HC Deb 02 July 1930 vol 240 cc1983-2049
The CHANCELLOR of the EXCHEQUER (Mr. Philip Snowden)

I beg to move, in page 25, line 24, at the end, to insert the words "situate in Great Britain."

It was never intended that this Clause should apply to transferors of real estate abroad. Under the existing law, real property situate abroad is not liable to British Estate Duty, and it is not intended to bring such property within the purview of the Clause.

Amendment agreed to.


I beg to move, in page 25, line 25, after the first word "of," to insert the words "or of any interest in."

This is a drafting Amendment. The words of the Clause as drafted are not wide enough to include the operation of the transfer of an interest in settled property, in circumstances which would limit the purview of the Clause, and the amending words put the matter right.


It seems to me that the Amendment, as drafted, does not make sense. If this Amendment is inserted, as far as I can gather, it will read: transfers of or of any interest in Is that correct?


It is quite all right. Amendment agreed to.


I beg to move, in page 25, line 27, at the end, to insert the words: (d) transfers of personal chattels not yielding income. (e) transfers of property made to a company to which this Part of this Act applies in the capacity of trustee, factor, agent, receiver, or manager. This Amendment may be regarded as a concession to the taxpayer. With regard to paragraph (d), it excludes from the scope of the Clause transfers of property which do not produce income, such as pictures and the like. It is designed primarily to meet the case where some employé or person not in the service of the company happens to have transferred such property and receives payment from the company in connection with his employment or service. With regard to paragraph (e), the provision is to make it clear than transfers of property to any company made in the capacity of an agent are not covered by the Clause.


I am glad that the Chancellor of the Exchequer has put in these Amendments. I rise only to say that you can hardly describe them as a concession to the taxpayer and thereby obtain merit. It is not a concession to the taxpayer; it is the correction of a mistake in the original drafting.


I wish to draw the attention of the Chancellor of the Exchequer to an ambiguity in the drafting of paragraph (e). The fault, if there be a fault, is mine, because paragraph (e) is in the terms of the Amendment which I and some of my hon. Friends put upon the Order Paper. I should like to express my appreciation to the Chancellor of the Exchequer for adopting that Amendment, but, as I have said, there is an ambiguity. The position is explained by the Amendment to the Amendment which I have pub upon the Paper, and which I will formally move if called upon to do so. It is not clear from the drafting whether the words "in the capacity of trustees," and so on are limited by the words "to a company to which this Part of this Act applies."


I may say, Mr. Dunnico, that if you call the Amendment of the hon. and gallant Member, I shall be prepared to accept it. I think it will remove any ambiguity there may possibly be.


The hon. and gallant Member may move his Amendment.


I beg to move, as an Amendment to the proposed Amendment, in line 2, to leave out the words: to a company to which this Part of this Act applies.

Amendment to the proposed Amendment agreed to.

Question proposed, "That those words, as amended, be there inserted."

4.0 p.m.


I cannot help thinking that these words might be made clearer. I do not know to what "personal chattels not yielding income" refer. The expression is something very difficult to define. I do not know whether a personal chattel yields income of its own accord. Obviously, this is not intended to apply to machinery which is incidental to a business, because that matter is covered by an earlier part of the Clause. Therefore, it must be intended that it is to apply to separate assignments of personal chattels. Does a motor car, if it is used as a taxi-cab yield income? I suppose that it does. Does a racehorse yield an income? It usually causes a loss. Does it not depend entirely on the use to which personal chattels are put? The Chancellor of the Exchequer mentioned pictures. If pictures are exhibited, they yield income. When one tries to construe these words and to visualise cases to which they apply, one realises that anyone who has to do this sort of thing will be in very great difficulty. Almost any personal chattel can yield an income if it is hired out or used for exhibition purposes. I do not know what is in the mind of the Chancellor of the Exchequer. With regard to paragraph (e), I am very glad that the ambiguity, which also occurred to me, has been cleared up. May I take it that if the trustees under a will in which mine leases form part of an estate, are unable to work the leases themselves, and make a transfer, which otherwise would be hit by this Bill, to a company for the purposes of working the mine leases, they would not be excluded because the assignment is made by trustees in the course of their capacity as trustees? I am asking for information. Frankly I do not understand what sort of transactions the Chancellor of the Exchequer has in mind. I suppose that "factor" or "agent" means a factor or agent of a company? It surely cannot be the agent of the transferor Does it mean that if a transferor makes an assignment himself the transaction is hit, but if it is made by an agent on his behalf it is not hit? Surely the Chancellor of the Exchequer cannot mean that? We would welcome the concession, but I feel sure that that is not what is meant. The same remark applies to the word "manager." Surely merely because he is managing for the transferor the transaction is not to be taken out of the Bill? The Chancellor of the Exchequer would be presenting a carriage and pair to everyone to drive through the Bill if the words meant that. Will the right hon. Gentleman tell us exactly what is meant, so that we can see whether his intention is being carried out by the Clause.


I would draw the attention of the learned Attorney-General to one little matter in the wording which is perhaps an oversight. We have inserted a paragraph (e) which is to read: transfers of property made.… in the capacity of trustee, etc. Should it not be "transfers of property made by the persons acting in the capacity of trustee," etc., or some words of that sort?

The ATTORNEY-GENERAL (Sir William Jowitt)

I am much obliged to the two hon. Gentlemen for their suggestions. In the light of their criticisms I think that the words of the Clause need a good deal of consideration. I will tell the Committee what we were intending to do by these words. In the course of the Debate we have had illustrations given of someone employed by a company who, for instance, gave a signed photograph or an armchair. We meant to take out that sort of thing. As I have said, the criticism of the wording suggests that it needs further consideration, and we shall see whether we can improve it. The observation of the hon. and gallant Member for Yeovil (Major Davies) seems to be most pertinent. What we meant was that if a, transfer is made by someone as trustee, so far as that trustee is concerned, if he dies or anything of that sort, it does not count at all; he was not the beneficiary at all and the transfer could be disregarded so far as he was concerned. But we do not disregard it so far as the beneficiary is concerned. If a beneficiary through a trustee makes a transfer, we mean by these words that the beneficiary ought to be caught. That was the intention of our words, but we shall see whether we can get better words between now and Report stage.

Question, "That those words, as amended, be there inserted," put, and agreed to.


I beg to move, in page 25, line 31, after the word "than," to insert the word "royalties."

There is the word "interest" in the Clause now, and we do not see why if concessions are made with regard to interest, similar concessions should not be made in the case where there is an interest arising directly from royalties.


We were not quite clear what, the hon. Member had in his mind in moving this Amendment. After the explanation of the hon. Member I think we might be prepared to accept the Amendment, with the qualification that it be left to us to find out what words are necessary to fulfil the hon. Member's purpose.

Amendment, by leave, withdrawn.

Amendments made: In page 25, line 31, leave out the words "bonâ fide."

In line 32, leave out the words "bonâ, fide."

After the word "on," insert the words "and repayments in respect of."—[Mr. P. Snowden.]


I beg to move, in page 25, line 33, after the word "company," to insert the words and payments of or on account of purchase money under a bona fide sale where that purchase money is a capital sum of a fixed amount. There is an Amendment on the Paper in the name of the right hon. Member for St. George's (Sir L. Worthington-Evans), but that will, of course, be covered by this Amendment.


I had on the Paper an Amendment which seems to have disappeared, or perhaps it was taken off because of the Amendment of the Chancellor of the Exchequer. It was designed to cover exactly the same point, but in a different way.


I do not think the right hon. Gentleman will mind my saying that the Amendment I have moved is in the interest of the taxpayer. The Amendment of the right hon. Gentleman as it stood originally on the Order Paper was to insert the words "repayment of." I have endeavoured in this Amendment to express the intention which he embodied in his own Amendment, and I think he now agrees that my Amendment correctly embodies the principle he wished to have included in the Bill.


Yes, that is so. I am glad that the Chancellor has inserted this Amendment, not because it is a concession to the taxpayer——


I said it was in the interest of the taxpayer.


Of course it is in the interest of the taxpayer that the Bill should be a reasonable Bill. This Amendment is making the Bill a little more reasonable, and on that account I am glad the Chancellor has moved the Amendment. Does he want the words "bona fide" in? He has been busy striking it out in other directions, and now he is putting it in again. I do not think he wants it.


In this case I am informed that it is necessary.


I do not propose to ask leave to move the Amendment which stands in my name in view of what took place last evening. It would be inconsistent with the attitude taken up by the Government, and I do not really attach much importance to it. I only rose because I think there is a mistake in the OFFICIAL REPORT, of yesterday. I moved an Amendment to the earlier part of this Clause and what I said is reported in column 1892. I asked the learned Attorney-General for an explanation of what he meant by "a capital sum of fixed amount." What was the subtle difference, I asked, between those words and other words used in the right hon. Gentleman's previous Amendment. As reported, the learned Attorney-General in his reply is made to say: It is a principle of law to regard that as fixed which is able to be fixed. and then For that reason, rightly or wrongly, I and those who advise me have inserted the words in that form."—[OFFICIAL REPORT, 1st July, 1930; col. 1892, Vol. 240.] In my recollection the learned Attorney-General did not use the words "rightly or wrongly." It would be quite incompatible with the courtesy which he has shown throughout this debate for him to make a reply which would appear petulant, and as such it appears in the printed report. No one who followed the debate would believe that of the learned Attorney-General. What, in fact, happened was that he gave a quotation from the Latin. It probably sounded like "rightly or wrongly" to the reporter, and I merely rise to give the learned Attorney-General an opportunity of correcting what otherwise could only be regarded as an injustice to himself.


I am very much obliged to the hon. and gallant Member. I had not looked at the OFFICIAL REPORT, but now he reminds me I see there is something in what he says. My recollection is somewhat hazy on the point.


May I suggest that, for the purposes of a record, the learned Attorney-General should repeat the quotation which he gave to the House.


It is a test of my Latin as well as a test of my memory. To the best of my recollection the quotation was: Id certum est quod certum reddi potest.


May we have an explanation from the Chancellor or the Attorney-General as to the whys and wherefores of the inclusion of the words "bona fide"? Quite good reasons were brought forward why it should be dropped in the early part of the Clause, and we have now got it again in this Amendment. The Chancellor says he is informed that there are good reasons why it is necessary, but we have had no reasons. I should like to know if he can give us the reasons why he has included the words in this Amendment, or whether it is an oversight of the printer or the draftsman.


I have looked into this matter. I find that the Finance Act, 1894, uses the words "bona fide" very often. It talks about "bona fide sales" and so on. When you speak of a bona fide sale, at least one understands what it means, but when applied to bona fide dividends, or bona fide interest, it is difficult to see what it does mean. As far as the Finance Acts of 1894 and 1900 are concerned, we are simply following precedent.


In admitting the words "bona fide sale" are we opening the door to an inquiry into the amount of consideration which is received as a result of the sale? It is obvious that the sale might be said to be not bona fide if £500,000 worth of goods were sold for £5. It is obviously wrong.


I agree.


