWill the Attorney-General tell us where it is provided in the Clause that property transferred to a company and then resold, the proceeds of which remain in the company, does not come within the purview of this Bill?
§ Mr. CROOM-JOHNSONI should like to reinforce what my hon. Friend has just said. I am not sure that the Attorney-General has understood the point submitted to him. What we understood from the Financial Secretary to the Treasury was—supposing that the property which the company had taken had been sold by the company—that the object of the Government was, when the time came to assess the duty which required to be assessed on the death of the particular individual who transferred the property to have regard to the proceeds in the hands of the company and not to the original property which the company had taken. When that statement was made those of us who had been examining the matter looked into the Clause to see whether we could find any such provision. So far our researches have not been successful. We understood, as the result of certain interrogatory observations, that the Financial Secretary was also of that opinion, and that the matter was to be considered and put right on the Report stage. The point has been raised by my hon. Friend only because he is anxious to have it made plain that this matter will come up again on the Report stage when we may have an opportunity of dealing with it.
§ The ATTORNEY-GENERALI think that the provision is there now. If it is not there now, the matter will be put right on the Report stage. I think I can satisfy the hon. Member on that point.
§ Amendment to the proposed Amendment, by leave, withdrawn.
§ Mr. ATKINSONOn a point of Order. I understood that the Amendment to the proposed Amendment was to be accepted, and therefore I did not wish to move my Amendment to the proposed Amendment.
§ The CHAIRMANThe Chancellor of the Exchequer said that he accepted the Amendment in principle and would put the matter right on the Report stage.
§ Sir A. STEEL-MAITLANDI beg to move, as an Amendment to the proposed Amendment, in line 5, after the word "sum," to insert the words:
and by the amount, if any, of the principal value of any proceeds of sale of the subject matter of the transfer or of property representing such proceeds on which estate duty is assessed on the same death.I move this Amendment only because we are advised that the object which the Chancellor of the Exchequer had in mind has not been secured in paragraph (b). There were two Amendments, one of which was handed in in manuscript, and they were intended to meet what is thought to be a defect in paragraph (b). I have chosen to move the Amendment on the Paper because it is thought that paragraph (b) does not in fact provide against any property paying Death Duty twice. If the property is sold and a certain amount of consideration is received for it, it may not be taken out of the operation of this Clause and Death Duty may, therefore, be payable on the property itself, and also upon such consideration as has passed for it. I should be glad to hear the opinion of the Attorney-General.
§ Mr. P. SNOWDENI have promised to take paragraph (a) of my Amendment into further consideration, and I am willing to give further consideration to paragraph (b). At the same time, I am not clear as to what is the purpose of the right hon. Gentleman, but after this explanation perhaps he will be satisfied if I say that when we come to an Amendment of paragraph (a), if we can meet the point raised, I shall be very glad to do so.
§ Viscount WOLMERThe position will be made a little difficult—and I speak as a Member who is not an expert lawyer—if the right hon. Gentleman is to put off the last version of this policy until the last stages of the Bill. If these matters are left to the Report stage we shall have a very small opportunity of considering any change of wording with the care that the importance of the case requires. Nobody knows better than the Chancellor of the Exchequer how involved and technical this wording is. It is difficult for him, but it is much more difficult for hon. Members in other parts of the Committee who have not the trained assistance which he has at his command. I beg of him to give us as much notice as possible of his final version. If the matter is taken at the last moment it will not give hon. Members time to consult people outside who ought to be consulted.
§ Mr. SMITHERSThe point of the Amendment to the proposed Amendment is a simple one. We understand that paragraph (b) does not make the question of double taxation completely watertight. Does it, or not? Is our Amendment necessary to make it watertight? Surely with the assistance of his expert advisers the right hon. Gentleman can answer that question?
§ Sir A. STEEL-MAITLANDIn view of the assurance of the Chancellor of the Exchequer, I beg to ask leave to withdraw the Amendment to the proposed Amendment, on the understanding that he will consider the matter before the Report stage with a view to meeting the point if there is double taxation.
§ Amendment to proposed Amendment, by leave, withdrawn.
§ Proposed words there inserted.
§ The ATTORNEY-GENERALI beg to move, in page 25, line 19, after the first word "property," to insert the words:
(being property which, if it had been in the disposition of the deceased at his death, would have been property in respect of which Estate Duty would have been payable on the death).We are really indebted for these words to the hon. Member for North-East Bethnal Green (Major Nathan) and those collaborating with him. I think the Committee will agree that these words are an improvement. They are certainly 1887 what we intended, and if there is any doubt about the intention I think they carry it out and that it is better to insert them. We have substantially pirated the hon. Member's idea, and put it in.
§ Amendment agreed to.
§ The ATTORNEY-GENERALI beg to move, in page 25, line 19, after the word "in," to insert the words "any such."
This is merely consequential upon the last Amendment.
§ Major NATHANI should like to intervene to express appreciation to the Attorney-General for having adopted this Amendment.
§ Amendment agreed to.
§ The ATTORNEY-GENERALI beg to move, in page 25, line 20, to leave out the words "for full consideration," and to insert instead thereof the words:
where the consideration for the sale was received or receivable wholly by the deceased for his own use or benefit and was satisfied in one or more of the following manners, that is to say, by a capital sum of a fixed amount or by shares in or debentures of the company.
§ The CHAIRMANDoes the hon. and learned Gentleman not move his first Amendment—In page 25, line 20, to leave out the words "for full consideration," and to insert instead thereof the words:
where the consideration for the sale was received wholly by the deceased for his own use or benefit and was satisfied in one or more of the following manners, that is to say, by a sum of money of an amount determined at the time of the transfer or by shares or debentures of the company.
§ Viscount WOLMERMay another hon. Member move it in order to get from the Government a statement as to why they are not moving it?
§ The CHAIRMANI understand that the Attorney-General is not moving this Amendment in order to move another Amendment which is in some respects similar.
§ The ATTORNEY-GENERALIf the Noble Lord will look at my Amendment, he will see that I am moving it in substitution for the other Amendment to which he refers, and with what is a verbal alteration.
§ Mr. SMITHERSAre there no other Amendments which come before this Amendment?
§ The ATTORNEY-GENERALI understood that the Chairman called upon me to move this Amendment. Most of the intervening Amendments were consequential on that which I am not moving.
§ The CHAIRMANI understand that the other Amendment on the Paper before this one is not being moved.
§ The ATTORNEY-GENERALI should explain that we have thought it desirable to omit the words "for full consideration" for this reason, that you might get, and probably would, all sorts of discussions and inquiries as to whether the consideration was full or was not. That might be an exceedingly difficult subject on which to pronounce any satisfactory opinion. After all, as long as the consideration, whatever it may be, is a consideration which passes to the transferor, that seems to us to be the important fact. For instance, if the transferor transfers a property to a company and receives in lieu of that property shares in the company, what happens? It is simply this: He receives shares in place of the property, and as long as he gets all the shares, the Committee will realise that, from the point of view of Estate Duty on his death, his estate has to be valued and those shares have to be valued. This does not deal with the fact that you can make a gift and can give shares away, and as long as the person continues to live for three years afterwards, the Estate Duty is not payable. The Clause does not deal with that at all, but, in view of the complication which might arise in embarking on any inquiry as to whether or not the consideration had been full, which is difficult to determine after a number of years, we have thought it right to say nothing about the fullness of the consideration, but seeing that it was a consideration which passes to the transferor, the effect of the Amendment is, that as long as the consideration is received or receivable wholly by the deceased for his own use and benefit, and is satisfied in one or more of the following manners, that is, by a capital sum of a fixed amount or by shares in or debentures of the company——
§ Mr. A. M. SAMUELDo not shares represent capital?
§ The ATTORNEY-GENERALThe shares represented are shares in the company. We have inserted the words "by a capital sum of a fixed amount" for this reason. We have to guard against those cases where we must take care to see that the amount paid to the transferor is not in the nature of an annuity, and not determinable on his death and not to be X pounds a year as long as he is alive. That would be a simple way of defeating the Clause. It must be a sum that is fixed, or, at any rate, is capable of being fixed, and which the law would regard as fixed. It must not depend upon a contingency such as the length of time which the transferor has still to live. These words "shares in or debentures of the company," speak for themselves. If the transferor, in lieu of the property transferred, receives share or debentures, then as long as he receives those shares or debentures, we do not strike at the transaction at all.
A typical case of the sort with which we have to deal is this, and we have had many of them. I will not mention names, though I can easily give cases. There is the case of a company, the "X" Estate, Limited, with a capital of £20,000 in £1 shares. Shares were issued to the extent of £19,998, but they were held by the transferor's son, and none of them were held by the transferor at all. The transferor agrees with the company that he shall be employed. I think they called it "life managing director," at a salary representing 95 per cent. of the annual income of the company. Obviously we have to deal with that case. In a case of that sort, where you have got this sort of mere jugglery, the transferor being careful not to hold any shares at all, we ought to take that as being within this Clause. Therefore, we have put down this Amendment.
§ Mr. A. M. SAMUELWill the learned Attorney-General allow me to point out that there may be cases where such shares represent no capital or money denomination? Some securities have no par value. I dare say that that is intended to be covered by the last line but one of the Clause, but evidently the point has escaped the notice of the Chancellor of 1890 the Exchequer and his learned colleagues. May I ask how the learned Attorney-General would cover a capital sum of fixed amount if the issued shares were of no par value? They have no monetary value of fixed amount.
§ The ATTORNEY-GENERALThe right hon. Gentleman really has not got this Clause at all clear. If the transferor is paid either, (1), by a capital sum of fixed amount, as an illustration £1,000, £500, £50—I hope that is clear to the right hon. Gentleman, or, (2) if he is paid by shares in the company, they may be shares having some nominal value or they may be no-par-value shares. Whatever shares may be going to the transferor, the case is just the same.
§ Major NATHANPerhaps the learned Attorney-General will allow me to ask him a question. He has called attention to the unusual words, "a capital sum of fixed amount." I refer him to the words used in the Amendment which appears in page 2641, "A sum of money of an amount determined at the time of the transfer." What exactly has he in mind? What is the subtle difference between "a sum of money of an amount determined at the time of the transfer," and "a capital sum of a fixed amount?" I hope I may have an opportunity of raising one or two small Amendments.
§ The ATTORNEY-GENERALThe point is a subtle one. Take this case. At the time of the transfer all that is arranged is that the amount is not fixed, but it is arranged that it shall be fixed at an arbitration. It might be said that it could not be described as an amount determined at the time of transfer. Equally, I think that would be a capital sum of fixed amount. It is a prinicple of law to regard that as fixed which is able to be fixed. For that reason, rightly or wrongly, I and those who advise me have inserted the words in that form.