Then you are opening the door to an inquiry. You may think that the payment of 50 per cent. of the worth makes a sale a bona fide sale, whereas with 49 per cent. the sale is not bona, fide. We have got rid of the words elsewhere. For example, it is just as possible to argue about bona fide interest. Supposing the rate of interest were 10 per cent. Is it bona fide supposing it were 2 per cent.? What is bona fide? Are you going to judge by the market? It is exactly the same thing as a sale. Bona fide dividend is rather another thing, because that implies action taken by the directors. Bona fide interest and bona fide sale are on exactly the same footing. I do suggest that the Chancellor should drop the words.


I want to add a word to what my hon. Friend has just said, and to point out that the matter goes a bit wider. When there is a question between the parties as to the fixing of interest or where a dividend is declared by a board of directors, these firm matters of contract, and if the revenue authorities can come along at the death of a person and say, "Was this bona fide interest or bona fide dividend?" then it seems to me that that official of the Crown would be coming along to break a contract arrived at between two parties. That is really going to be quite serious. I agree with my right hon. Friend that there is no difference between bona fide interest and bona fide sale, and that the Chancellor or the learned Attorney-General might see their way to withdraw the words "bona fide," which, I think, are more serious than the right hon. Gentleman seemed to imagine.


I hesitate to intervene in a discussion between lawyers. Might I point out as a justification for keeping in the words "bona fide" that the relation of these words to the rest of the Clause has been considered, and their retention is, I think, quite consistent.


May I add one word to what my right hon. Friend has said? The words "bona fide" have received different interpretation on different occasions in the Courts. There was a case, under the Act of 1894, of a "bona fide sale or purchase." The learned Attorney-General will recollect the decision. When you come to a bona fide sale, quite different rules of interpretation are employed, and you go beyond the mere fact of the man being on the spot. You have to prove that the man was not only actually there and bona fide present, but that he was there in good faith for making exercise and not for the purpose of getting a benefit. I think it is rather a dangerous word to use. I do not think it really helps the Government at all.


May I ask the Chancellor of the Exchequer a question? This Amendment and the other that preceded it have been redefining the benefits that it is desirable to exclude, and three Amendments out of four that have been put down by myself and hon. Members associated with me have been accepted by the right hon. Gentleman. The other Amendment, also designed for the same object, was not called by you when we were on page 2713 of the Amendment Paper. I should like to ask the right hon. Gentleman whether he considers that his new Clause, which makes three out of four Amendments, also meets that point of mine about "full consideration"? If it is not met by the right hon. Gentleman, we shall have to ask leave to raise it on the Report stage. Perhaps the reason is the same reason why you did not call the other three, namely, that the case had been met by the right hon. Gentleman in his concessions. I should like to ask the right hon. Gentleman whether he considers accepting that one or not.


The right hon. Gentleman may, of course, answer the hon. Member if he wishes, but the proper place to raise matters contained in Amendments not selected is upon the Question, "That the Clause stand part of the Bill."

Amendment agreed to.


I do not propose to move the Amendment which stands in my name—in page 25, line 33, at end, insert the words "or remuneration for genuine services rendered to the company"—as the Chancellor of the Exchequer states that he is considering the matter with a view to the question being dealt with on Report.


I beg to move, in page 25, line 35, to leave out the words "and for the purposes of this Section," and to insert instead thereof the words: (3) In ascertaining for the purposes of this section the value of a benefit—

  1. (a) In the case of a benefit consisting of a payment, a deduction shall be made in respect of any Income Tax (other than Sur-tax) paid or borne by the deceased in respect of that payment; and
  2. (b)"


I beg to move, as an Amendment to the proposed Amendment, to leave out the words "(other than Sur-tax)."

I move the Amendment to the proposed Amendment with the object of finding out what the Chancellor of the Exchequer has in his mind in seeking to put these words into the Clause. I presume that if "Income Tax" was left by itself the phrase would include Sur-tax; therefore he puts in the words "other than Sur-tax" in order to prevent Surtax being deducted for the purposes of benefit. It is obvious that from the point of view of the Inland Revenue the larger the benefit and the smaller the income of the company the larger will be the sum by way of Estate Duty which will have to be paid. There may be a danger of double taxation arising here, because the Chancellor of the Exchequer allows Income Tax to be deducted but refuses to allow Sur-tax to be deducted, presumably because the recipient of the benefit in this case might enjoy a large income from other sources and might thus be able by the deduction of Sur-tax as well as Income Tax to reduce the benefit to very small proportions.

But when it comes to estimating the amount which has to be paid in Estate Duty, I understand that the amount is aggregated with other sums that he possessed. Whereas on the one hand the Inland Revenue get the benefit of aggregation, they refuse to allow the estate of the deceased to have the benefit of deduction with respect to Sur-tax. It seems to me that the Treasury are having the best of the bargain both ways. They are producing a Clause which will take the maximum of the deceased's property by way of aggregation and not allow him by way of computing his benefit to aggregate Income Tax and Sur-tax paid upon it.

The FINANCIAL SECRETARY to the TREASURY (Mr. Pethick-Lawrence)

If the hon. Member will consider the Amendment fully he will see that the words in the Chancellor of the Exchequer's Amendment are correct. In this Clause we are dealing with the question of proportion, a proportion represented on the one hand by the income received by an individual in the shape of benefit, and on the other hand by the income of a company in the shape of profits. The income received by the company in the shape of profits is to be reduced by Income Tax at the standard rate, and it is reasonable, therefore, that when you want to find the proportion received in benefit by the individual you should allow the individual to deduct Income Tax at the standard rate from the benefits that he receives from the company. In that way you are comparing like with like. If in addition to that you allow the individual also to deduct Sur-tax you would not get a true proportion, and where you were dealing with a very wealthy individual whose Sur-tax is very considerable you would be invalidating the provision that only if he obtains as much as 50 per cent. in the shape of benefit it comes within the provisions of this Clause. In certain cases that would vitiate the Clause, in effect raise the percentage to 75 per cent. or even more. What we are doing is perfectly fair. For the purpose of computing the proportion we deduct Income Tax at the standard rate from the profits of the company, and, therefore, you allow the individual to deduct Income Tax at the standard rate from the benefits that he receives.


I do not think that the explanation of the Financial Secretary quite covers the whole point of the Amendment to the proposed Amendment. It is true that for the purpose of the fraction you must deduct a like amount from the numerator and the denominator, but there is a third point, that of adjudicating as to what amount of money is deemed to come in the benefit. So far as I understand the Clause, it is an honest attempt to find out exactly how much the tax dodger is dodging the tax and how much money has gone into his pocket which ought to have gone into the coffers of the Exchequer. If we leave the Clause with the Chancellor of the Exchequer's proposed Amendment and without my hon. Friend's Amendment to the proposed Amendment, we shall be leaving the tax dodger or rather the company to pay duty according to a fractional proportion that includes in the numerator not only the benefit that the tax dodger kept in his pocket but also on the benefit that the Chancellor of the Exchequer has already received in the form of Sur-tax. Therefore, I should desire to leave out the words "other than Sur-tax" in order that that which the tax dodger has already paid to the Exchequer should not be leviable in any other form on the company on the death of the tax dodger.


The hon. Member is under a misapprehension. The only way that the amount of the benefit comes in is in the proportion.


Surely the whole Clause is governed by the first words, "In ascertaining for the purposes of this Section the value of the benefit." What is the value of the benefit? Surely the value of the benefit is the value less tax, the net value that the receiver of the benefit gets. I think that that is what the Government have in mind—that in computing the value of the benefit the payment should be taken to be the net and not the gross value. I think that is common justice, and I do not think it would open the door to any tax dodging if we omit the words "other than Surtax" here.


Is it not a fact that the individual has paid the Surtax although the company has not, and that therefore the Exchequer has it in its pocket. It must give credit for that payment in some form or another, or it must take it into account. Is it taken into account?

Amendment to the proposed Amendment negatived.

Proposed words there inserted.


I beg to move, in page 25, line 38, at the end, to insert the words "due allowance being made in respect of any rent paid by the deceased."

I do not think there will be any complaint with respect to the insertion of these words.


Would the right hon. Gentleman consider inserting some words to cover other obligations that are undertaken? In many cases the tenant, besides paying rent, undertakes very onerous duties, such as repairs, painting, maintenance and the like. If it is right to make an allowance in respect of money paid in the form of rent, why is it not right to make an allowance in respect of other obligations which may impose a greater burden than the rent? The Amendment, as it is, does not cover all the ground which should be covered or which is intended to be covered.


I do not think I can accept an Amendment so wide as that indicated by the hon. and learned Member. The phrase "other obligations" may mean anything and would open the door to a great deal of evasion. When the rent is fixed these "other obligations" are taken into consideration.

Viscount WOLMER

Will the right hon. Gentleman undertake to look into this matter between now and Report? Obviously a rent paid under a non-repairing lease is very different in value from a rent paid under a repairing lease.

Amendment agreed to.


I beg to move, in page 26, to leave out the words from the word "year," in line 6, to the end of the Sub-section.

I am moving this Amendment in order to put a question to the Chancellor of the Exchequer. I want the right hon. Gentleman to say whether he is intending to enlarge the three years governing gifts inter vivos; to vary, in fact, the present law, because the result of having the accounting year, which is not a calendar year, may mean, and possibly does mean, that in certain cases there will be three years or three and three-quarter calendar years; the accounting year will not correspond to the calendar year. The Amendment would, of course, really destroy the Clause as it is framed. I have never had an opportunity of raising this point before. It cannot be done by an Amendment because it would mean redrafting the whole Clause, but almost by a side wind you are destroying the three years of the inter vivos gift. If it is a benefit given more than three years before the testator's death, it is not subject to duty, but by the arrangement of your accounting years, which do not correspond with the calendar years, it may be that a benefit accruing more than three years back, in the fourth year, which happens to be one of the accounting years is interfered with. I ask that this point shall be considered, and, if it is desired to extend beyond the three years, that some appropriate words should be put in so that the person taxed shall have an opportunity of stopping at three years rather than three accounting years.


The answer to the right hon. Member for St. George's (Sir L. Worthington-Evans) is this: It is not the intention of the Clause to enlarge by a single day the period of three years which governs gifts of inter vivos. Nor do I think that the Clause as drafted does any such thing. For a particular company you take a period of time, three years, or three and three-quarter years, and you compare the benefit with the period. Then you do your sum on the assets of the company. I do not think the Clause in any way touches the question of inter vivos gifts. It is not intended to do so. I myself raised this point and discussed it with my advisers and we are satisfied that the Clause does not do so.


I am much obliged to the learned Attorney-General. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.


I beg to move, in page 26, line 9, after the word "of," to insert the words:

  1. "(i) any sum paid by way of interest on mortgages or bonds secured upon lands or buildings belonging to the company or any part of them;
  2. (ii) any expenditure upon the repairs or upkeep of such lands and buildings;
  3. (iii) interest on money lent to the company;
  4. (iv) dividends on preference shares;"
  5. (v)
This Sub-section is one of the most confusing of a rather difficult Clause, and if I am correct, it may as it stands create great hardships which have not been intended. The Attorney-General yesterday said that if there was a risk of hardship being inflicted on innocent people in a Clause which sets out to deal with those who are not innocent, those risks should be reduced to a minimum, and it is from that point of view that I ask the Chancellor of the Exchequer to consider this Sub-section. The fact that there is a good deal of confusion will regard to the definition of "total income" is due to the wording of this Clause. It may be quite necessary, but the wording has given rise to a very natural misconception. The Clause refers to "total income for any accounting year." It says: In ascertaining for the purposes of this section the total income for any accounting year of a company, the income of the company from any source The very fact that that phrase is used has led a number of those who have been construing this Bill to think that what really is in question is some matter with regard to liability to Income Tax, and consequently they judged the suitability of other deductions or additions to the phrase "total income" from the point of view of liability to income-tax. The term "total income" in this case is used as a method of measurement, or what is commonly called a yard-stick, for determining whether the benefit reserved by the transferor is excessive or not. What you do is to take the amount of benefit reserved by the transferor, divide it by the amount of the total income. Then, according to the fraction, which is now 50 per cent. after the concession made by the Chancellor of the Exchequer yesterday, if the fraction exceeds 50 per cent. then, as far as this Bill is concerned, if the other qualifications are satisfied, liability exists. It is quite obvious that if total income is a figure which is used as a divisor the more you reduce that figure the more certain you make if that any benefit may exceed 50 per cent. of it. The figure represented by the total income may, by the deductions proposed, be reduced to nothing at all, and whatever benefit is received would certainly be more than 50 per cent. of that amount.

I think I know the reason why those who have been responsible for framing this Clause have used these words. It is that they may by deducting money which is ear-marked for certain purposes like debenture interest arrive at the free distributable pool, i.e., the fund which is free to be collared by the transferor and applied to himself for the purposes of annual benefit. What in fact the Government are doing is to make certain quite arbitrary deductions from income in the sense in which we usually know it. They deduct any money that is used on account of interest on debentures, and of interest on loans, and, not only that, all dividends on preference shares. If the Attorney-General adheres to this definition of total income he gets a unit of measurement, a yardstick, which may produce absolutely unfair results in the legitimate case and does not catch the tax dodger who pursues means which are at present legitimate, but which quite rightly the Government want to stop. Finally, you may arrive at the perfectly absurd result that in the case of two transferors, each with an estate of precisely the same value, with benefits precisely the same, one gets caught and the other does not, according to the way they arrange the capitalisation of the company, although the capitalisation of the company does not affect the merits of the case one bit.

It is a very intricate question and therefore let me give the reasons for my conclusions. Take the deductions we have made. Under the Clause there is to be deducted the whole of the interest on debentures, the whole of the interest on loans and the whole of the dividends on preference shares. Take an ordinary estate company in land, exactly the kind of company which the Attorney-General quite properly wishes to deal with, one which is tax dodging. What happens in a perfectly typical case? You may get an estate with quite a good and considerable rent roll, but one which is fairly heavily mortgaged. The interest on the mortgage is a very heavy deduction from the gross rental.

5.0 p.m.

You may then have debentures which amount perhaps to half of the true capitalisation and there are deductions for the interest on debentures. There are further deductions for the interest on any preference shares, and, in a number of cases, the effect of these deductions may well be that the actual free income left, the distributable pool, the amount which should be distributed in dividends on ordinary shares, might, even if no benefits were reserved, be quite inconsiderable. It might under certain conditions not exist at all. I take definite cases. At the present time on agricultural estates there is a heavy expenditure on upkeep and repairs. Even though it is a good many years since the War, a number of estates are, as yet, only getting abreast of repairs which had to be left in abeyance during the War. At the same time there have been very unfavourable and indeed disastrous seasons for agriculture. Abatements are given to tenants on their rents, and all these abatements, though each may be quite a small amount compared to the gross rental, have to be deducted in globo from the very small amount which remains for distribution as dividend on ordinary shares. The amount of the total income, after all deductions, in quite a number of cases, when we try to arrive at it by means of the definitions in this Clause, may be nothing at all, or in any case quite an inconsiderable amount.

What is going to happen as regards benefit? There are certain perfectly legitimate benefits, that is to say, payments which may be reserved by the transferor. I am not going to argue the case of legitimate consideration for services rendered, because I understand that the Chancellor of the Exchequer is considering whether something cannot be done to meet that case. I only say in passing that anyone who is anxious for landowners to reside on their estates and not to be absentee landlords, should wish them to take an active interest in the management of their estates, and, if they do so, it is as legitimate for them to receive payment from the estate company as it is for the business man who transfers, let us say, his textile mill to a company, to act as managing director and receive a salary for his services. Quite apart from that question of remuneration—though it adds force to my argument—there are other legitimate benefits. I am not going to enumerate them in detail, but that there are such legitimate benefits is shown by the fact that the Chancellor of the Exchequer and the Attorney-General were both willing to allow a certain percentage in this respect before what I will call the apparatus against the tax dodger comes into play. If the amount of income is so arbitrarily reduced to vanishing point, then any benefit at all is more than the income, because, in fact, the income may be nothing at all. But the whole of the pains and penalties with regard to excessive benefit would in such cases begin to apply.

On the other hand, supposing that you want in the future to get at the tax-dodger, it is quite possible that with this definition of annual income, you will not catch him if he is wise enough when he makes an estate company not to create any debentures or preference shares but only ordinary shares so that, after the payment of mortgage interest or anything of that kind, the whole of the income after payment of repairs, etc., is available merely for dividends on ordinary shares. In that case it would be quite possible for him to retain an amount of benefit which is really excessive, and yet at the same time he would not be caught by this Clause at all. The whole framework of this Clause makes it very difficult to find a good yard-stick, but if you use the term "total income" then I think you ought to put in the items which are suggested in the Amendment. If that were done, then I think it would be fair not to have a fraction of 50 per cent. or 40 per cent. or even 30 per cent. I think 20 per cent. would possibly be quite ample and that it would be better to have a much smaller percentage on a sum which is a larger and truer representation of what ought to govern these considerations. As things are, two estates of the same size and value may be transferred to estate companies formed for the purpose, and the amount of benefit may be precisely the same in each case. But if one person creates debentures and preference shares, the interest or dividends on which are deducted, he may be caught, whereas if the other only creates ordinary shares, he will slip through these provisions. One will be caught, the other will not be caught, although the circumstances and the benefit received are precisely the same in all respects.


This is a very odd Sub-section. It begins by stating that the rules applicable to the computation of profits shall be the rules contained in the Income Tax Acts and it then proceeds, for some 20 lines, to point out that of all rules those of the Income Tax Acts are the very rules which are not to apply. By the time any accountant has framed the accounts of a company in accordance with the provisions of this Sub-section there will be very little of the Income Tax Acts left. To begin with, it is not even to be in respect of the period prescribed by the Income Tax Acts. Then, under paragraph (a)—on the hypothesis of the Government as to benefit being remuneration for services—it is specifically declared that just that sum is not to be deducted from profits which, under the Income Tax Acts, would be deducted from profits, while under paragraph (b) just those things which under the Income Tax Acts would not be deducted from profits, are to be deducted. For the first time, I believe, in any legislation in this country, and contrary to the findings of the Colwyn Committee, and contrary to statements made, I think, by the Chancellor of the Exchequer himself and certainly by other Members of the Government, to the effect that Income Tax is not a charge upon profits—for the first time, as I say, in our legislation, it is made a charge upon profits by this Clause in the sense that it is to be deducted from the amount of profits ascertained under the Income Tax Acts, before the conventional and artificial income provided by this Clause is ascertained at all. Then there are questions like those of interest on money and dividends on preference shares.


I would point out to the hon. and gallant Member that we are not now discussing paragraph (b) of the Sub-section, which refers to dividends on preference shares. The Amendment relates to paragraph (a). One does not wish to apply any unnecessary restraints or limitations to the discussion of these matters, but there are other Amendments on the Paper relating to paragraph (b), and we must try to keep the discussion as far as possible to the Amendment now before the Committee.


It is scarcely necessary for me to say that I should be very unwilling to transgress your Ruling, Mr. Dunnico, but may I direct attention to the wording of the Amendment. The words upon my lips when you called me to order were "dividends on preference shares," and those are the very words of the Amendment. Indeed, the Amendment—not in the technical sense, it is true, but in the broad sense, is, as regards the details to which I am referring a direct negative to line 21 of paragraph (b). It is very difficult, and I am not sure that it is not impossible to deal with the Amendment without also referring to that part of the Sub-section to which it is directed and which it must necessarily affect.


As I say, I do not want unduly to interfere with the discretion of hon. Members in these discussions. I must point out, however, that there are other Amendments on the Paper dealing with paragraph (b). Of course if it is understood that we are now discussing that paragraph generally on this Amendment, and that the discussion will not be repeated when we come to the other Amendments, I do not mind allowing it in order to expedite our proceedings.


I think I can deal with the matter without even appearing to do what is quite contrary to my intention, namely, to infringe your Ruling, Mr. Dunnico. I direct attention solely to the words of the Amendment and there I find that the right hon. Gentleman the Member for Tamworth (Sir A. Steel-Maitland) suggests that dividends on preference shares should not be deducted from the amount of the profits. That is the point with which I was previously dealing. The right hon. Gentleman pointed out that Sub-section (3) defines the measure whereby is to be tested the question of liability or non-liability and it is extraordinarily important that nothing should be permitted as deduction from profits which, in the ordinary way, an honest man in the conduct of his business would not deduct from his profits. It is a legitimate assumption, that the vast majority of those entering into transactions with the 100,000 companies and the £1,500,000,000 of capital coming within the provisions of this Measure—a very startling figure—it must, I say, be assumed that those conducting business with that vast number of companies—by far the greatest number in this country—and that vast amount of capital, are doing so honestly. Yet a person who entered into a transaction which was perfectly legitimate and honest at the time when it was entered into, which remained by all the tests of the Bill a perfectly legitimate and honest transaction up to, let us say, a year before his death, might be stigmatised as a tax evader coming under the provisions of this Bill, partly because the profits of the company in which he was interested might in the ordinary way of business have diminished, and partly because there was an entirely artificial deduction made from those profits, which by no possible means could he have anticipated.

I will take the case of dividends on preference shares as a very striking example. Such dividends are dividends which may or may not be paid. It is entirely in the discretion of the directors of a company whether a dividend on a preference share be paid or be passed, and it seems a very odd situation that a man's or a company's liability under this Bill should depend upon something which is so casual, so unpredictable, and so incalculable as the decision, at some future date, of a board of directors as to whether it will pay or pass a preference dividend. If it pays a preference dividend, then, unless the Amendment is adopted, the profits will be reduced and the risk of liability increased. If, on the other hand, instead of paying a preference dividend, the dividend is passed and the amount which might have been distributed by way of dividend is instead placed to reserve, then the assets and the profits of the company are increased for the purposes of this Bill and the liability which otherwise would have existed does not come into operation at all. Surely, by means of this or some other Amendment, steps ought to be taken which will make it possible for a taxpayer to know beforehand, by some objective test, whether or not he will be liable, and it should not be left to the casual discretion of a board of directors as to whether the liability shall or shall not arise.