§ Major NATHANI hope that in order to remove any ambiguity or doubt the learned Attorney-General will be able to accept the Amendment in that sense which I have put upon the Paper.
§ Viscount WOLMERI do not know if this phrase "a capital sum of a fixed amount" is new to Acts of Parliament, but it certainly is a phrase which 1891 appears to admit of very drastic treatment. I take it that there will be nothing in that phrase to prevent a sale taking the form of payment by instalment? It would be perfectly possible for the transferor to arrange that he shall be paid in instalments of £10,000 a year, until the total sum, which might be in multiples of £10,000, is fully paid. If that is so, there is very little difference between it and an annuity. If a gentleman at the age of 60 transferred his property to a company and was able to arrange that he should get an instalment of so much per annum for 40 years, he can be reasonably sure of getting it for the remainder of his life. I think the right hon. Gentleman will find that this phrase will enable him to be paid by instalments in exactly the same way as by annuity.
§ The ATTORNEY-GENERALI hope the noble lord will forgive me, but there is an obvious distinction. In the case he has outlined, when the man dies before the expiration of the time the money still outstanding becomes part of his estate. It goes on for 40 years. On the other hand, if it is an annuity, at his death it stops.
§ Viscount WOLMERStill it will be possible for the transferor to calculate with the advice of his insurance company what his expectation of life is, and it will be possible for him to arrange instalments to work out, there or thereabouts. If he is so unfortunate as to die earlier, there will be so much residue for the Chancellor of the Exchequer to take. On the other hand, if he is a prudent man and has insured his life, he will benefit correspondingly from the insurance companies. I do not think the Chancellor of the Exchequer will find this phrase entirely meets his case, but if he is satisfied I am not going to make any further objections.
§ Sir D. HERBERTI do not want the Government to withdraw this Amendment, and I do not want to advertise the means by which people can evade this Duty. I think there is a good deal in the point which was raised by the noble lord just now, and I would like to ask the learned Attorney-General if he does not think that by means of debentures with particular rights with regard to the 1892 rate of interest payable then, and particular rights as to repayment of those debentures, it would be a very easy matter indeed for a transferor to arrange a scheme by which he could defeat the whole of this Clause? I have an Amendment to this Clause in which I suggest a way in which this particular question might be met, and that is that where any payment is made otherwise than in a lump sum down it should be in the power of the Revenue to apportion any instalments as between capital and income. By that means you would stop at one blow all the many methods there are of living upon capital instead of upon income. If we could get a provision which would enable us to apportion money strictly between capital and income, it would be much more satisfactory and fair to the trading company.
Mr. TINNEI have had a comparatively recent experience as an executor in a case which possibly might interest the Attorney-General. A certain company which had defaulted for a comparatively large amount agreed to issue debentures to its creditors for the amount of the debt and accrued interest. The particular creditor for whom I was executor died, and the question was at what amount the bad debt should be valued. After a certain amount of argument with the Inland Revenue authorities, we fixed it at an amount which was not satisfactory to either party, certainly not to me, as the debt has not realised the value put upon it by Somerset House. That is a concrete case of the sort of difficulty which may arise.
§ Question, "That the words proposed to be left out stand part of the Clause," put, and negatived.
§ Question proposed, "That those words be there inserted."
§ Mr. A. M. SAMUELI beg to move, as an Amendment to the proposed Amendment, in line 1, after the word "where," to insert the word "of."
I am proposing this Amendment on behalf of my right hon. Friend the Member for Tamworth (Sir A. Steel-Maitland) and in order to hear what the Attorney- General has to say on the matter.
§ The CHAIRMANWhat has happened in this case is that the first Amendment in the name of the Chancellor of the 1893 Exchequer should have been taken off the Order Paper, then these Amendments to the proposed Amendment would have been in order and would have been put down to the Amendment which has now been moved. These Amendments, I suppose, hang together.
§ The ATTORNEY-GENERALWe have had some difficulty in understanding what this Amendment means. We were waiting to hear an explanation from the right hon. Member for Tamworth (Sir A. Steel-Maitland), but if the hon. Member who has moved it will explain the exact effect of this proposal, which I do not understand, I shall be glad to see how far we can meet his wishes.
§ Sir D. HERBERTIf the Attorney-General will take the whole of these Amendments together, he will find no difficulty in understanding them. The key is in the second Amendment, which is to insert the words "not less than three-quarters." The proposed Amendment will read:
whereof the consideration for the sale was not less than three-quarters was received wholly by the deceased.And so on. The Attorney-General will find that the proposed Amendment will read intelligibly.
§ The ATTORNEY-GENERALIf it is intended that we should except from the operative part of this Clause these transfers, notwithstanding the fact that part of the consideration is paid to someone other than the transferor, we are not prepared to accept it. That is the effect of the proposed Amendments. The Amendment of the Chancellor of the Exchequer provides for including certain transfers within the operation of the Clause, and it limits it to those cases where the transferor receives the whole consideration in cash, shares or debentures, that is to say, an out and out sale of the property. I cannot see any good ground for extending this to cases where part of the consideration is paid to other persons.
§ Amendment to the proposed Amendment negatived.
§ The CHAIRMANThe hon. Member for North-East Bethnal Green (Major Nathan) has handed in a series of manuscript Amendments to the proposed Amendment.
§ Major NATHANI beg to move, as an Amendment to the proposed Amendment, in line 3, after the word "satisfied," to insert the words "or to be satisfied."
This is the same Amendment as I have on the Order Paper to the previous Amendment of the Chancellor of the Exchequer. It does not need a long explanation. The Attorney-General has already accepted an Amendment to add the words "or receivable," and, therefore, it is necessary after the word "satisfied" to bring in the words "or to be satisfied." There is a point of substance in this Amendment, but I do not know that it is necessary to pursue it. If the Attorney-General is going to accept this Amendment, I need say no more. If he is unable to do so, I would point out that the matter of substance is this, that sometimes you have a contract for sale prescribing the date at which and the manner in which the consideration is to be satisfied. The contract of sale may take place on the first of the month, and completion may take place only at the end of the month. The words "received or receivable" which the Attorney-General has already accepted would answer the case if the matter rested there, but the words "or to be satisfied" are required, otherwise the whole object and purpose of inserting the words "or receivable" would be defeated.
§ The ATTORNEY-GENERALTo complete the case which the hon. and gallant Member has in mind, we are prepared to accept his Amendment.
§ Amendment to the proposed Amendment agreed to.
§ Proposed words, as amended, there inserted.
§ The ATTORNEY-GENERALI beg to move, in page 25, line 21, after the word "transfers," to insert the words "of or."
The question is, Could the transfer of a business itself be said to come within the words "transfers incidental to the transfer," and to make it quite plain that the transfer of these businesses is to be taken out, we propose to insert the words "of or."
§ 10.0 p.m.
§ Viscount WOLMERI should like to ask the hon. and learned Gentleman if 1895 he is quite satisfied that the words he has just moved prevent the transfer of a cricket field or anything of that sort, because it seems to me that they do not. These are only
transfers of or incidental to the transfer of a bona fide business,and it seems to me that the position is not quite safe in that respect. I suppose I should not be in order in discussing the whole of this paragraph (b) on this Amendment, because these words are qualified by the phrase that follows:not being a business which substantially consists in holding, managing, developing or dealing in land.It is a separate point.
§ Sir B. PETOThis paragraph deals with the question of the transfer of a business, and the Attorney-General said he is putting in these words to make it quite clear that they will cover the transfer of a business as well as the transfer incidental to the transfer of a business. Seeing that later in this paragraph it says:
not being a business which substantially consists of holding, managing, developing or dealing in land,I take it that such a business as that which was mentioned, namely, Morris's, is outside the Clause. We have heard constantly in our discussions on this Clause such an illustration as that of large commercial undertakings, and do I understand that this Amendment means that no such business of big motor car undertakings will come within the scope of this Clause?
§ Sir D. HERBERTI wish to say a word of welcome to this Amendment. Earlier in the evening I quoted to the Committee and to the Attorney-General the case of a man transferring his business to his managers and those associated with him, and he then told me that that would be covered, because it was a business. I rather want to excuse myself for what I said first of all, because this Amendment was not in here then, and I had not seen it, and when I read the Clause as originally drawn, I thought it only referred to what one might call subsidiary transfers after the main formation of a company. I am satisfied now that the 1896 transfer of any kind of business is absolutely exempted from the operation of the Clause.
§ Amendment agreed to.
§ Sir L. WORTHINGTON-EVANSI beg to move, in page 25, line 21, to leave out the words "bona fide."
I understood that the Chancellor of the Exchequer was going to do this, but I do not see any Amendment in the name of the Chancellor of the Exchequer on the Paper.
§ Sir B. PETOI would call attention to the fact that on the amended Clause printed in the White Paper, the words "bona fide" are indicated by dots and the Amendment to omit the words "bona fide" in the names of other hon. Members and myself, were passed over.
§ Amendment agreed to.
§ Sir D. HERBERTI beg to move, in page 25, to leave out the words from the first word "business," in line 22, to the end of the paragraph.
This Amendment raises a very big question, namely, the leaving out of the words:
not being a business which substantially consists in holding, managing, developing or dealing in land.I understand that the Government have in view as concerns which unduly avoid taxation companies whose main business is the holding of certain landed estates, and apparently their difficulty in dealing with these particular companies has been so great that they have come to the conclusion that they would practically confine this Clause to companies dealing with land, because any other sort of business is to be absolutely excepted from this portion of the Bill. Surely, it must be admitted at once, that there are a very large number of companies whose business substantially consists in holding, managing, developing or dealing in land—companies which are, in the strictest sense of the word, commercial undertakings, perfectly honest and absolutely as genuine businesses, with no desire to interfere with the taxes, as those trading concerns which the Government think it necessary to except. Therefore we come to this: it is only what was said on an earlier part of the Clause, that the Government has misconceived the whole scheme for dealing with the particular 1897 type of individual with whom they are trying to deal. They have been driven to excluding from the operation of this part of the Bill certain companies which may well be and often are what we may call tax-dodging companies, but because they do it in connection with personal property instead of with real property, the Government must find it necessary to shut them out.In effect they say, "The task is too big for us; we cannot deal with them." But in doing that they are still open to the same objection. A number of companies formed to develop building estates, formed by people known as speculative builders, companies formed to finance building estates—all of those, apparently, are to come within this Clause, and therefore make the Clause open to all the many objections which have been raised, and only to some extent with regard to the earlier parts of the Clause. I would point out to the learned Attorney-General again the case I quoted earlier in the evening of a man transferring to those associated with him, the business that he had built up. I put that case to him again with this variation, that the man has built up a business which is mainly concerned with holding, managing, developing or dealing in land.
I take the case of a man who has carried on the business of an estate agent, and in that connection has come to undertake and to deal with the management of a large amount of land. The man makes over his business to those associated with him in the business. I put the question to the Attorney-General. The answer that he gave in the previous case will not apply. I want to know why the companies in that case should be hit by this? I am going a step further with regard to these particular words. This Clause is, as far as I know, about the most open and unabashed attempt in legislation to victimise the holders of real estate. Why are they to be treated in this way? The Chancellor of the Exchequer may say that people who own real estate avoid his taxes more than people who hold personal estate. If that be so, why is the whole class of people who deal in land to be penalised because there are some sinners amongst them? The taxpayers are penalised sufficiently already by having to bear the burden of those taxes which the Chancellor of the 1898 Exchequer is unable to collect from those whom he describes as tax dodgers, by reason of their ability to get out of this legislation.
But I must put this: If there is one sinner amongst 12 owners of real property, why should the 11 innocent ones be punished? The Chancellor of the Exchequer seems to be amused, but I do now know why. I put the question in all seriousness. Surely he must know that the number of limited companies registered by people whom no one would describe as landowners in the ordinary way, the number of companies registered for dealing in and developing land, is far greater than the number of companies that are registered for the purpose of holding and dealing with the ordinary big landed estates of wealthy men? The number of companies carrying on a genuine business in real estate is, I think I can say without hesitation, several times the number of those registered for the mere purpose of holding landed property for a private individual.
I suppose it would be too much to expect the Chancellor of the Exchequer to accept the Amendment, but it raises such a serious point that it requires a serious answer. What is more, I think it is an Amendment which we on this side are bound to push to a Division. We are bound to press for some alteration of this portion of the Bill in this respect, right up to the last stage, because if it is our duty to stop people avoiding their fair share of taxation, it is our duty also to see that concerns such as those which are dealing with great housing schemes—and that ought to appeal to hon. Members opposite—to see that honest businesses, intended to provide more houses, are not penalised. That is the kind of business that is going to be brought within the operation of these very complicated and difficult Clauses which bear very harshly upon those concerned. Therefore I express the hope that the Chancellor of the Exchequer and his advisers will, at least, give serious consideration to this point and will see that, before the Report stage, something is done to exempt from the operation of this legislation, those perfectly honest and genuine commercial and trading companies to which I have referred.
§ Mr. CHURCHILLI beg to move, "That the Chairman do report Progress, and ask leave to sit again."
I understand that it may be for the general convenience if, before we enter upon the discussion of the extremely important Amendment placed before us in the lucid speech of my hon. Friend the Member for Watford (Sir D. Herbert), I give the Chancellor of the Exchequer an opportunity of telling us what his ideas are about the progress which we ought to make to-night and how long he wishes to keep us here.
§ Mr. P. SNOWDENSince the right hon. Gentleman raised this question two hours ago we have made fairly considerable progress—I think sufficient progress to justify me in expecting that we shall, at least, get to the end of the Amendments to Clause 29 to-night. Apart from the Amendment now before the Committee I think the remaining Amendments are very largely consequential upon Amendments which have already been decided or deal with points which have already been discussed on previous Amendments. It is the general wish—it is the wish at any rate of two parties in the Committee—that we should be at the end of the Amendments on Clause 29 this evening and I think the Committee will do me the justice of saying that I have not pressed them very severely to-day. I have not once appealed to the Chair upon any of the Amendments; there has been ample opportunity for discussion and I think the party opposite might show a little reciprocity and meet me in what is, I think, the very reasonable suggestion that we should get to the end of these Amendments. I should like to have completed the Clause, but I am willing to concede this, that if we can get the Amendments, I will leave over the discussion on the Question "That the Clause, as amended, stand part" until to-morrow. I hope that the right hon. Gentleman will consider that the suggestion is reasonable.
§ Mr. CHURCHILLNo one complains of the tone in which the Chancellor of the Exchequer has addressed the Committee on this point. Of course, our path would be greatly smoothed by the treatment which he may decide to mete out to the Amendments which we may have to move, and particularly to the present 1900 Amendment. At the same time, I hope that we shall, without entering into any bargain of any kind, be able to make progress in the direction he has indicated before inconvenience is caused to Members by a protraction of the sitting. If so, I suppose that the debate on the Clause will be taken in the light of day to-morrow, when we shall be able to survey the whole of the Clause as it has been remodelled by the House in the process of the Committee work. It is not only a question of endeavouring to compress discussion within certain limits, but there are questions of merit, one of which we are now discussing, which it is difficult to say might not enter into the arrangement. But if the right hon. Gentleman is able to accept some of the Amendments on this side of the Committee, I do not think that his suggestion is unreasonable. I, therefore, ask leave to withdraw the Motion.
§ Motion, by leave, withdrawn.
§ Question again proposed, "That the words proposed to be left out, to the end of line 24, stand part of the Clause."
§ Viscount WOLMERThe progress we make to-night will largely depend on whether we are going to get any help on the Amendment which my hon. Friend has just moved. With regard to the Amendment which we are discussing, this is a matter that it is no exaggeration to say affects the whole countryside. The right hon. Gentleman has picked out landed interests and agricultural interests, among all the other industries of this country, for special discrimination in this Finance Bill. I ask the Attorney-General what justification the Government have for doing this. I know that some hon. Members opposite think that there has been a scandalous evasion of taxation on the part of some country landowners who form these estate companies, and I want to argue that matter fully and frankly with hon. Members opposite. There has been and is tax evasion in some of the private companies, but I submit that the great bulk of the estate companies which deal with agricultural land are not tax evaders. They are putting agriculture in exactly the same position as that of any other business, and that is the position in which 1901 agriculture ought to be placed and ought to be regarded by His Majesty's Government.
Let me take a concrete example with which I happen to be acquainted, although I am not personally interested in it. There is an agricultural estate in a part of England where the soil is rich and the rents are relatively high. It has been valued at something like £250,000, and Death Duties would have to be paid on that sum. This estate is well managed, but the average return to the owner is under 1 per cent. That is absolutely typical of agricultural estates in England at the present day. Any estate that returns as much as 1 per cent. on its capital value is, as a matter of fact, in a very fortunate position. Why is it that these estates do not pay more than 1 per cent., however good the management? I am not talking now of farming companies, but of estate companies doing the business of landowners, or landowners doing their own business on the same lines as any other business. These agricultural landowners have not charged their tenants rack rents. They have to the full taken their share of the depression in agriculture which has been going on, in different phases, for the last 50 years. The agricultural depression of the 'eighties ruined a great number of the landowning families in England. A great number of them permanently crippled themselves by the assistance they gave to their tenants to tide over that great crisis. Another great depression in the 'nineties left landowners further impoverished; and now there is another agricultural depression.
The result of these depressions is that rents have been put down to a point where they no longer bring in an economic return on the capital value of the land. Some hon. Members opposite have considerable experience of these agricultural matters, through their connection with co-operative societies, and they will bear me out when I say that farmers in this country do not pay high rents. That is the principal reason why estates of all sorts, whether owned by companies or individuals, bring in a very small return on the capital value of the land. What does the landowner do? He forms an estate company. That means that on his death his shares are valued by the amount that they bring in, by 1902 what he can make out of his estate as long as he is running it as a business. Now what is there unfair in that? The market value of an estate may be worth £250,000, but because the landowner shares the burden of these depressed days with his tenants, does not exact high rents, and tries to do his best by keeping his farms in a proper state of repair, the net profits are very small or non-existent. Why should he be taxed at his death on a capital suns which bears no relation at all to the income which he has ever drawn from the land or which he would expect or desire his son to draw from the land?
All that the agricultural landowners have done by turning their estates into estate companies has been to put their affairs on a business footing and they say, "We will pay taxation on what we make out of our property." The Chancellor of the Exchequer says that that is tax evasion. The landowners in the past have been forced to pay Death Duties on the capital value of the land, which bears no relation whatever to what they have been making out of their property. The Chancellor of the Exchequer may say that the land had to be valued for Death Duties like any other form of property. The right hon. Gentleman knows that land has an amenity value, which is often a fancy value which bears no relation at all to the money which is made out of it. If you tax land on the amenity value, you tax a, theoretical value and you must do one of two things—either you are trying to force the landowners to raise rents and make more out of their land, or you are forcing them to sell their estates to speculators who frequently make the tenant buy their own farms. By that policy you are not doing any good to agriculture, and you are only forcing the breaking up of large agricultural estates. That is what the right hon. Gentleman is doing by these duties. I can speak of a case which I have in mind. It is an estate which brought in about £2,000 a year. That estate has to pay £50,000 in Death Duties. Unless a man possesses considerable private means, he cannot pay Death Duties on such a large scale as that upon property that brings in such a small return.
By forcing estates of that kind into the market, you are depriving the tenant of an indulgent landlord who has not 1903 exacted the full economic rent and who has stood by the tenants in times past. You are forcing the landowners to sell their farms to land speculators who force the tenants to buy their farms, and the tenants find that the mortgagee is not so indulgent in his relations with them as the former landlord. Agriculture is suffering from the breaking up of these estates, and the fact that the landlord no longer has as much capital at his disposal as he had in previous years. It is that fact which makes agricultural depression more serious than it was in the eighties and the nineties, when the landlords stood by their tenants. Now the landlords are left with a reduced capital and very small incomes, and when they try to put their estates on a business basis and ask to be taxed on their income, the Chancellor of the Exchequer calls them tax-dodgers, and introduces a Bill which singles them out as people who are evading a public duty, and seeks to penalise them. If the Chancellor of the Exchequer persists in this course of action he will be doing agriculture and farming an exceedingly ill turn, and he will be adding to the agricultural depression which the Labour Government have expressed a desire to relieve.
§ Captain BOURNEI support wholeheartedly the argument of my Noble Friend the Member for Aldershot (Viscount Wolmer). I think that this provision goes even beyond the limits that he has mentioned, and imposes an intolerable burden on our agricultural industry. Most people who have any acquaintance with business will agree that much of the prosperity of this country has resulted from the Joint Stock Companies Act, which, if my memory serves me, was passed about the year 1860 or 1861. The agricultural industry at the present moment is in a bad way. The landlord is hard up, the farmer is hard up, and it is generally agreed that the workmen are paid very low wages. It seems to me to be essential, if agriculture is to become prosperous, to introduce ordinary business methods into the industry.