I urge that this Amendment is worthy of very serious consideration. You want to get in some way at the value of the retained benefits for the purpose of guiding you as to the proportion of the company's assets upon which you are going to levy the duty, and the method that has been chosen is to say, Let us see what proportion the retained benefits bear to the income of the company. That can only be a fair test if you use "income" in the sense of "earnings." You want really to get at what proportion the benefits paid to the transferor bear to the earnings of the company, because it only throws light on the proportion of assets that ought to be taxed if you are considering what proportion that bears to earnings. Obviously, the question of what a company does with its earnings is wholly irrelevant. The only sense in which it is fair at all is to take, on the one side, the retained benefits and, on the other, the earnings, and that surely ought to be quite irrespective of what the company chooses to do with those earnings. You may have managing directors who get a percentage on the profits of the company. Those profits are always calculated as the earnings of the company; the proportion or percentage which the manager is to get is not to be varied by what the company chooses to do with its earnings, so that the real thing one ought to have in mind is the earnings of the company, and one should put altogether on one side the objects to which they choose to apply those earnings.

Take the question of dividends on preference shares. Surely, in any sense of the word "income," that which you distribute in dividends is part of the income. The deduction of dividends on preference shares is giving a wholly fictitious meaning to the expression "income." To say that whether or not a transaction is to come within this Bill depends upon whether or not a company pays a preference dividend is saying something which has no sense or reason behind it, and I suggest that there ought to be no question about deducting dividends on preference shares. Let us go to the next most obvious item, namely: any expenditure upon the repairs or upkeep of such lands and buildings. How can it be fair to deduct that? It comes out of income. The company is free to spend much or little as it likes. What would be the position of a company if it had a managing director or some servant enjoying some benefits who might be thought to be going to die in one of die next three years? It would not dare to spend a penny on repairs for fear that it might bring the transaction within this Clause, and it would be very chary about what it spent. When you want to lay down tests as to the kind of transaction you want to get at, to introduce fortuitous circumstances in this way is really making the whole thing much more artificial than it need be. It is wholly wrong to deduct from this fictitious in come of a company expenditure upon the repairs or upkeep of land and buildings.

As to those two items, I should have thought there was a fairly obvious case, but now let us take "interest on money lent to the company." Why should that be deducted from, the earnings? It has been earned or made by the company in the same way as any other part of its income. What does it matter that it pays interest on money lent or on mortgages secured on the property? Here again you have income on the one side, and you ought not to consider what is done with that income any more in the case of a company than you would consider what is done with his benefit by the receiver of the benefit. You do not take any interest, in that benefit once he has received it. To introduce all these fortuitous circumstances, really dependent upon what the company does with its income, is to make this a wholly artificial and unfair comparison.


I cannot help thinking that the hon. and learned Member for Altrincham (Mr. Atkinson) has rather misconceived the intention of the Clause, and it is misleading to talk about the income of a company in the way he suggested. I cannot complain of it being said that it is to a certain extent an artificial criterion that is set up in the Clause, but our intention is to get at what I may call the free income, the income available for distribution, and then see how much of that the deceased gets. That surely is the framework of the Clause and what we ought to aim at. That is implicit in the whole framework of this Clause, and we want to compare the benefits which the deceased gets with, on the other hand, that fund of money which is available to pay him benefits. If you are going to compare those two things, you obviously should take off those charges which may regard as prior charges, fixed charges, charges which have to be made, such as interest on debentures and interest on preference shares, which for this purpose are money which does not fall within the distributable pool, and preference shares have to be paid before any dividend is available on ordinary shares. [Interruption.] We say in the Clause that you must deduct interest on money lent to the company. Before you can get money available for ordinary shares—and for this purpose we may regard the ordinary shareholders as the proprietors of the company—the company has to pay interest on money lent to it, and it has to pay dividends on preference shares, and then, and then only, does a sum of money become available for the ordinary shareholder.


The hon. and learned Gentleman's line of argument seems perfectly logical, but it has no relation to the facts in relation to which one of these companies is formed. If the transferor is a managing director with a salary, and he employs no paid agent, that salary should be paid before any preference dividends are paid out, just as much as before any ordinary dividends are paid out. Indeed when you remember that it is a question of choice in this case whether the debentures are created or not, it is right and proper that the salary should be considered as part of the ordinary expenses and not related to any distributable pool, which, from this point of view, is an idea which is not applicable to the circumstances of the case.


The right hon. Gentleman is rather traversing the ground which he indicated in a previous Amendment, which he did not move because my right hon. Friend the Chancellor of the Exchequer said it would have his consideration; that is to say, as to how far he could go in meeting the right hon. Gentleman in seeing whether benefits should exclude salary in return for genuine services rendered. That is rather a different point, and I am afraid I cannot go further than to explain the framework of the Clause. It seems to me that this thing is implicit in the Clause. Hon. and right hon. Members opposite have said that our Clause is all wrong and unworkable, though I notice with interest that nobody at present has suggested any better way of wording it. It may be that we cannot stop up this gap, and, if so, it is very deplorable, but personally I think this Clause will do it.

It is implicit in this Clause that you should compare two things, namely, the benefits which the individual gets and the income of the company. We must compare the benefits which the individual gets with that fund which is available to pay the benefits to him, to see what proportion of the available sums he gets. You cannot treat as available for paying benefits sums which have to be paid to somebody who lends him money. That is not a benefit at all, so we say we will adopt this yardstick, and start by referring to the income, and we say, "You are to arrive at it, and deduct from it certain things, which I agree are purely arbitrary from the point of view of the Income Tax law, but are essential if what you are trying to determine are not merely earnings of the company,, but something which is of benefit to those who can be regarded as the proprietors of the company." It is for that reason that we have inserted these words, and that we cannot accept this Amendment; it is for that reason, too, that my right hon. Friend the Chancellor of the Exchequer made the concession which he did yesterday in extending the 30 per cent. to 50 per cent., so that the 50 per cent. of the available fund has to be paid to the transferor before he comes in the Clause at all.

This Clause does not apply to transfers of ordinary businesses; it applies to transfers of estates, whether agricultural, landed, or building estates, and it has this peculiarity, that whereas the ordinary company might have a very prosperous year one year, and an unfortunate year the next, by subjecting it to any given period of three years, you can get a fair index of the true position of the company, and the sort of company with which we are dealing does not jump about so violently from year to year. It may be, as the Noble Lord the Member for Aldershot (Viscount Wolmer) suggested last night, a position of always living in a state of perpetual gloom, but the point I am making is that it is perpetual; it is not vast prosperity one year and terrible gloom the next. You do get more or less standard and stable conditions. In these circumstances, I suggest that we have done the right and sensible thing in comparing the benefit which the individual gets with the fund which is available to pay the benefit, that is to say, the fund diminished by those prior claims which, first of all, have to be met before you can pay any benefit.

Viscount WOLMER

I ask the Attorney-General to consider the position in which the Government are putting these agricultural estate companies. It comes to this, that the more they pay on the upkeep of their farms, on the repair of fences and the upkeep of the esate, the greater the liability, and almost the certainty that they will be subjected to penal taxation on the death of the chief proprietor. The Attorney-General pointed out that these agricultural companies are in certain respects in a different position from ordinary commercial companies, in that they are not subject to booms and slumps. That may be perfectly true, but I will tell him another respect in which they are in a different position. They spend on repairs a far greater proportion of their income than ordinary private commercial companies do. That was the point which I attempted to make last night. The Government say that the less agricultural estates spend on repairs, the more money the chief proprietor will be able to take out of that company without rendering his affairs liable to penal taxation; that is a strong incentive to the agricultural estate companies to cut down their estate maintenance and repairs to a degree which would be very injurious to the agricultural welfare of the community. I wish I could persuade the hon. and learned Gentleman that this is not merely a case of tax-dodging. I do not know if he has ever had the administration of an agricultural estate; if he has, he will know the truth of what I say. Everybody who deals with agricultural land at the present time finds that they charge very low rents, and that they have to spend a very high proportion of those rents on maintenance and repairs.

Let me take another point in regard to this Amendment. The Attorney-General will not allow us to treat the interest on loans in the way that we have asked. Consider the position in which an agricultural estate company is placed in that matter. Suppose there is some improvement on the estate, which it is desirable to carry out in the interests of the tenants and of the whole estate. They may borrow £10,000 to effect an irrigation or drainage system, or any other work of that sort, which will add to the income of the estate. The chief proprietor will be able to see his way to do that, for he says: "I shall have to pay £500 a year in interest, but I shall get back out of this improvement of the estate £600 or £700 a year." The transaction will pay the company, and it will benefit the estate and everybody who lives on the estate. Then the Government come down and say, "This £500 a year which you have to pay in interest on borrowed money must not be calculated as part of the earning power of the estate, and what profit you make after having paid that interest is to be calculated as a benefit that you have got." So the result of the transaction would be that the principal proprietor would be drawing out a somewhat bigger sum than he was previously drawing out, and the total income of the estate which would be raised by this improvement cannot be calculated without comparing the relative size of the benefit to the income of the estate; so it will be a deterrent to landed estate companies to borrow money in order to improve their estates. Therefore, on this Clause the Government are doing everything they can to discourage landed estate companies from keeping their estates in proper repair, and from borrowing money in order to improve the value of their estates.


The Attorney, General has given an explanation covering to some extent paragraph (i) and even paragraph (iii) of this Amendment, but, so far as I understand the explanation, it does not cover paragraph (ii) and paragraph (iv). His explanation is that we are here comparing the benefit which the deceased has received with the fund of money available for distribution, and he explained that further by saying that to obtain that we must deduct prior payments which have to be made. Any payments on repairs and upkeep of lands and buildings are not prior payments that have to be made; they are payments you can decide to make in any one year or not. During a war or at times such as these, there is no question that there are fewer repairs done now than in times of boom, because there is no money available. That is a deplorable fact. It is not a prior payment that has to be made. If the Government stick to these deductions the result will be that when the transferor is old, when there is doubt of survival, repairs and expenses of upkeep will not be undertaken, and in the other case preference share dividends will not be declared. You are not going to gain one penny by this, because the tax-dodger has an open road by which he can take a short cut round you; but you are going to do a great deal of damage to the agricultural interest if you do not allow the repair-and upkeep to be undertaken.


May I put some further considerations before the Attorney-General? His whole conception is wrong for this reason, that he is misled by the circumstances which are the natural circumstances of an ordinary settled industrial company, whereas he ought to be considering what are in fact, for practical purposes the quite different circumstances of a landed estate which is made into a company, and which the creator of that company can alter as he wishes. It is a fundamentally wrong conception. The landowner who transfers his estate to a company can make the available income within large margins whatever he wishes. He can, if this definition is to stand, make the available income quite large, or he can reduce it to nothing. It is not as if you were dealing with an ordinary industrial company which is loaded up with £1,000,000 worth of debentures. You have to consider that here is the proprietor of an estate making a company, who can create either debentures, preference shares or ordinary shares, and therefore, to say that you must only consider the income after debenture interest is paid or after preference dividend is paid—to say that you must take that income as your yardstick is misconceiving the whole situation. Although he has great knowledge of ordinary companies, he has not, I feel, put himself quite into the position of the proprietor of a landed estate, who creates an estate company.