I would ask the Attorney-General, or whoever is going to reply, whether there is any company dealing with land that would not come under this Clause. A company formed purely for the purpose of farming would come under it, since 1904 it holds land and manages land. The landlord who forms his estate into a limited company—and there are many reasons for doing that, apart from Death Duties—makes the management of his estate very much easier. He pays tax on a very much fairer basis, namely, on the profit that he actually makes, and not on the profit that some Inland Revenue official may think he ought to make. He has a far better chance of charging accurately for what he spends in maintenance, and does not have interminable wrangles with the authorities as to whether it should or should not be maintenance.
There are many practical reasons in favour of forming an estate, like any other business, into a joint stock company. After all, if a man wishes to make soap, and turns his business into a joint stock company, everyone would regard that as a most laudable effort on his part, and it would be applauded. Why should not a farmer do the same? The farmer, however, would come under the disabilities of these new Clauses. Obviously, he must hold land for the purposes of his business, he must manage land, and he must develop land; and if he went before a Court of Law, he would be held to be under this Clause, and, on his death, the company would be held liable for Death Duties. That seems to me to be a very serious state of affairs. One way in which the Government might help agriculture is by encouraging the agriculturist to take up the more modern forms of business and of production, but, instead of that, the Chancellor of the Exchequer is trying to prevent any development along ordinary commercial lines in the agricultural industry.
After all, as my Noble Friend has said, why should not the landlord put his estate on to an ordinary commercial basis? That is all that he is doing when he turns it into a company. Most people who have had any experience of the management of estates know that the amount of net revenue derived from them is very different from the amount of the gross revenue. A man is lucky if he receives 30 per cent. of the gross revenue. The Death Duties can only be paid off in one way, unless the owner has very large resources, and that is by selling off the land piecemeal. There is nothing worse for the agricultural industry than selling 1905 the farms off. It is bad for the tenant, bad for the labourer and bad for the landlord and, within certain limits, the more the estate is reduced owing to sales, the less efficiently can it be kept up, because the less can the owner afford to keep a permanent staff, because he has not the amount of work for it to do. The Clause seems to me to go far beyond what is needed and I hope the Committee will reject it.
§ The ATTORNEY-GENERALWe have listened to three remarkable and very differing speeches. In the first place we had the speech of the hon. Member for Watford (Sir D. Herbert), coldly logical, in which he suggested that, unless we accepted the Amendment, there was a great danger of perfectly innocent persons, who had no idea of tax evasion whatever, being hit by the pains and penalties of the Clause. Then we had the speech of the Noble Lord, not quite so cold and not quite so logical, though very picturesque which, if I followed its implications, was nothing short of a passionate plea to allow us to continue tax evasion in the case of agricultural land lest a worse thing should befall, namely that estates would have to be sold up and the tenant would find the last state of things worse than the first. Finally we have had the speech of the hon. and gallant Member for Oxford (Captain Bourne) which, as far as it was possible to do it, seemed to reconcile the two totally inconsistent speeches that had previously been made. He and the Noble Lord asked why we should refuse to agriculture the adoption of the ordinary business methods which we encouraged in the case of every other company. Do we refuse it at all? Let us see. If the owner of a business, or a landed estate, sells it to a company on ordinary business methods, presumably the person who sells would be the person who receives the consideration. If that is so in this Clause, it is out of the Clause altogether. Where the consideration is received by the transferor, the case does not come within the Clause at all. Then the Noble Lord said you have the case of a landowner who has made over his estate to a company and has received shares. If he has received shares and they are payable to him, if he has them at the time of his death or within three years of it, he has to pay Duty on 1906 the value of them in the ordinary way, and the consideration of the company passes directly to him, the company is not hit at all and no Duty is payable on the estate.
But let us face the question frankly. I should like to understand. Does the Noble Lord or does he not suggest that this sort of case—and I can assure him it is quite common—should go on, that the owner of a landed estate, agricultural or building or what you will, being desirous of avoiding Death Duties and, at the same time, of continuing to enjoy the benefits and privileges which he now gets from the estate, makes a sale to a company and takes care to see that the whole of the shares are transferred not to him, but to his son, and gives himself, although not even the holder of one share, a complete right to control the company and to receive every penny of its income. If I follow the implication of the speech of the Noble Lord, he seems to think that we ought not to stop that sort of thing.
§ Viscount WOLMERI was protesting against agriculture being singled out for different treatment from that of any other industry.
§ The ATTORNEY-GENERALI shall be glad to come to that point, but I think that if the Noble Lord reads his speech to-morrow he will see that his speech did go as far as that.
§ Viscount WOLMERNo.
§ The ATTORNEY-GENERALWell, let us see to-morrow. If it did not do so, I will gladly withdraw what I have said. The Noble Lord will follow that where the transferor transfers the property to a company he is out of the thing altogether. My point is unanswerable. In ordinary business methods it is the person who transfers who receives the consideration. The hon. Member for Watford asked me why is it that we differentiate specially with regard to these landed estates. Let me address myself to that point. If the way of the tax evader is easy—I do not know whether it is or not—I can assure the Committee of this fact, that the way of the man who tries to stop up the holes of the tax evader without hitting the innocent is extraordinarily difficult. I have given a great deal of thought to 1907 this matter during the last few days, and I think that some of the flaws of the Clause have been amended. I do not say that the Clause is perfect now. I do not believe that it is in the wit of man to devise a thing that is perfect. I do not think that it is possible to do more here than our utmost to see that there is no risk of innocent men being hit. I do not believe that anyone can say more than that.
I hope that we have achieved that object. I believe we have achieved it. We have reduced that risk to a minimum, but risk, negligible though it may be, always must be in a Clause of this sort. That being so, we are faced with this position. As far as I know there have been no cases of tax evasion other than by landed concerns. I do not know of one single case. [Interruption.] Perhaps the right hon. Gentleman does. He may know more about these things than I do. I do not know of one single case of an ordinary business. [Interruption.] I do not mean anything personal. If the right hon. Gentleman thinks that I did, I will withdraw at once. I can assure him that I did not. I really meant that he may have come across cases, in the course of his business experience, but I have not done so. I think that with regard to these companies, Clause 32 of our Bill deals with the means of evasion. I think that this form of evasion is a form of evasion which is applicable to these landed estates, and to these landed estates only. For what it is worth, I can only say that I have not come across cases of this sort except in that connection.
§ Sir D. HERBERTDoes the learned Attorney-General mean since the Acts of 1922 and 1927, which at such great trouble were enacted in order to deal with one-man companies which dealt with personal property?
§ The ATTORNEY-GENERALThis form of evasion is a good deal older than that. This particular form of evasion with regard to landed estates has to my certain knowledge, and, I should think, to the knowledge of the hon. Member, been going on for the past seven or eight years. That being so, is not this proposal sensible and right? In taking what precautions we can, and doing the 1908 utmost we can, to see that there is no risk of any innocent man being hit, and in taking all these precautions about transfer, and considerations in regard to the transferor and the income from benefits and so on, there is still this risk. If we find in the future that advantage is being taken of this exception by companies other than landed companies, then we shall certainly not hesitate to come to the Committee and ask for powers to extend what we do to-day to other companies.
But I do submit that as, at the present time, this particular evil is confined, as far as we know, to the case of companies concerned with or dealing in land, speaking broadly, we are right in the first instance to try to make our machinery fit, and fit those only who, as far as we know, are taking advantage of the present law to go in for this tax evasion. We must make the punishment fit the crime and make it coincide with those who are trying to evade. Those are the landed estates only, as far as we know, and therefore we apply it to them. I ask the Committee to realise that the mere fact that a person transfers his property, a landed agricultural estate, to a company, does not bring him within this Cause. The case which the Noble Lord put would not come within the Clause. He cannot suggest that in the case of such a company the income which the transferor receives, otherwise than by dividends on shares, would amount to 30 per cent. of the entire income of that company.
§ Viscount WOLMERWhat I said was that what is driving landowners to do this is the fact that they are being taxed on a scale altogether higher than anything which they can make out of land. If the right hon. Gentleman wants to deal with the problem of estate companies, the best way to do it is by taxing the landowners on what they receive.
§ The ATTORNEY-GENERALThe Noble Lord is confusing Income Tax with Estate Duty. The right hon. Member for Epping (Mr. Churchill) dealt with that in one of his Budgets, and provided that the rates of Estate Duty should be particularly toned down to deal with agricultural estates. It is the fact that, as far as agricultural land is concerned, so far from its being treated more harshly than other cases, it does in fact pay a 1909 lower rate of duty. Everybody has to pay his share, but there is no ground for saying that agricultural land, in respect to Estate Duty, has to pay more than its fair share. The case put by the Noble Lord really missed the point. The mere fact that the owner of a landed estate transfers it to a company does not bring it within the Clause at all. He receives a consideration and is out of it altogether, and even though he does not receive a consideration and it goes to his son, he is out of it. He is out of it, unless the benefits which he continues to draw from the company, otherwise than by shares or dividends on shares, amount to 50 per cent. or half of the entire income of the company. I cannot think that there is really any more than a negligible danger of our doing hardship or injury to any person, and for these reasons I regret that we cannot see our way to accept the Amendment.
§ Sir L. WORTHINGTON-EVANSThe hon. and learned Gentleman has made a speech which hardly dealt with the Amendment before the Committee. As a speech on the question "That the Clause stand part of the Bill," it was an admirable one. Let us see how he dealt with the case put by my Noble Friend. He put the case of a landowner who transferred his property to a company, but retained the whole value of the estate, either by an annuity or by some dodge which enabled him to secure the income. He said that that was the case at which he was striking. By all means let him strike at that case. That is the case we are not concerned with and are not defending in any sense. Where there is a deliberate attempt to endeavour to pretend to transfer, and yet to retain the benefit, those are cases with which, we admit, this Clause should deal, and that is the case, of course, with which the right hon. Gentleman dealt. He gave earlier on in the evening another case of a personal property case, where someone with £50,000 of War Loan transferred it to a private company, did not take any dividends on his shares, put the shares in the name of his son but continued to receive, as governing director, £2,500 a year, the whole of the income on the War Bonds, as his remuneration. That is, again, a transaction with which we are not concerned 1910 in the least. We are not concerned to defend that for a, moment, and we welcome any Clause which restores to the Revenue the proper duties that should accrue, in either of those two cases. That is not at all the case that we have to deal with to-night. This Amendment seeks to exclude any business not being
a business which substantially consists in holding, managing, developing or dealing in land.But that is not a business about which these dodges are taking place, but it is an ordinary estate company either of a private owner, or of a building estate to which my hon. Friend the Member for Watford (Sir D. Herbert) referred. Let me deal with both these cases, because the hon. and learned Gentleman seemed to think that they were contradictory and required reconciliation. Let me take the private estate company first. Is it not fair that the owner of an estate consisting of the mansion house, and the farms and, perhaps, building land, should pay not only Income Tax upon his income, but Death Duties, and Estate Duties upon the value of the income capitalised? That is not what he pays now, and because he is now overcharged, the habit has grown of transferring these properties to a limited company, so that the income on the shares should be capitalised for the purpose of Death Duties. Those shares are valuable. They are in the ownership of the transferor. It is all very well to say that he is outside the Clause. Are hon. Gentlemen so certain of that? I do not think it is possible to say that he is always outside the Clause. That depends upon many things—whether he has had any benefits within three years, and a large number of other things; then, finally, upon the construction put by the Law Courts on an exceedingly difficult Clause. The Committee well knows how difficult this Clause it.The point I want to make, and I put it without hesitation to the Committee, is this: Is it fair that the owner of an estate which is carried on in future by a company should pay upon the value of the shares in that company? If it were an engineering business, a shop or a group of shops, on what do they pay? The capital value of the income of the shares which they hold in those businesses. Why should real estate be separately and differently 1911 treated? It is not really, therefore, fair to say that in this case there is an attempt at avoidance.
11.0 p.m.
Let me deal with building estates. The question put by my hon. Friend the Member for Watford, whether admitted or not, is undoubtedly true. It is undoubtedly true that the Budget of 1910–11 paralysed speculative house building. A large amount of the arrears of house building up to the War was due to the taxes of the 1909–10 Budgets, and unless this Amendment is accepted this Bill will have the same paralysing effect upon the development of building estates. Building estates cannot be developed unless there is such confidence as will induce bankers to lend money to builders for the development of these estates, and if this Clause goes in without this Amendment you will destroy that confidence and make it more difficult for these building developments to be financed. This Amendment is not designed to help the tax dodger, nor has it that effect. Let me read the Clause as it has been amended:
The transfers referred to in the preceding sub-section are transfers, whether made for consideration or not of property or any interest in property other than"—That is an exemption—transfers of or incidental to the transfer of a business not being a business which substantially consists in holding, managing, developing or dealing in land.There are two negatives here. Let me read the Clause in the positive:The transfers referred to in the preceding sub-section are transfers of a business which substantially consists in holding, managing, developing, or dealing in land.You are attaching these penalties to a company which carries on a business which substantially consists in holding, managing or developing land. Why should you do that? You are jeopardising building estate companies, you are not dealing with the tax evader. We do not want to defend them, but you are jeopardising companies which are registered for the purpose of taking over estates in order that they may be rationalised and really pay upon the actual income obtained by the owners of shares.
§ Mr. TURTONI want to direct the attention of the Attorney-General to the 1912 actual effect of the Amendment. The first, material word is the word "holding." This word has been used for at least 200 years in agricultural Acts to define the specific action in which you look after land in order to work it. In a long sequence of Agricultural Holdings Acts the word "holding" has been defined as meaning the land farmed, market gardens, excluding park land. My first question is whether holding land in this respect will not be construed in the Courts in a similar way to that in which it has been construed under the Agricultural Holdings Acts, and whether the word is not the same as the substantive founded upon the verb.
So far as I can construe the word "holding," it will attack most virulently the farmer who wishes to turn his business into a company. Let us imagine a farmer who wishes to retire from business and who sells it to a private company in return, it may be, for an annuity. He receives remuneration or a pension from the private company, and if in the next three years farming was still not made to pay, that company would have to undergo Estate Duty to the maximum amount allowable under the Clause—in fact, up to 100 per cent. of the total assets of the company. That is one of the grave instances to which we have been led by using the word "holding."
The next material word is "managing," and you may there get the case of an estate agent who may wish to turn his business into a company. Is he also to be hit, and, if so, why is not another professional man, the solicitor, equally hit when he wishes to turn his business into a company? Fortunately for the learned Attorney-General and myself, we cannot turn our profession into a company, but there are other professions which can, and I submit that it is undeniably hard that you should penalize those who draw their living from some connection with the land, such as the estate agent, or the builder, or the farmer. If this Clause is passed as it stands, it will be one of the most grievous burdens ever put on the agricultural industry by any Government since Parliament began.
§ Mr. W. S. MORRISONThe Committee must, I think, be disquieted at the tenour of the Attorney-General's reply to 1913 this Amendment. He appeared to have missed the main contention that has been urged upon him. The reason for the Amendment is that, in the exceptions which this Clause confers upon certain undertakings, one form of industry alone is singled out for attack. It is clearly a case in which this industry alone, as in the past, has been singled out as the victim of this sort of taxation. We are told that the Socialist party is waging a war against the capitalist. Why then do they seek out of all capitalists that particular form which renders the most conscientious social service in the kingdom? They are very loath to attack the capitalist in the town, but direct the whole energy of their attack on those in the country who render more service to the people than any other. May I appeal to my hon. Friends who sit on the other side of the Committee? Supposing you nationalise the land to-morrow and the experiment does not pay, and you want to attract persons back into the private ownership of land. If you offer them land on these terms, you will only get on the average a return from your capital of 2½per cent. on your buildings, and you will have to throw the land in for nothing. That is no exaggeration. I recently went through the books of a landowner in my constituency who owns very good land. I satisfied myself that the total financial result of his ownership of land was that he extracted from his tenants 2½ per cent. on the capital value of his buildings, and the land was thrown in for nothing. Supposing, again, it was pointed out that, apart from all other capitalists in the country, he would be expected to perform important social duties of leadership and arbitration among his people, that he would be expected to give not only money but his time and interest——
§ The DEPUTY-CHAIRMANThe hon. Member must confine his remarks to the Amendment.
§ Mr. MORRISONI have no desire in the slightest to transgress your Ruling, but the point is that this is a provision which discriminates against all landed interests alone, and my endeavour is to show that of all forms of capitalist the landed capitalist is he who extracts least from the people and renders the most service for it. I note with interest the reference of the Attorney-General to the 1914 many privileges the landed capitalist enjoys, but, still, I think we get his services a great deal cheaper than we get the service of any other form of capitalist in the Kingdom. If we look at it from the social point of view, we get more efficient and cheaper service. In these matters we are considering the whole incidence of taxation on our people, and we ought as a House of Commons to see that taxation not only falls upon those backs most able to bear it, as I submit the landed interest to-day is not able to do, but we ought also to encourage those forms of activity which yield the greatest benefit to the people. I submit that, far from discriminating against landed interests as this provision does, we ought so to encourage them that the countryside which has been devastated by a long course of radical legislation should be revived and encouraged, and receive at least equal terms with capitalists in the towns.
§ Sir B. PETOOn a point of Order. I wish to know, Mr. Dunnico, whether you propose to call the Amendment in the name of the hon. Member for Macclesfield (Mr. Remer) to leave out the words "managing, developing." If that Amendment is not to be called, some of us wish to raise the point on this Amendment.
§ The DEPUTY - CHAIRMANThe Amendment to which the hon. Member refers is not selected.
§ Mr. CHURCHILLThe inclusion in the Clause of this strange provision, removing the business of holding, dealing in or developing land from the exemption aspect of the Clause, shows a prejudice which has existed in this country for a great many years. Indeed it dates from a time when the possession of the soil constituted almost the sole form of wealth, but the times have entirely changed, and the wealth which is derived from the ownership of agricultural land has become an almost insignificant part of the general system of wealth from which the revenues of the Exchequer are drawn. But the prejudice persists, though the facts have altered. As a result of that prejudice there is an injustice and the result of the injustice has been, to some extent, the position with which the Clause sets out to deal. It is pointed out that, in regard to the taxation of 1915 land, the Exchequer no longer seeks to follow the rule of apportioning the burden in proportion to the ability to pay. That principle is abandoned. There is a lot of talk about amenity values and the pleasant life that can be lived in the country and so forth, but the levying of taxation in proportion to the real beneficial yield, the financial return derived by the owner from the property—that principle which, in every other sphere, is acclaimed as dominant and indisputable—is now here cast aside. There is the injustice that Death Duties are calculated on capitalised value which bears no relation to the actual commercial value of the property.
§ Mr. LEIF JONESThe evils of which the right hon. Gentleman is complaining are due to the fact that it is a capital tax—a tax on the capital value of the land, and the capital value of the land is not based on its agricultural value.
§ Mr. CHURCHILLThat is our complaint. Here is a particular class of property the capital valuation of which for the purposes of Death Duties bears no relation to the return which that property gives, in the actual money power and money advantage which is derived from that form of capital. That is the injustice, and it is not, certainly, an injustice which dates its origin from the arrival in power of the so-called Socialist Government. It has been enforced by every administration, in one form or another, over a long period of years. But while you have that injustice and illogicality, although you may have some plausible explanation of custom behind you, you will have serious injury growing up in the State. I had as Chancellor of the Exchequer to consider these matters, and the late Cabinet considered it with attention, and we were certainly not prepared to say that the highly artificial arrangements which have been referred to for the purpose of enabling landowners to evade Death Duties should continue without further legislation; but it had never been our intention to make any legislation of this kind a feature in our policy without at the same time endeavouring to redress the root injustice which has been referred to by my Noble Friend the Member for Aldershot (Viscount Wolmer) 1916 and which has almost without resistance been pressed upon the Committee from so many parts of the Committee. I will take only one instance, and if the right hon. Gentleman were able to meet us now or on the Report stage, it would notably facilitate the passage of this Clause and other Clauses.
Take the question of the inclusion of the amenity value in the valuation for Death Duties, in the case where the estate is passing not by sale—a sale is a commercial event—but by succession. Why should a man have to ransom the amenity value of his own home, where his family have lived for generations, when his father dies, against the bidding of any profiteer or Transatlantic importation, or any new arrival in this country from any part of the world? One can quite understand that there is a certain class of vulgar persons who will pay a very large and fancy price in order to sit in the ancestral seat of some decaying British family; but why should the amenity value be brought into calculation when it is in regard to a man's own home? We have always considered that that was an injustice which must be removed before you proceed to stiffen up this legislation relating to the Death Duties. I cannot see why the right hon. Gentleman could not do it. It would be quite easy to insert a provision to say that the amenity value should not be taken into consideration in assessing the amount for Death Duties except when it passes by sale and not by succession.