The right hon. Gentleman has said that no one has suggested an alternative. I think there is a possible alternative, but it is difficult. The moment you try to catch evasion it becomes an extraordinarily difficult task, and in any case it is very difficult to get any unit of measurement which is entirely satisfactory for all purposes. I think, however, we could get something much more satisfactory if we arrived at the figure of the earnings of an estate company—got those defined—and then allowed a much smaller fraction of those for benefit than is to be allowed with "total income" as defined by this Clause. I think that is an alternative. At the moment, I cannot say precisely how the earnings should be decided for this purpose, but think it ought to be possible to reach a definition. Then we should get a yard stick based upon the realities of the case.

I think the Attorney-General has misconceived the case. He has said that as compared with an ordinary company the income of an estate company does not vary greatly, and because of that we may have a fraction of 30 per cent. or 50 per cent. and it may be fair. That is where he is wrong. The earnings of an estate company do vary, I do not say greatly, but they may vary substantially according to whether there are a large number or a small number of repairs undertaken in a year, or whether rents may or may not be remitted in a given year. There is not an enormous variation in the gross earnings of an estate company, but, on the other hand, when it comes to free available income, under his definition, then the variations from year to year are considerable. You may change one year from a total income, for this purpose, of £200 of profit available for distribution in ordinary dividend's, or £1,000 available for distribution, to an actual

deficit next year. That is perfectly easy. Therefore, when the Chancellor of the Exchequer accepted 50 per cent. instead of 30 per cent. I could not express gratitude, because I think under certain circumstances that fraction is unreal. It is unreal because we are measuring it by available income, which is itself unreal. The right hon. Gentleman has asked for an alternative, and I think we could get a valid alternative based upon the earnings of the company; and then, I think, by fixing a much smaller fraction of those earnings, he would really fulfil his intention of catching the tax dodgers whilst not being unfair to the other parties who received legitimate benefit.


I was called away suddenly just now, but there is one point which I wish to put very shortly. I wish to ask the Attorney-General if he cannot grant some concession on paragraph (ii) of the Amendment, which refers to expenditure on the repairs or upkeep of land and buildings. I am a farmer myself and I have many friends farming in a big way in the farming districts. When visiting them lately I have seen the terrible condition of some of those large estates, on which beautiful buildings are falling into disuse and disrepair. Could not the right hon. Gentleman, by accepting even this small part of the Amendment, do something to encourage the maintenance of farm buildings? I beg him to consider that point. It is a most sincere appeal that I am making.

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

The Committee divided: Ayes, 129; Noes, 265.

Division No. 399.] AYES. [5.57 p.m.
Acland-Troyte, Lieut.-Colonel Colfox, Major William Philip Galbraith, J. F. W.
Albery, Irving James Colman, N. C. D. Gault, Lieut.-Col. Andrew Hamilton
Allen, Sir J. Sandeman (Liverp'l., W.) Courthope, Colonel Sir G. L. Glyn, Major R. G. C.
Atholl, Duchess of Cranbourne, Viscount Gower, Sir Robert
Atkinson, C. Croft, Brigadier-General Sir H. Graham, Fergus (Cumberland, N.)
Baillie-Hamilton, Hon. Charles W. Crookshank, Capt. H. C. Grattan-Doyle, Sir N.
Balniel, Lord Croom-Johnson, R. P. Greaves-Lord, Sir Walter
Berry, Sir George Culverwell, C. T. (Bristol, West) Gretton, Colonel Rt. Hon. John
Betterton, Sir Henry B. Cunliffe-Lister, Rt. Hon. Sir Philip Guinness, Rt. Hon. Walter E.
Bevan, S. J. (Holborn) Dalrymple-White, Lt.-Col. Sir Godfrey Hacking, Rt. Hon. Douglas H.
Bourne, Captain Robert Croft. Davies, Dr. Vernon Hall, Lieut.-Col. Sir F. (Dulwich)
Bowater, Col. Sir T. Vansittart Davies, Maj. Geo. F. (Somerset, Yeovil) Harvey, Major S. E. (Devon, Totnes)
Bracken, B. Davison, Sir W. H. (Kensington, S.) Haslam, Henry C.
Brass, Captain Sir William Dixon, Captain Rt. Hon. Herbert Henderson, Capt. R. R. (Oxf'd, Henley)
Brown, Col. D. C. (N'th'l'd., Hexham) Duckworth, G. A. V. Hennessy, Major Sir G. R. J.
Brown, Brig.-Gen. H. C. (Berks, Newb'y) Dugdale, Capt. T. L. Herbert, Sir Dennis (Hertford)
Bullock, Captain Malcolm Eden, Captain Anthony Hills, Major Rt. Hon. John Waller
Cadogan, Major Hon. Edward Edmondson, Major A. J. Hoare, Lt.-Col. Rt. Hon. Sir S. J. G.
Cayzer, Sir C. (Chester, City) Elliot, Major Walter E. Hurd, Percy A.
Chamberlain, Rt. Hn. Sir J. A. (Birm., W.) Erskine, Lord (Somerset, Weston-s. M.) Hurst, Sir Gerald B.
Chamberlain, Rt. Hon. N. (Edgbaston) Falle, Sir Bertram G. Jones, Sir G. W. H. (Stoke New'gton)
Christie, J. A. Fermoy, Lord King, Commodore Rt. Hon. Henry D.
Cobb, Sir Cyril Fielden, E. B. Lamb, Sir J. Q.
Cockerill, Brig.-General Sir George Fremantle, Lieut.-Colonel Francis E. Locker-Lampson, Rt. Hon. Godfrey
Locker-Lampson, Com. O. (Handsw'th) Ramsbotham, H. Stuart, Hon. J. (Moray and Nairn)
Long, Major Eric Rawson, Sir Cooper Sueter, Rear-Admiral M. F.
Lymington, viscount Reid, David D. (County Down) Thomson, Sir F.
Macdonald, Capt. P. D. (I. of W.) Rentoul, Sir Gervals S. Turton, Robert Hugh
Margesson, Captain H. D. Roberts, Sir Samuel (Ecclesall) Vaughan Morgan, Sir Kenyon
Merriman, Sir F. Boyd Rodd, Rt. Hon. Sir James Rennell Ward, Lieut.-Col. Sir A. Lambert
Mitchell-Thomson, Rt. Hon. Sir W. Ruggles-Brise, Lieut.-Colonel E. A. Wardlaw-Milne, J. S.
Monsell, Eyres, Com. Rt. Hon. Sir B. Russell, Alexander West (Tynemouth) Warrender, Sir Victor
Moore, Sir Newton J. (Richmond) Salmon, Major I. Waterhouse, Captain Charles
Moore, Lieut.-Colonel T. C. R. (Ayr) Samuel, A. M. (Surrey, Farnham) Wayland, Sir William A.
Morrison, W. S. (Glos., Cirencester) Sandeman, Sir N. Stewart Wilson, G. H. A. (Cambridge U.)
Newton, Sir D. G. C. (Cambridge) Sassoon, Rt. Hon. Sir Philip A. G. D. Windsor-Clive, Lieut.-Colonel George
Nirholson, Col. Rt. Hn. W. G. (Ptrsf'ld) Savery, S. S. Winterton, Rt. Hon. Earl
O'Connor, T. J. Smith, Louis W. (Sheffield, Hallam) Wolmer, Rt. Hon. Viscount
O'Neill, Sir H. Smith, R. W. (Aberd'n & Kinc'dine, C.) Womersley, W. J.
Ormsby-Gore, Rt. Hon. William Smith-Carington, Neville W. Wood, Rt. Hon. Sir Kingsley
Peaks, Captain Osbert Smithers, Waldron Worthington-Evans, Rt. Hon. Sir L.
Percy, Lord Eustace (Hastings) Spender-Clay, Colonel H.
Pliditch, Sir Philip Stanley, Lord (Fylde) TELLERS FOR THE AYES.
Pownall, Sir Assheton Steel-Maitland, Rt. Hon. Sir Arthur Major the Marquess of Titchfie and Captain Wallace.
Adamson, W. M. (Staff., Cannock) England, Colonel A. Lansbury, Rt. Hon. George
Addison, Rt. Hon. Dr. Christopher Evans, Capt. Ernest (Welsh Univer.) Lathan, G.
Aitchison, Rt. Hon. Craigie M. Foot, Isaac Law, A. (Rossendale)
Alexander, Rt. Hon. A. V. (Hillsbro') Gardner, B. W. (West Ham, Upton) Lawrence, Susan
Alpass, J. H. Gardner, J. P. (Hammersmith, N.) Lawrie, Hugh Hartley (Stalybridge)
Ammon, Charles George George, Rt. Hon. D. Lloyd (Car'vn) Lawson, John James
Arnott, John George, Megan Lloyd (Anglesea) Lawther, W. (Barnard Castle)
Aske, Sir Robert Gibbins, Joseph Leach, W.
Attlee, Clement Richard Gibson, H. M. (Lancs, Mossley) Lee, Frank (Derby, N. E.)
Ayles, Walter Gill, T. H. Lee, Jennie (Lanark, Northern)
Baker, John (Wolverhampton, Bilston) Glassey, A. E. Lees, J.
Baldwin, Oliver (Dudley) Gossling, A. G. Lewis, T. (Southampton)
Barr, James Gould, F. Lloyd, C. Ellis
Batey, Joseph Graham, D. M. (Lanark, Hamilton) Logan, David Gilbert
Bellamy, Albert Graham, Rt. Hon. Wm. (Edin., Cent.) Longbottom, A. W.
Benn, Rt. Hon. Wedgwood Gray, Milner Longden, F.
Bennett, Capt. Sir E. N. (Cardiff C.) Grenfell, D. R. (Glamorgan) Lowth, Thomas
Bennett, William (Battersea, South) Griffiths, T. (Monmouth, Pontypool) Lunn, William
Benson, G. Groves, Thomas E. Macdonald, Gordon (Ince)
Bentham, Dr. Ethel Grundy, Thomas W. MacDonald, Rt. Hon. J. R. (Seaham)
Bevan, Aneurin (Ebbw Vale) Hall, F. (York, W. R., Normanton) MacDonald, Malcolm (Bassetlaw)
Blindell, James Hall, G. H. (Merthyr Tydvil) McElwee, A.
Bowen, J. W. Hamilton, Mary Agnes (Blackburn) 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. Hastings, Dr. Somerville Maclean, Sir Donald (Cornwall, N.)
Brown, C. W. E. (Notts, Mansfield) Haycock, A. W. Maclean, Neil (Glasgow, Govan)
Brown, Ernest (Leith) Hayes, John Henry MacNeill-Weir, L.
Brown, Rt. Hon. J. (South Ayrshire) Henderson, Ht. Hon. A. (Burnley) McShane, John James
Brown, W. J. (Wolverhampton, West) Henderson, Arthur, Junr. (Cardiff, S.) Malone, C. L'Estrange (N'thampton)
Buchanan, G. Henderson, Thomas (Glasgow) Mansfield, W.
Burgess, F. G. Henderson, W. W. (Middx., Enfield) March, S.
Buxton, C. R. (Yorks, W. R. Elland) Harriotts, J. Marcus, M.
Caine, Derwent Hall- Hirst, G. H. (York W. R. Wentworth) Markham, S. F.
Cameron, A. G. Hirst, W. (Bradford, South) Marley, J.
Cape, Thomas Hoffman, P. C. Marshall, Fred
Charleton, H. C. Hollins, A. Mathers, George
Chater, Daniel Horrabin, J. F. Matters, L. W.
Church, Major A. G. Hudson, James H. (Huddersfield) Maxton, James
Clarke, J. S. Hunter, Dr. Joseph Messer, Fred
Cluse, W. S. Hutchison, Maj.-Gen. Sir R. Millar, J. D.
Cocks, Frederick Seymour Isaacs, George Milner, Major J.
Compton, Joseph Jenkins, W. (Glamorgan, Neath) Montague, Frederick
Cove, William G. John, William (Rhondda, West) Morley, Ralph
Cowan, D. M. Johnston, Thomas Morris, Rhys Hopkins
Daggar, George Jones, F. Llewellyn- (Flint) Morris-Jones, Dr. J. H. (Denbigh)
Dallas, George Jones, Henry Haydn (Merioneth) Morrison, Herbert (Hackney, South)
Dalton, Hugh Jones, J. J. (West Ham, Silvertown) Morrison, Robert C. (Tottenham, N.)
Davies, E. C. (Montgomery) Jones, Rt. Hon. Leif (Camborne) Mort, D. L.
Day, Harry Jones, Morgan (Caerphilly) Moses, J. J. H.
Dickson, T. Jones, T. I. Mardy (Pontypridd) Mosley, Sir Oswald (Smethwick)
Dukes, C, Jowett, Rt. Hon. F. W. Muff, G.
Duncan, Charles Jowitt, Rt. Hon. Sir W. A. Muggeridge, H. T.
Ede, James Chuter Kelly, W. T. Murnin, Hugh
Edge, Sir William Kennedy, Thomas Nathan, Major H. L.
Edmunds, J. E. Kinley, J. Naylor, T. E.
Edwards, C. (Monmonth, Bedwellty) Kirkwood, D. Newman, Sir R. H. S. D. L. (Exeter)
Edwards, E. (Morpeth) Knight, Holford Noel Baker, P. J.
Egan, W. H. Lambert, Rt. Hon. George (S. Molton) Owen, Major G. (Carnarvon)
Elmley, Viscount Lang, Gordon Owen, H. F. (Hereford)
Palin, John Henry Shepherd Arthur Lewis Vaughan, D. J.
Paling, Wilfrid Sherwood, G. H. Viant, S. P.
Palmer, E. T. Shield, George William Walker, J.
Perry, S. F. Shiels, Dr. Drummond Wallace, H. W.
Pethick-Lawrence, F. W. Shillaker, J. F. Wallhead, Richard C.
Phillips, Dr. Marion Shinwell, E. Walters, Rt. Hon. Sir J. Tudor
Pole, Major D. G. Short, Alfred (Wednesbury) Watkins, F. C.
Potts, John S. Simmons, C. J. Watson, W. M. (Dunfermline)
Price, M. P. Sinclair, Sir A. (Caithness) Watts-Morgan, Lt.-Col. D. (Rhondda)
Quibell, D. J. K. Sinkinson, George Wellock, Wilfred
Ramsay, T. B. Wilson Sitch, Charles H. Welsh, James (Paisley)
Raynes, W. R. Smith, Ben (Bermondsey, Rotherhithe) Welsh, James C. (Coatbridge)
Richards, R. Smith, Frank (Nuneaton) West, F. R.
Richardson, R. (Houghton-le-Spring) Smith, H. B. Lees- (Keighley) Westwood, Joseph
Riley, Ben (Dewsbury) Smith, Tom (Pontefract) White, H. G.
Ritson, J. Snell, Harry Whiteley, Wilfrid (Birm., Ladywood)
Roberts, Rt. Hen. F. O. (W. Bromwich) Snowden, Rt. Hon. Philip Williams, David (Swansea, East)
Rosbotham, D. S. T. Snowden, Thomas (Accrington) Williams, Dr. J. H. (Llanelly)
Rowson, Guy Sorensen, R. Wilson, C. H. (Sheffield, Attercliffe)
Russell Richard John (Eddisbury) Stamford, Thomas W. Wilson, J. (Oldham)
Salter, Dr. Alfred Stephen, Campbell Wilson, R. J. (Jarrow)
Samuel, Rt. Hon. Sir H. (Darwen) Stewart, J. (St. Rollox) Winterton, G. E. (Leicester, Loughb'gh)
Sanders, W. S. Strachey, E. J. St. Loe Wise, E. F.
Sandham, E. Sullivan, J. Wood, Major McKenzie (Banff)
Sawyer, G. F. Sutton, J. E. Wright, W. (Rutherglen)
Scrymgeour, E. Thomas, Rt. Hon. J. H. (Derby)
Scurr, John Thurtle, Ernest TELLERS FOR THE NOES.
Sexton, James Tinker, John Joseph Mr. Allen Parkinson and Mr. William Whiteley.
Shaw, Rt. Hon. Thomas (Preston) Townend, A. E.