What right has anyone to force a man to pay for the amenity value of his own home in competition with the common market value offered by all and sundry who might come and bid for it? It is contrary to every form of justice and fair play. This is an old subject with the right hon. Gentleman, but I hope that he will consider this, because we wish to stop the evasion of Death Duties by artificial, elaborate and deliberate means, but you ought to couple with that the protection of the successor to his own home from being, as it were blackmailed to bring it back over again in competition with all and sundry from any part of the world.
I hope the right hon. Gentleman will consider this point. I propose to put down a new Clause dealing with it. It would go a long way to remove the 1917 strong feelings which are naturally aroused by the flagrant statement in print which we see before us that of all the business methods of producing wealth or of organising industry the one selected for special severity of treatment is the business of holding, managing, developing or dealing in land. I hope the right hon. Gentleman is not going to make a very controversial reply.
§ Mr. ALPASSYou have not been controversial!
§ Mr. CHURCHILLI have not been controversial. I have put a point of view, but I have tried not to say anything to hurt the feelings of hon. Gentlemen. The principle is that wealth should be taxed. The principle is that the enjoyment and power which money gives should be taxed in proportion, but not that you should apply your taxation in such a way as to force from the man who loves his own home a price, in order that he may stay there, which is far beyond its proper use or money value. I am only suggesting an extension to the amenity value of the principle which Sir William Harcourt himself, and afterwards the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George), in a Budget which was denounced as severe Radical legislation, applied to pictures and other heirlooms. As long as the estate is passing by succession and is not being brought into the market for sale, the amenity value ought not to be included for the purpose of valuation for Death Duties. I hope the right hon. Gentleman will not brush that contention aside at this moment, not only for our own sakes, but for his own.
§ Sir B. PETOWe know that the purpose of this Clause is to deal with landowners who turn their estates into companies. The words "holding and managing" in this paragraph might possibly be appropriate to the ordinary ownership of an estate, but with the words "developing or dealing in land" it seems we are going altogether outside the ordinary business of a landowner, going into a line of business which is just as much a business as any other and deserves every encouragement. Developing and dealing in land implies putting these landed estates which are now in many cases derelict to some useful purpose such as opening them up as hotel 1918 properties or building estates. That is not the business of an ordinary landed estate. This is an attack upon one form of business and one only, and so, apart from the enormously strong argument of the right hon. Member for Epping (Mr. Churchill), I say that whatever words ought to be here, these words are most inept for the purpose the Government have in view.
Marquess of HARTINGTONThe particular Amendment which we are discussing is one which aims at preventing the Chancellor of the Exchequer from discriminating against agriculture. The right hon. Gentleman the Member for Epping (Mr. Churchill) has already shown that agriculture is severely taxed. There is another argument which has not been put in this debate, and it is the very serious effect on agriculture caused by this discrimination against land owners. When an agricultural estate passes on the death of its owner, heavy duties have to be paid, and unless the new owner possesses a large amount of realisable property the estate has to be broken up and sold. The forced sale of an agricultural property inflicts great hardship and has the effect of depressing agriculture permanently over a wide area. I do not think the extent to which agriculture in adjacent counties is affected by the breaking up of estates is fully realised by hon. Members. Take, far example, a corn-growing county. When that county is doing fairly well, it means prosperity for adjoining counties, because more horses are required and there is a better market for oats and hay, and better prices are obtained. The Death Duties inflict a severe blow on estates which come into the market, because the new owners have to liquidate all their available capital, and this brings them to the end of resources——
§ The DEPUTY-CHAIRMANThe Noble Lord cannot discuss the merits of the Death Duties on this Amendment.
Marquess of HARTINGTONSurely I am in order in discussing the discrimination against land as compared with other forms of property?
§ The DEPUTY-CHAIRMANThe Noble Lord cannot discuss the merits and demerits of the Death Duties upon an Amendment of this kind.
§ Viscount WOLMERMay I point out to you, Mr. Dunnico, that you have allowed previous speakers to refer to the exceptional effect of the Death Duties on agriculture and to argue that this taxation bears no relation to the returns from the land?
§ The DEPUTY - CHAIRMANThe Amendment under discussion does not deal with the merits or demerits of the Death Duties as such.
Marquess of HARTINGTONThis discrimination is bound to have a serious effect upon agriculture, and I urge the Chancellor of the Exchequer seriously to consider whether it is really worth while, in view of the very small revenue which he is likely to get to inflict this hardship upon the agricultural industry. The right hon. Gentleman may reply that the revenue and not agriculture is his own particular job. But it is his job to look after the revenue, and, in smashing the agricultural industry by this Clause, he is not only doing serious damage to agriculture, but is permanently impairing the buoyancy of the revenue. When you destroy an agricultural estate, you have destroyed, as far as one can see for all time, a great revenue-producing asset. [An HON. MEMBER: "The land is there."] Hon. Gentlemen opposite remind me of the Zulu who got a watch during the Zulu War, and smashed it because it did not work. They do not begin to understand what it is that they are destroying. The day will come when they will have the same regret that the Zulus had for their acts of destruction. They do not begin to know the effect of legislation of this kind, and the harm which it inflicts upon an industry that is already struggling with very great difficulties. It is the right hon. Gentleman's business to understand the effect that he is producing on the revenue. By breaking up estates to an even greater extent than is being done at present, he is permanently reducing the revenue-producing capacity of this country, and the time will come when there will be no more Death Duties, no more Sur-tax, and perhaps even no more Income Tax. If he persists in sticking to this Clause, he will inflict grievous harm, not only on agriculture, but on the revenue of the country.
§ Mr. LEIF JONESThe Noble Lord is mistaken in complaining that the Death Duties discriminate against agriculture at the present time. So far as there is discrimination in our taxation, it is in favour of agriculture, and that has been so in all recent Budgets, as it is in the present one. [Interruption.] I speak as one who has managed agricultural estates for 40 years. Really, hon. Members here, including the right hon. Gentleman the Member for Epping (Mr. Churchill), have insulted agriculture in specially exempting it, thought I do not know that actually it makes any difference to agriculture whether it is exempted or not. No one on these benches wishes agriculture to get out of paying the taxes that are due from it, and we are all agreed, as I understand, that tax evaders are not to escape; but I do think that the form of the Clause is most unfortunate. The Attorney-General told us that agricultural landowners have been driven to seek almost any refuge against the storm, but it is very unfortunate that one particular interest should be picked out for the purpose of stopping a gap. It is a great pity that general words have not been found, and it may be that they will have to be found if other businesses do as landowners have been compelled to do.
The speeches of the right hon. Gentleman the Member for Epping and of the Noble Lord the Member for West Derbyshire (Marquess of Hartington) have been directed, not against the Clause, but against the heavy incidence of Death Duties on these agricultural estates. The fact is that a capital tax on landowners falls very unfairly upon them, because of the taxing of the amenity values which have been described. The capital value has no real relation to the annual income of the estate, and that is at the root of the complaint that the agricultural interest is very justly making. Capital taxes can hardly ever be fair. Capital is an estimate. Income is more or less a reality. We know what we receive but no man knows what he is worth in the open market.
§ The DEPUTY-CHAIRMANI have allowed a certain amount of latitude in the discussion of the Amendment because I thought it would conduce to the debate coming to an end, but the question of Death Duties does not arise at all. The 1921 only question is whether the proposed method of preventing evasion is suitable or is going to inflict needless hardship.
§ Mr. JONESI will only add that the speeches against the Amendment have not been directed against it at all but against the incidence of the Death Duties upon agricultural estates.
§ Major COLVILLEI should like to put the case of a person interested in a mining company and owning land in the neighbourhood of the company's operations and transferring it to the company, to enable it to work the mines better, otherwise than by sale for full consideration—it might be for the sinking of a shaft or for the disposal of refuse. Is it intended that such a transaction should fall within the scope of the Clause? I conceive that it does at present, and our Amendment is designed to remedy it, but I should like to know if it is the intention to include such a transaction in the Clause.
§ Lieut.-Colonel RUGGLES-BRISEI hope we shall have some reply to the question of what is the justification for this discrimination against landed estates. The Attorney-General evaded the question put to him by my hon. Friend and went off into a disquisition about tax evasion. It is only right that we who feel most deeply about the matter should at least be given a reason, if there is one, for the discrimination. It may well be that there is no reason, and I believe that to be the true answer. If so, I trust someone on the Treasury Bench will have the courage to give it, but I very much doubt it.
§ Mr. CHURCHILLWe really must ask for an answer from the Chancellor of the Exchequer. We could not let the debate lapse without a statement, and I hope it will be a statement full of good words and not harsh words. Anyhow, however it goes, we could not possibly let a matter of this kind be disposed of without an attempt on the part of the Leader of the House for the time being and the Minister in charge of the Bill to answer the many important and cogent points which have been addressed to him across the Floor of the House. I hope that the right hon. Gentleman is going to give us an answer, because he really will not accelerate his business by sitting silent. [Interruption.] If I am 1922 interrupted I shall take much longer. The right hon. Gentleman can, no doubt, say what there is to say in four or five minutes, but by sitting silent he may lose ten times that time by reason of the offence he will cause to hon. Members who have brought forward, in a respectful and reasonable manner, grievances which they have felt bound to present. I ask the right hon. Gentleman to take part in this debate, as it is his duty and proper function in the great office which he holds.
§ Mr. P. SNOWDENI have never heard, I think, a fuller, more comprehensive and complete reply to everything that had been said at that time, and to everything that has been said since, than the reply of the right hon. Gentleman. As you, Mr. Dunnico, have said, what has been said in the course of this discussion has had no relevance at all to the Amendment which is before the Committee. Not a word of what the right hon. Gentleman the Member for Epping (Mr. Churchill) said had the slightest bearing upon the point with which the Amendment now before us deals. We are not dealing with the question of amenity values here, and the assessment of the amenity values to the capital values, on which Death Duties will be paid, seems to be a new interest on his part. He has during the last six years presented five Budgets to the House of Commons and in not one of those Budgets did he deal with that matter. How can he expect that on an Amendment like this I should give any pledge on such an important matter?
With regard to the Amendment itself, where the observations have been directed to the words proposed to be left out, hon. Members seem to have been under a complete misapprehension. They seem to have assumed that if there is a business holding, managing, developing, and dealing in land, that that alone brings it within the provisions of Clause 29. [Interruption.] Oh, yes, it has been assumed by many of the speakers who have taken part in the debate. But the conditions which are set forth in Clause 29 are preparatory to an agricultural estate coming under the provisions. There must be consideration of the percentage of profits of the company, consideration of transfer and the like, and it is only when those conditions have been fulfilled that it comes within the provisions of Clause 29. This is really 1923 the point at issue. Do hon. Members opposite want to stop what has been going on in the past in regard to the transfer of agricultural or landed estates to one man companies for the purpose of evading Death Duties? That is really the point at issue, and there is no doubt about it, unless these words are kept in, that in all these cases one man companies will continue to be free to adopt that method of tax evasion.
Therefore, I cannot possibly accept the Amendment. The Attorney-General explained that the reason why landed estates are specially mentioned is that up to the present that has been the only class of property which has practised this system of legal tax evasion. When this Clause is finished and the Bill becomes law we are perfectly well aware that legal ingenuity will try to devise some other means. It will then be the duty of some future Parliament to try to close those gaps, but we are dealing at the present moment with that form of legal evasion which is within our knowledge, and if other forms come to light in the future, then we shall have to deal with them.
§ Sir D. HERBERTAs the Mover of the Amendment, I should like to say one word in reply to the right hon. Gentleman. I am one of those who want to stop this particular method of tax avoidance, but I am not satisfied with his explanation or with that of the Attorney-General as to the reason for this Clause, and I will tell them why. The Attorney-General quoted an extreme case—I do not say there are not many of them—of tax avoidance, and on that he tried to ride off with this Clause. I put it to him and to the Chancellor of the Exchequer that if you want to catch one man for one particular thing, why do you not legislate against him instead of legislating against everybody who is interested? The Attorney-General will admit that if you have a large number of limited companies which deal in land, it is only a small percentage of them which are tax-avoiding companies. Why should the large percentage be obliged to prove their innocence? That is what is being done to those companies under the Clause and I do not think it is a proper thing to do. Legislate so that you can attack the man who is offending, but 1924 do not legislate in such a way that you bring into the net, as if they were offenders, everybody carrying on one particular class of business and leave them to prove their innocence. The Clause is misconceived, because it goes the wrong way to work and ropes in every possible concern instead of being directed merely against those who are offenders.
§ Sir A. STEEL-MAITLANDI want to put to the Chancellor of the Exchequer some perfectly definite types of case based on actual facts, and I think he will realise that the Attorney-General's answer has not met the point. First of all, as regards transfers to, or incidental to, a business. The kind of transfer which you can have incidental to a business in land is the transfer of rights over adjoining ground. That is one kind of transfer.
There are two benefits which would bring this transaction within the ambit of this Clause. You can have either the benefit reserved—shall we say sporting rights in connection either with land or fishing—or they can, so far as benefits here are defined, be service rendered by the transferor to the land company to whom he has conveyed the land. The learned Attorney-General has said that the risk of injustice ought to be reduced to a minimum, and he also stated that it was hardly possible that the benefits reserved could be as much as 50 per cent. of the total income. So far as the definition of total income is concerned, I say no more at this moment, because we shall have to deal with that. The way in which they define the total income may mean that in the case of a perfectly bona fide company they make so many deductions that in some years "total income" may vanish altogether, especially in bad agricultural years, and that, therefore, a comparatively small reserved benefit may have been very much greater than 50 per cent. of the company.
§ Mr. TURTONMay I ask the learned Attorney-General the question I asked earlier in the evening—whether he is now in a position to reply as to whether a holding in this Clause is different from a holding under the Agricultural Holdings Act? What is his interpretation of the word "holding"? It is a very material point.
§ The ATTORNEY-GENERALThe word "holding" means "owning"——[Interruption.]
§ Lieut.-Colonel HENEAGEThe question asked by my hon. Friend on my left was a perfectly civil one. I think the method in which it was answered was not in accordance with the Attorney-General's high office. If I understood him to say "owning land," then I withdraw. But on account of all the noise that is going on by the hon. Gentlemen opposite it sounded very much as though he said, "The word 'holding' meant 'holding.'" It seemed a vague and improper answer.
§ Major COLVILLEMay I have an answer to my question? I should like to ask the Attorney-General a question in regard to the transfer of the land of a mining company otherwise than by saleable consideration, whether it was the intention of the Chancellor that this sort
§ of transfer should be brought within the scope of this Clause?
§ Mr. BRACKENThe question addressed to the Chancellor by my hon. Friend is a very important question for the colliery districts.
§ Mr. P. SNOWDENThe practice of the House is not to answer hypothetical questions, or we should be here for weeks.
§ Sir ROBERT HORNEIt is not a hypothetical question!
§ Mr. P. SNOWDENThe answer can be given in one word: The answer to the question is no!
§ Question put, "That the words proposed to be left out, to the end of line 24, stand part of the Clause."
§ The Committee divided: Ayes, 242; Noes, 149.
1929| Division No. 398.] | AYES. | [12.1 a.m. |
| Adamson, Rt. Hon. W. (Fife, West) | Ede, James Chuter | Hunter, Dr. Joseph |
| Adamson, W. M. (Staff., Cannock) | Edge, Sir William | Hutchison, Maj.-Gen. Sir R. |
| Addison, Rt. Hon. Dr. Christopher | Edwards, E. (Morpeth) | Isaacs, George |
| Aitchison, Rt. Hon. Craigle M. | Egan, W. H. | Jenkins, W. (Glamorgan, Neath) |
| Alexander, Rt. Hon. A. V. (Hillsbro') | Eimley, Viscount | John, William (Rhondda, West) |
| Alpass, J. H. | Evans, Capt. Ernest (Welsh Univ.) | Johnston, Thomas |
| Ammon, Charles George | Foot, Isaac | Jones, F. Llewellyn- (Flint) |
| Arnott, John | Forgan, Dr. Robert | Jones, Rt. Hon. Leif (Camborne) |
| Aske, Sir Robert | Gardner, B. W. (West Ham, Upton) | Jones, Morgan (Caerphilly) |
| Baker, John (Wolverhampton, Bilston) | Gardner, J. P. (Hammersmith, N.) | Jowett, Rt. Hon. F. W. |
| Barnes, Alfred John | George, Megan Lloyd (Anglesea) | Jowitt, Rt. Hon. Sir W. A. |
| Barr, James | Gibbins, Joseph | Kelly, W. T. |
| Batey, Joseph | Gibson, H. M. (Lancs. Mossley) | Kennedy, Thomas |
| Beckett, John (Camberwell, Peckham) | Gill, T. H. | Kenworthy, Lt.-Com. Hon. Joseph M. |
| Bellamy, Albert | Gillett, George M. | Kinley, J. |
| Benn, Rt. Hon. Wedgwood | Glassey, A. E. | Lang, Gordon |
| Bennett, William (Battersea, South) | Gossling, A. G. | Lansbury, Rt. Hon. George |
| Benson, G. | Gould, P. | Lathan, G. |
| Bentham, Dr. Ethel | Graham, D. M. (Lanark, Hamilton) | Law, Albert (Bolton) |
| Bevan, Aneurin (Ebbw Vale) | Graham, Rt. Hon. Wm. (Edin., Cent.) | Law, A. (Rosendale) |
| Blindell, James | Gray, Milner | Lawrence, Susan |
| Bowen, J. W. | Greenwood, Rt. Hon. A. (Colne) | Lawrie, Hugh Hartley (Stalybridge) |
| Brockway, A. Fenner | Grenfell, D. R. (Glamorgan) | Leach, W. |
| Brooke, W. | Griffith, F. Kingsley (Middlesbro' W.) | Lee, Frank (Derby, N. E.) |
| Brothers, M. | Griffiths, T. (Monmouth, Pontypool) | Lee, Jennie (Lanark, Northern) |
| Brown, C. W. E. (Notts, Mensfield) | Groves, Thomas E. | Lees, J. |
| Brown, Ernest (Leith) | Grundy, Thomas W. | Lewis, T. (Southampton) |
| Brown, Rt. Hon. J. (South Ayrshire) | Hall, F. (York, W. R., Normanton) | Lindley, Fred W. |
| Brown, W. J. (Wolverhampton, West) | Hall, G. H. (Merthyr Tydvil) | Lloyd, C. Ellis |
| Buchanan, G. | Hall, Capt. W. P. (Portsmouth, C.) | Logan, David Gilbert |
| Burgess, F. G. | Hamilton, Mary Agnes (Blackburn) | Longbottom, A. W. |
| Burgin, Dr. E. L. | Hardie, George D. | Longden, F. |
| Cameron, A. G. | Harris, Percy A. | Lunn, William |
| Charleton, H. C. | Hartshorn, Rt. Hon. Vernon | Macdonald, Gordon (Ince) |
| Chater, Daniel | Hastings, Dr. Somerville | MacDonald, Rt. Hon. J. R. (Seaham) |
| Church, Major A. G. | Haycock, A. W. | MacDonald, Malcolm (Bassetlaw) |
| Clarke, J. S. | Hayes, John Henry | McElwee, A. |
| Cluse, W. S. | Henderson, Arthur, Junr. (Cardiff, S.) | McEntee, V. L. |
| Cocks, Frederick Seymour | Henderson, Thomas (Glasgow) | McGovern, J. (Glasgow, Shettleston) |
| Collins, Sir Godfrey (Greenock) | Henderson, W. W. (Middx., Enfield) | McKinlay, A. |
| Compton, Joseph | Herriotts, J. | MacLaren, Andrew |
| Daggar, George | Hirst, G. H. (York W. R. Wentworth) | McShane, John James |
| Dallas, George | Hirst, W. (Bradford, South) | Malone, C. L'Estrange (N'thampton) |
| Davies, E. C. (Montgomery) | Hoffman, P. C. | Mander, Geoffrey le M. |
| Denman, Hon. R. D. | Hollins, A. | Mansfield, W. |
| Dickson, T. | Hopkin, Daniel | Marcus, M. |
| Dudgeon, Major C. R. | Hore-Belisha, Leslie. | Markham, S. F. |