Amendments made: In page 26, line 12, leave out the words "bona fide."

In line 13, leave out the words "bona fide."—[Mr. P. Snowden.]


I beg to move, in page 26, line 31, to leave cut from the word "year" to the end of the Sub-section, and to insert instead thereof the words: take the last year for which the accounts have been made up as those of the accounting year. I had a conversation on this point with the Attorney-General, and he told me that it was not the intention of the Government to enlarge the period of three years from the date of death which governs gifts inter vivos. I would like to know whether the Clause does not provide for that. The prescribed period is defined by the Act to commence within three years before the end of the accounting year, and that may be 3¾ years before the death of the transferor. Take the case of £50,000 transferred to a private company. If that sum was transferred more than three years before the death took place, there would be no duty payable, but if the £50,000 were transferred, and during 3¾ years a benefit was received, the duty would attach. Therefore, I suggest that the Bill is extending by three-quarters of a year the period during which a charge may take place, notwithstanding the avowed intention of the Government not to alter the three years' rule. I ask the Attorney-General to reconsider the state- ment which he made earlier to-day, and I trust that he will give an undertaking to make the Bill in accordance with the expressed intention of the Government.


We are dealing with totally different things. In the first place, a three years' period has to elapse, and secondly there is an arbitrary period which you take for the working out of the proportions. It seems to me that it is more fair to take the three years' period in order to work out the proportions, and I am sure that that course is not against the interest of the taxpayers. If I am right in thinking that the two things are more or less the same, who is going to benefit by what is now proposed? I will certainly promise to read again the observations which the right hon. Gentleman the Member for St. George's (Sir L. Worthington-Evans) made on the previous occasion, and I will go into the matter. I must adhere to what I have said that it is not our intention to alter the three years' period.


I should like the Attorney-General to appreciate that this point is not connected with taking a merely arbitrary period. The prescribed period is the period within which a gift operates, and I am afraid what is proposed would forbid a transaction of that kind. The prescribed period is definite with reference to the accounting period, and therefore the prescribed period may be thrown back to 3¾ years. Supposing that 3¾ years before the man's death he has transferred the property for less than a full consideration, and at the same time has received a benefit. Apart from that being within the prescribed period, that would not be an offending transaction, because it would be outside the three years before his death; but because the man has received a benefit with reference to the accounting period, it becomes an offending transaction for the reasons which have been pointed out. In these circumstances I hope that the Attorney-General will reconsider the answer which he has given.


I beg to ask leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Brigadier-General CLIFTON BROWN

I beg to move, in page 27, line 19, at the end, to add the words: Provided that in the case of persons dying after the passing of this Act no period before the commencement of this Act shall be deemed to be within the prescribed period. The Chancellor of the Exchequer has already made concessions on the average of the three years, and therefore the Treasury would be doing very little more by accepting this Amendment. This kind of retrospective legislation is very hard on the people who have paid very heavy duties in the past, and have added a great deal to the Treasury returns.


I must take exception to the use of the word "retrospective" in regard to this Clause. Supposing a regulation was made that anybody who served in the Boer War was to be allowed to pay half the rate of Income Tax, obviously that would not be retrospective legislation. The liability would be fixed in the same way as in the past, and this is a complete misuse of the word "retrospective." We do not apply this provision to the death of any person if it takes place before the passing of the Act, and, therefore, I cannot see how the phrase "retrospective legislation" can be used. I do not think this Amendment is logical, and it is not very clear.

The principle of all these Finance Acts has been, and has rightly been, to look at the date of death after the Act, notwithstanding that the liability which then accrues may be affected by things which have taken place before. In this particular case there is this additional point. Some years ago, I think in 1927 or 1928, the then Chancellor of the Exchequer, the right hon. Gentleman the Member for Epping (Mr. Churchill), forecast that this very legislation would come. It has been anticipated for a long time that it would come, and I do not doubt, strange though it may seem to say it, that, had the right hon. Gentleman the Member for Epping remained Chancellor of the Exchequer, he would have introduced some Clause in very much the same form as this.

The hon. and gallant Member's Amendment would not work. The test ought to be the death of the person on whose estate Estate Duty is claimed, and if, within a period of three years prior to his death, he received these benefits, then I think, logically, the Clause ought to apply. If he has not received the benefits, no doubt it does not apply. I do not think there is any logical ground for saying that, in the case of persons dying after the passing of the Act, no period before the commencement of the Act shall be deemed to be within the prescribed period. That would simply postpone the operation of the Act for some further time. I regret to say that we cannot accept the Amendment.


I hope that the Attorney-General is not going to stick to the attitude that he has just taken up. Surely, what he wants to do is to stop an evasion which has taken place perfectly legally in the past. It may have been undesirable, but the law has allowed it, and it has been taking place quite openly and legally, though not without considerable cost. The Treasury has taken its toll. It is true that it has been in another form, and probably a smaller toll, but the Treasury has taken a considerable toll in Stamp Duty. Many of the so-called tax evaders have, at considerabe personal sacrifice, taken this course in the hope of retaining, it may be, some historic estate in the possession of the family which has possessed it for centuries, and the necessary money has been raised to carry through the transaction. It has been done quite openly and legally, and I do not think that it is unfair of my hon. and gallant Friend the Member for Newbury (Brigadier-General Brown) to describe the Clause as it now stands as retrospective legislation. Therefore, I urge the Attorney-General and the Financial Secretary to consider again whether they will not be serving the purpose which they have at heart, of stopping evasion, by saying that what has been done legally in the past may not be done legally any longer, and that for the future the gap of evasion will be stopped. It is quite certain that after the passing of the Act no more of these estate companies will be formed for this purpose of

evasion, in so far as they have been formed for the purpose of evasion in the past. Though it is true that the period on which the calculation will be made will not be retrospective, I think that as an act of justice this Amendment should be accepted.