| Dukes, C. | Horrabin, J. F. | Marley, J. |
| Duncan, Charles | Hudson, James H. (Huddersfield) | Marshall, Fred |
| Mathers, George | Quibell, D. J. K. | Sullivan, J. |
| Matters, L. W. | Ramsay, T. B. Wilson | Sutton, J. E. |
| Maxton, James | Rathbone, Eleanor | Thurtle, Ernest |
| Messer, Fred | Raynes, W. R. | Tinker, John Joseph |
| Millar, J. D. | Richards, R. | Tout, W. J. |
| Mills, J. E. | Richardson, R. (Houghton-le-Spring) | Trevelyan, Rt. Hon. Sir Charles |
| Milner, Major J. | Ritson, J. | Vaughan, D. J. |
| Montague, Frederick | Roberts, Rt. Hon. F. O. (W. Bromwich) | Walker, J. |
| Morgan, Dr. H. B. | Rosbotham, D. S. T. | Wallace, H. W. |
| Morley, Ralph | Rowson, Guy | Watson, W. M. (Dunfermline) |
| Morris-Jones, Dr. J. H. (Denbigh) | Sanders, W. S. | Watts-Morgan, Lt.-Col. D. (Rhondda) |
| Mort, D. L. | Sawyer, G. F. | Wellock, Wilfred |
| Moses, J. J. H. | Shaw, Rt. Hon. Thomas (Preston) | Welsh, James (Paisley) |
| Mosley, Lady C. (Stoke-on-Trent) | Shepherd, Arthur Lewis | Welsh, James C. (Coatbridge) |
| Mosley, Sir Oswald (Smethwick) | Sherwood, G. H. | West, F. R. |
| Muff, G. | Shield, George William | Westwood, Joseph |
| Muggeridge, H. T. | Shiels, Dr. Drummond | White, H. G. |
| Murnin, Hugh | Shillaker, J. F. | Whiteley, Wilfrid (Birm., Ladywood) |
| Nathan, Major H. L. | Simmons, C. J. | Whiteley, William (Blaydon) |
| Naylor, T. E. | Sinkinson, George | Williams, David (Swansea, East) |
| Noel Baker, P. J. | Sitch, Charles H. | Williams Dr. J. H. (Llanelly) |
| Oldfield, J. R. | Smith, Ben (Bermondsey, Rotherhithe) | Williams, T. (York, Don Valley) |
| Oliver, George Harold (Ilkeston) | Smith, Frank (Nuneaton) | Wilson, C. H. (Sheffield, Attercliffe) |
| Oliver, P. M. (Man., Blackley) | Smith, Rennie (Penistone) | Wilson, J. (Oldham) |
| Owen, H. F. (Hereford) | Smith, Tom (Pontefract) | Wilson, R. J. (Jarrow) |
| Palin, John Henry | Smith, W. R. (Norwich) | Wise, E. F. |
| Paling, Wilfrid | Snowden, Rt. Hon. Philip | Wood, Major McKenzie (Banff) |
| Perry, S. F. | Snowden, Thomas (Accrington) | Young, R. S. (Islington, North) |
| Pethick-Lawrence, F. W. | Sorensen, R. | |
| Picton-Turbervill, Edith | Stamford, Thomas W. | TELLERS FOR THE AYES.— |
| Potts, John S. | Stephen, Campbell | Mr. Parkinson and Mr. Charles |
| Price, M. P. | Strachey, E. J. St. Loe | Edwards. |
| Pybus, Percy John | Strauss, G. R. | |
| NOES. | ||
| Acland-Troyte, Lieut.-Colonel | Elliot, Major Walter E. | Newton, Sir D. G. C. (Cambridge) |
| Albery, Irving James | Erskine, Lord (Somerset, Weston-s. M.) | Nicholson, O. (Westminster) |
| Allen, Sir J. Sandeman (Liverp'l., W.) | Everard, W. Lindsay | Nicholson, Col. Rt. Hn. W. G. (Ptrsf'ld) |
| Allen, W. E. D. (Belfast, W.) | Falle, Sir Bertram G. | O'Connor, T. J. |
| Amery, Rt. Hon. Leopold C. M. S. | Ferguson, Sir John | O'Neill, Sir H. |
| Atholl, Duchess of | Fielden, E. B. | Ormsby-Gore, Rt. Hon. William |
| Atkinson, C. | Forestier-Walker, Sir L. | Peake, Capt. Osbert |
| Baillie-Hamilton, Hon. Charles W. | Fremantle, Lieut.-Colonel Francis E. | Penny, Sir George |
| Balfour, George (Hampstead) | Gault, Lieut.-Col. Andrew Hamilton | Percy, Lord Eustace (Hastings) |
| Balfour, Captain H. H. (I. of Thanet) | Gibson, C. G. (Pudsey & Otley) | Peto, Sir Basil E. (Devon, Barnstaple) |
| Balniel, Lord | Gilmour, Lt.-Col. Rt. Hon. Sir John | Power, Sir John Cecil |
| Beaumont, M. W. | Glyn, Major R. G. C. | Ramsbotham, H. |
| Betterton, Sir Henry B. | Gower, Sir Robert | Reid, David D. (County Down) |
| Bevan, S. J. (Holborn) | Graham, Fergus (Cumberland, N.) | Remer, John R. |
| Bird, Ernest Roy | Greene, W. P. Crawford | Rentoul, Sir Gervais S. |
| Bourne, Captain Robert Croft. | Grenfell, Edward C. (City of London) | Roberts, Sir Samuel (Ecclesall) |
| Bowyer, Captain Sir George E. W. | Gretton, Colonel Rt. Hon. John | Ross, Major Ronald D. |
| Boyce, H. L. | Guinness, Rt. Hon. Walter E. | Ruggles-Brise, Lieut.-Colonel E. A. |
| Bracken, B. | Gunston, Captain D. W. | Russell, Alexander West (Tynemouth) |
| Braithwaite, Major A. N. | Hacking, Rt. Hon. Douglas H. | Salmon, Major I. |
| Brass, Captain Sir William | Hamilton, Sir George (Ilford) | Samuel, A. M. (Surrey, Farnham) |
| Briscoe, Richard George | Hartington, Marquess of | Samuel, Samuel (W'dsworth, Putney) |
| Brown, Col. D. C. (N'th'l'd., Hexham) | Harvey, Major S. E. (Devon, Totnas) | Sandeman, Sir N. Stewart |
| Brown, Brig.-Gen. H. C. (Berks, Newb'y) | Haslam, Henry C. | Shepperson, Sir Ernest Whittome |
| Bullock, Captain Malcolm | Henderson, Capt. R. R. (Oxf'd, Henley) | Skelton, A. N. |
| Butler, R. A. | Heneage, Lieut.-Colonel Arthur P. | Smith, Louis W. (Sheffield, Hallam) |
| Carver, Major W. H. | Herbert, Sir Dennis (Hertford) | Smith, R. W. (Aberd'n & Kinc'dine, C.) |
| Cayzer, Maj. Sir Herbt. R. (Prtsmth. S.) | Horne, Rt. Hon. Sir Robert S. | Smith-Carington, Neville W. |
| Chamberlain, Rt. Hn. Sir J. A. (Birm., W.) | Howard-Bury, Colonel C. K. | Smithers, Waldron |
| Churchill, Rt. Hon. Winston Spencer | Hurd, Percy A. | Somerville, D. G. (Willesden, East) |
| Colman, N. C. D. | Iveagh, Countess of | Southby, Commander A. R. J. |
| Colville, Major D. J. | King, Commodore Rt. Hon. Henry D. | Spender-Clay, Colonel H. |
| Courthope, Colonel Sir G. L. | Lamb, Sir J. Q. | Stanley, Lord (Fylde) |
| Cranborne, Viscount | Leigh, Sir John (Clapham) | Steel-Maitland, Rt. Hon. Sir Arthur |
| Crichton-Stuart, Lord C. | Leighton, Major B. E. P. | Stuart, Hon. J. (Moray and Nairn) |
| Croft, Brigadier-General Sir H. | Locker-Lampson, Com. O. (Handsw'th) | Sueter, Rear-Admiral M. F. |
| Crookshank, Capt. H. C. | Lymington, Viscount | Titchfield, Major the Marquess of |
| Croom-Johnson, R. P. | McConnell, Sir Joseph | Train, J. |
| Culverwell, C. T. (Bristol, West) | Macdonald, Capt. P. D. (I. of W.) | Turton, Robert Hugh |
| Cunliffe-Lister, Rt. Hon. Sir Philip | Makins, Brigadier-General E. | Vaughan-Morgan, Sir Kenyon |
| Dalkeith, Earl of | Margesson, Captain H. D. | Wallace, Capt. D. E. (Hornsey) |
| Dalrymple-White, Lt.-Col. Sir Godfrey | Marjoribanks, E. C. | Ward, Lieut.-Col. Sir A. Lambert |
| Davies, Maj. Geo. F. (Somerset, Yeovil) | Mason, Colonel Glyn K. | Warrender, Sir Victor |
| Dawson, Sir Philip | Merriman, Sir F. Boyd | Waterhouse, Captain Charles |
| Dixey, A. C. | Monsell, Eyres, Com. Rt. Hon. Sir B. | Woyland, Sir William A. |
| Dixon, Captain Rt. Hon. Herbert | Moore, Sir Newton J. (Richmond) | Wells, Sydney R. |
| Dugdale, Capt. T. L. | Morrison, W. S. (Glos., Cirencester) | Williams, Charles (Devon, Torquay) |
| Edmondson, Major A. J. | Muirhead, A. J. | Wilson, G. H. A. (Cambridge U.) |
| Windsor-Clive, Lieut.-Colonel George | Womersley, W. J. | TELLERS FOR THE NOES.— |
| Winterton, Rt. Hon. Earl | Worthington-Evans, Rt. Hon. Sir L. | Sir George Hennessy and Sir |
| Wolmer, Rt. Hon. Viscount | Frederick Thomson. |
Question put, and agreed to.
§ Mr. P. SNOWDENOn a point of Order. Members of the Committee who were in the House a few hours ago will remember that the right hon. Gentleman opposite raised the question of the length of this sitting. Our conversation was quite agreeable, and I think it will not be disputed that I am stating a fact when I say that there was, I will not say an agreement, but at any rate an understanding, or a hope, or an expectation that we should get to the end of all the Amendments on the Paper to Clause 29 before moving to report Progress. I agreed to hold over to the opening of the Committee stage on the next day the discussion of the Question of the Clause standing part. I very much regret—indeed, I feel it rather deeply—that that hope or expectation has been so gravely disappointed. We have only just voted upon the Amendment which was under discussion at the time when the right hon. Gentleman intervened.
I do not want to say anything which might dissipate what has been, on the whole, rather an agreeable spirit to-day, but I think the Committee will agree that I have a right to be rather disappointed at the slowness of the progress during the last two or three hours. May I make this suggestion to the right hon. Gentleman and his friends? If I agree to move to report Progress now, may I reasonably expect that we shall get Clause 29 by half-past seven to-morrow evening—that is, the Amendments and the discussion upon the Clause standing part 9 If I can have a reasonable assurance of that, I am prepared to move to report Progress now.
§ Mr. CHURCHILLHaving regard to the late period of the Session, I think the right hon. Gentleman is not asking more than he is entitled to ask, and we will make every effort to-morrow to see that his reasonable expectations are not disappointed.
§ Mr. P. SNOWDENI beg to move, "That the Chairman do report Progress, and ask leave to sit again."
§ Committee report Progress; to sit again To-morrow.