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

The Committee divided: Ayes, 125; Noes, 265.

Division No. 400.] AYES. [6.19 p.m.
Acland-Troyte, Lieut.-Colonel Eden, Captain Anthony O'Connor, T. J.
Albery, Irving James Edmondson, Major A. J. O'Neill, Sir H.
Allen, Sir J. Sandeman (Liverp'l., W.) Elliot, Major Walter E. Ormsby-Gore, Rt. Hon. William
Astor, viscountess Erskine, Lord (Somerset, Weston-s-M.) Peake, Capt. Osbert
Atholl, Duchess of Falle, Sir Bertram G. Percy, Lord Eustace (Hastings)
Atkinson, C. Fermoy, Lord Ramsbotham, H.
Baillie-Hamilton, Hon. Charles W. Ford, Sir P. J. Rawson, Sir Cooper
Balfour, George (Hampstead) Fremantle, Lieut.-Colonel Francis E. Reid, David D. (County Down)
Balniel, Lord Ganzoni, Sir John Rentoul, Sir Gervais S.
Berry, Sir George Gauit, Lieut.-Col. Andrew Hamilton Roberts, Sir Samuel (Ecclesall)
Betterton, Sir Henry B. Gibson, C. G. (Pudsey & Otley) Rodd, Rt. Hon. Sir James Rennell
Bevan, S. J. (Holborn) Glyn, Major R. G. C. Ruggles-Brise, Lieut.-Colonel E. A.
Bourne, Captain Robert Croft Gower, Sir Robert Russell, Alexander West (Tynemouth)
Bowater, Col. Sir T. Vansittart Graham, Fergus (Cumberland, N.) Salmon, Major I.
Bracken, B. Grattan-Doyle, Sir N. Samuel, A. M. (Surrey, Farnham)
Braithwaite, Major A. N. Greaves-Lord, Sir Walter Sandeman, Sir N. Stewart
Brass, Captain Sir William Gretton, Colonel Rt. Hon. John Smith, Louis W. (Sheffield, Hallam)
Briscoe, Richard George Guinness, Rt. Hon. Walter E. Smith, R. W. (Aberd'n & Kinc'dine, C.)
Brown, Col. D. C. (N'th'l'd., Hexham) Hacking, Rt. Hon. Douglas H. Smith-Carington, Neville W.
Brown, Brig.-Gen. H. C. (Berks, Newb'y) Hall, Lieut. Col. Sir F. (Dulwich) Smithers, Waldron
Buchan, John Harvey, Major S. E. (Devon, Totnes) Spender-Clay, Colonel H.
Cadogan, Major Hon. Edward Haslam, Henry C. Stanley, Lord (Fylde)
Cayzer, Sir C. (Chester. City) Henderson, Capt. R. R. (Oxt'd, Henley) Sueter, Rear-Admiral M. F.
Chadwick, Capt. Sir Robert Burton Hennessy, Major Sir G. R. J. Train, J.
Chamberlain, Rt. Hn. Sir J. A. (Birm., W.) Herbert, Sir Dennis (Hertford) Turton, Robert Hugh
Chamberlain, Rt. Hon. N. (Edgbaston) Hills, Major Rt. Hon. John Walter Vaughan-Morgan, Sir Kenyon
Christie, J. A. Hoare, Lt.-Col. Rt. Hon. Sir S. J. G. Wallace, Capt. D. E. (Hornsey)
Colfox, Major William Philip Hurd, Percy A. Ward, Lieut.-Col. Sir A. Lambert
Colville, Major D. J. Jones, Sir G. W. H. (Stoke New'gton) Wardlaw-Milne, J. S.
Courthope, Colonel Sir G. L. King, Commodore Rt. Hon. Henry D. Warrender, Sir Victor
Cranborne, Viscount Lamb, Sir J. Q. Waterhouse, Captain Charles
Croft, Briqadier-General Sir H. Lane Fox, Col. Rt. Hon. George R. Wayland, Sir William A.
Crookshank, Capt. H. C. Locker, Lampson, Rt. Hon. Godfrey Wilson, G. H. A. (Cambridge U.)
Croom-Johnson, R. P. Lymington, Viscount Windsor-Clive, Lieut.-Colonel George
Culverwell, C. T. (Bristol, West) Macdonald, Capt. P. D. (I. of W.) Winterton, Rt. Hon. Earl
Cunliffe-Lister, Rt. Hon. Sir Philip Margesson, Captain H. D. Wolmer, Rt. Hon. Viscount
Dalrymple-White, Lt.-Col. Sir Godfrey Merriman, Sir F. Boyd Womersley, W. J.
Davies, Dr. Vernon Mitchell-Thomson, Rt. Hon. Sir W. Wood, Rt. Hon. Sir Kingsley
Davies, Maj. Geo. F. (Somerset, Yeovil) Monsell, Eyres, Com. Rt. Hon. Sir B. Worthington-Evans, Rt. Hon. Sir L.
Davison, Sir W. H. (Kensington, S.) Moore, Sir Newton J. (Richmond)
Dixon, Captain Rt. Hon. Herbert Morrison, W. S. (Glos., Cirencester) TELLERS FOR THE AYES.
Duckworth, G. A. V. Newton, Sir D. G. C. (Cambridge) Sir Frederick Thomson and Major
Dugdale, Capt. T. L. Nicholson, Col. Rt. Hn. W. G. (Ptrsf'ld) the Marquess of Titchfield.
Adamson, Rt. Hon. W. (Fife, West) Bennett, William (Battersea, South) Caine, Derwent Hall-
Adamson, W. M. (Staff., Cannock) Benson, G. Cameron, A. G.
Addison, Rt. Hon. Dr. Christopher Bentham, Dr. Ethel Cape, Thomas
Aitchison, Rt. Hon. Craigie M. Bevan, Aneurin (Ebbw Vale) Charleton, H. C.
Alexander, Rt. Hon. A. V. (Hillsbro') Blindell, James Chater, Daniel
Alpass, J. H. Bondfield, Rt. Hon. Margaret Church, Major A. G.
Ammon, Charles George Bowen, J. W. Clarke, J. S.
Arnott, John Bowerman, Rt. Hon. Charles W. Cluse, W. S.
Aske, Sir Robert Brockway, A. Fenner Clynes, Rt. Hon. John R.
Attlee, Clement Richard Brooke, W. Cocks, Frederick Seymour
Ayles, Walter Brothers, M. Compton, Joseph
Baker, John (Wotverhampton, Bilston) Brown, C. W. E. (Notts, Mansfield) Cove, William G.
Baldwin, Oliver (Dudley) Brown, Ernest (Leith) Cowan, D. M.
Barr, James Brown, Rt. Hon. J. (South Ayrshire) Daggar, George
Batey, Joseph Brown, W. S. (Wolverhampton, West) Dallas, George
Bellamy, Albert Buchanan, G. Dalton, Hugh
Benn, Rt. Hon. Wedgwood Burgess, F. G. Davies, E. C. (Montgomery)
Bennett, Capt. Sir E. N. (Cardiff C.) Baxton, C. R. (Yorks, W. R. Elland) Day, Harry
Dickson, T. Lawrence, Susan Ritson, J.
Dukes, C. Lawrie, Hugh Hartley (stalybridge) Roberts, Rt. Hon. F. O. (W. Bromwich)
Duncan, Charles Lawther, W. (Barnard Castle) Rosbotham, D. S. T.
Ede, James Chuter Leach, W. Rowson, Guy
Edge, Sir William Lee, Frank (Derby, N. E.) Russell, Richard John (Eddisbury)
Edmunds, J. E. Lees, J. Salter, Dr. Alfred
Edwards, C. (Monmouth, Bedwellty) Lewis, T. (Southampton) Samuel, Rt. Hon. Sir H. (Darwen)
Edwards, E. (Morpeth) Lloyd, C. Ellis Sanders, W. S.
Egan, W. H. Logan, David Gilbert Sandham, E.
Elmley, Viscount Longbottom, A. W. Sawyer, G. F.
England, Colonel A. Longden, F. Scrymgeour, E.
Evans, Capt. Ernest (Walsh Univer.) Lowth, Thomas Scurr, John
Foot, Isaac Lunn, William Sexton, James
Gardner, B. W. (West Ham, Upton) Macdonald, Gordon (Ince) Shaw, Rt. Hon. Thomas (Preston)
Gardner, J. P. (Hammersmith, N.) MacDonald, Rt. Hon. J. R. (Seaham) Shepherd, Arthur Lewis
George, Megan Lloyd (Anglesea) MacDonald, Malcolm (Bassetlaw) Sherwood, G. H.
Gibbins, Joseph McElwee, A. Shield, George William
Gibson, H. M. (Lancs, Mossley) McEntee, V. L. Shiels, Dr. Drummond
Gill, T. H. McGovern, J. (Glasgow, Shettleston) Shillaker, J. F.
Glassey, A. E. McKinlay, A. Shinwell, E.
Gossling, A. G. MacLaren, Andrew Short, Alfred (Wednesbury)
Gould, F. Maclean, Sir Donald (Cornwall, N.) Simmons, C. J.
Graham, D. M. (Lanark, Hamilton) Maclean, Neil (Glasgow, Govan) Sinclair, Sir A. (Caithness)
Graham, Rt. Hon. Wm. (Edin., Cent.) MacNeill-Weir, L. Sinkinson, George
Grenfell, D. R. (Glamorgan) McShare, John James Sitch, Charles H.
Griffiths, T. (Monmouth, Pontypool) Malone, C. L'Estrange (N'thampton) Smith, Frank (Nuneaton)
Groves, Thomas E. Mander, Geoffrey le M. Smith, H. B. Lees- (Keighley)
Grundy, Thomas W. Mansfield, W. Smith, Rennie (Penistone)
Hall, F. (York, W. R., Normanton) March, S. Smith, Tom (Pontefract)
Hall, G. H. (Merthyr Tydvil) Marcus, M. Snell, Harry
Hamilton, Mary Agnes (Blackburn) Markham, S. F. Snowden, Rt. Hon. Philip
Hardie, George D. Marley, J. Snowden, Thomas (Accrington)
Harris, Percy A. Marshall, Fred Stamford, Thomas W.
Hartshorn, Rt. Hon. Vernon Mathers, George Stephen, Campbell
Hastings, Dr. Somerville Maxton, James Stewart, J. (St. Roilox)
Haycock, A. W. Messer, Fred Strachey, E. J. St. Loe
Hayes, John Henry Millar, J. D. Sullivan, J.
Henderson, Rt. Hon. A. (Burnley) Milner, Major J. Sutton, J. E.
Henderson, Arthur, Junr. (Cardiff, S.) Montague, Frederick Thomas, Rt. Hon. J. H. (Derby)
Henderson, Thomas (Glasgow) Morgan, Dr. H. B. Thurtle, Ernest
Henderson, W. W. (Middx., Enfield) Morley, Ralph Tinker, John Joseph
Herriotts, J. Morris, Rhys Hopkins Tout, W. J.
Hirst, G. H. (York W. R. Wentworth) Morris-Jones, Dr. J. H. (Denbigh) Townend, A. E.
Hirst, W. (Bradford, South) Morrison, Herbert (Hackney, South) Trevelyan, Rt. Hon. Sir Charles
Hoffman, P. C. Morrison, Robert C. (Tottenham, N.) Vaughan, D. J.
Hollins, A. Mort, D. L. Viant, S. P.
Horrabin, J. F. Moses, J. J. H. Walker, J.
Hudson, James H. (Huddersfield) Mosley, Sir Oswald (Smethwick) Wallace, H. W.
Hunter, Dr. Joseph Muff, G. Wallhead, Richard C.
Hutchison, Maj.-Gen. Sir R. Muggeridge, H. T. Watkins, F. C.
Isaacs, George Murnin, Hugh Watson, W. M. (Dunfermline)
Jenkins, W. (Glamorgan, Neath) Nathan, Major H. L. Watts-Morgan, Lt.-Col. D. (Rhondda)
John, William (Rhondda, West) Naylor, T. E. Wedgwood, Rt. Hon. Josiah
Johnston, Thomas Owen, Major G. (Carnarvon) Wellock, Wilfred
Jones, F. Llewellyn- (Flint) Owen, H. F. (Hereford) Welsh, James (Paisley)
Jones, Henry Haydn (Merioneth) Palin, John Henry Welsh, James C. (Coatbridge)
Jones, J. J. (West Ham, Silvertown) Palmer, E. T. West, F. R.
Jones, Rt. Hon. Leif (Camborne) Parkinson, John Allen (Wigan) Westwood, Joseph
Jones, Morgan (Caerphilly) Perry, S. F. White, H. G.
Jones, T. I. Mardy (Pontypridd) Pethick-Lawrence, F. W. Whiteley, Wilfrid (Birm,, Ladywood)
Jowett, Rt. Hon. F. W. Phillips, Dr. Marion Whiteley, William (Blaydon)
Jowitt, Rt. Hon. Sir W. A. Pole, Major D. G. Williams, David (Swansea, East)
Kelly, W. T. Potts, John S. Williams, Dr. J. H. (Llanelly)
Kennedy, Thomas Price, M. P. Wilson, C. H. (Sheffield, Attercliffe)
Kinley, J. Pybus, Percy John Wilson, J. (Oldham)
Kirkwood, D. Quibell, D. F. K. Wilson, R. J. (Jarrow)
Lambert, Rt. Hon. George (S. Molton) Ramsay, T. B. Wilson Winterton, G. E. (Leicester, Loughb'gh)
Lang, Gordon Raynes, W. R. Wood, Major McKenzie (Banff)
Lansbury, Rt. Hon. George Richards, R. Wright, W. (Rutherglen)
Lathan, G. Richardson, R. (Houghton-le-Spring)
Law, A. (Rosendale) Riley, Ben (Dewsbury) TELLERS FOR THE NOES.—
Mr. B. Smith and Mr. Paling.

Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."


We have now come to the end of a long and complicated Clause, the objects of which have the support of the Opposition as well as of the Government. It was to prevent evasion of Death Duties by illusory transfers of property, and at the same time to avoid any interference with legitimate business. As the original Clause was presented, we found that there were many dangerous features in it and many that were entirely objectionable. The result was that my right hon. Friends put down a number of Amendments, 30 or 40 perhaps, a great many of them important Amendments, and we have had an exhibition of restlessness on the part of the Chancellor of the Exchequer and an inclination to flout our Amendments and to suggest that we were wasting time in pointing out what we believed to be the weaknesses of the Clause. As we went on, the Chancellor found it necessary to accept a very large number of the Amendments and to recast the Clause altogether. We asked him to reprint it so that the Committee might make better progress in discussing it with the Clause as reprinted before them. We were thanked by the Chancellor for doing that in a manner peculiar to him. He complained that any such request was tomfoolery and, if more time were taken on the Amendments, he would bring in a guillotine Resolution. He did reprint the Clause and we had a most amicable day and real progress was made both yesterday and to-day, and real improvements have been made in the Clause. Talking of reprints, I now ask the Government, as there have been a great many Amendments since the Clause was reprinted, that they shall again reprint it, well ahead of Report, so that we may consider what further Amendments, if any, are necessary for Report. That is the more reasonable because on at least two, and I think three, important questions the Government were unable to deal with the matter in Committee but promised to consider them before Report.

What have we done in Committee? The Amendments that have been made are really of the greatest importance. The first to which I will refer is that getting rid of the phrase "private company" and so preventing confusion between the definition of a private company in this Bill and in the Companies Act. That is certainly a great improvement. We have removed from the Bill double taxation, for in the Clause as originally introduced not only was a company to be taxed for Death Duties on the death, in certain circumstances, of the transferor, but also the previous owner of the property was to have his taxation increased. We have deprived the Revenue of a most extraordinary Clause that the Chancellor put into the Bill giving them the option of taking either of two values of the subject to be taxed, either the value at the date of the transfer or at the date of the death of the transferor. As proposed originally, the taxation was to be levied on whichever was the higher value—an option in favour of the revenue only and not in favour of the taxpayer. The Chancellor could not defend that and so he has very naturally withdrawn it, and now the value at death only is to be taken. Similarly with regard to benefits. The Clause as originally proposed, again, gave an option to the Revenue to pick out of the three years the year that suited them best. Now, much more fairly, an average of the three years is to be taken. Another Amendment has increased from 30 to 50 per cent. the amount that is necessary before the company is charged with the Death Duties. "Bona fide" is out in most cases, but, curiously, it is retained with regard to sales, although a bona fide sale stands on practically the same footing, I think, as a bona fide interest. If you can get rid of the phrase "bona fide" in the one case, it seems to me you could well get rid of it in the other. At any rate, I am told it will lead to legal trouble because of the various definitions of the phrase, and it would be wise for the Chancellor to consider that again before Report.

There are other matters that he has promised to consider. He has promised to consider whether the date of transfer should be in some way related to the date of fixing the benefits—the prescribed period. I moved an Amendment suggesting 12 years. He could not accept that but I understand that, before Report, some reconsideration will be given to it. Reconsideration is also to be given to a point I have been discussing with the Attorney-General to-day. It seems to me, although the avowed intention of the Government is not to interfere with gifts inter vivos and to leave the present law alone, they have by some Clauses in this, especially by fixing the prescribed period relating to the accounting year, extended it for three and three quarter years in certain circumstances. The Attorney-General does not think that is the case, but he has promised to consider whether anything is necessary in that respect. No one can say, therefore, that there has not been great improvements made at the instance of the Opposition, for almost every single one of what the Chancellor has from time to time called concessions to the taxpayer has resulted from Amendments put down by the Opposition but not moved, because the Chancellor has either put his name on the Amendments or put down Amendments in slightly differing words to cover the same points. Nevertheless, though much better than when it was brought in—which entirely justifies the line the Opposition have taken in proposing Amendments and discussing them—there are still parts of the Clause which are going to deal great hardship to quite innocent people and are, I think, going to prevent land development in the future.

The Clauses to which the Attorney-General objects being called retrospective, whether retrospective or not, will affect people who have formed companies and transferred property to them for perfectly legitimate purposes and not for the purpose of evading Death Duties at all. If it does not affect them retrospectively, at any rate, the Clause is retroactive, because it affects them notwithstanding that they have hitherto been acting within the law, and it will handicap land development. We know what the effect of the Budget of 1909–10 was on building. The shortage of houses before the War was largely due to the fear caused by that Budget, and confidence was destroyed to such an extent that builders could not get the finance that was necessary in order to enable them to carry on the building of small houses. So also in this Clause you have a distinct handicap to land development. You are going to destroy confidence and, to some extent, render more difficult the financing of building estates.


There is no parallel there at all, and you know it.


That is an extraordinarily offensive remark. There is a parallel. You only have to destroy confidence and you will find that it is infinitely more difficult to get the finance necessary for the purpose of enabling people without much capital to develop their estates, and it is because this Clause will affect estate development in that way that I think the Chancellor would do well to consider further mitigation that he can make in that sense. While grateful to him for having accepted so many of our Amendments, I still find that the Clause contains matters to which further consideration should be given by the Government.


I should like to join in the appeal to the Chancellor to have the Clause reprinted before Report. We want not merely that, but a print of the Clause with the undertakings that have been given carried out, so far as they are going to be carried, so that one may see the effect of them. There is no sympathy in any part of the Committee for the tax evader, who is robbing every other member of the community, because by his evasion he compels everyone else to pay more than his fair share of taxation. On the other hand, if your legislation is so drawn that you give the impression that one section of the community or one particular type of property is being asked to pay more than its fair share of taxation, you are apt to breed sympathy with the man who, under those circumstances, tries to take care that he pays no more than his fair share. That is one of the dangers that are inherent in the Clause as it stands at present. I, for one, do not pretend to understand it. After all, revenue law and company law are two highly technical divisions of the law, and certainly one who does not pretend to be an authority on either would be guilty of very serious pretence if he said he could understand the Clause either as originally drawn or in its amended form.

The difficulty in which we find ourselves is that even those who are experts on these two branches of the law are in very grave doubt as to the effect of the Clause, even though it has been so plentifully amended. The result is that grave doubt and uncertainty are created by the method that is adopted of dealing with tax evasion. Instead of dealing with it on the broad principle of prohibiting tax evasion, the Legislature is attempting to define the cases which are and which are not evasion, and once you start that, you will always find that a very large number of cases that were thought to be evasion, when the real facts of the case are inquired into, are not. You will also find what is equally important from the point of view of the State and of the Revenue, that a great many of the cases which you have left untouched, and to which you have given a certain amount of sanctity as cases where there is no evasion, are, in fact, evasions which are more guilty than a great many of the transactions which you are trying to put down. Once you get into the realm of narrow definition of an Act of Parliament transactions of that description, you are getting into a land which is bristling with danger.

I should like to make, at this late time, an appeal to the Chancellor of the Exchequer and to the Attorney-General to try to get away from this miasma of definition. Let the Chancellor of the Exchequer take his courage in both bands and scrap the Clause as it stands, and start anew with a new idea and an idea to deal with the matter on broad lines. Why should it be difficult to deal with it on broad lines? If you take the history of our criminal law, in regard to which to-day there is probably a greater amount of certainty than in any other system of criminal law in the whole world, it has not grown up by any attempt to define by Statute that which is and that which is not crime. Nobody has thought of putting into a Statute a certain set of circumstances, and saying that in those circumstances a man must be presumed to have obtained money by false pretences, and that in another set of circumstances he must be presumed not to have obtained money by false pretences. No one has pretended to put that into a Statute. If you had done so, the criminal law, instead of being an absolute certainty, would be in absolute chaos. Our criminal law has grown up by the application of general principles to the facts of cases as the cases have arisen. The result is, that you have to-day the degree of certainty which I have mentioned.

Why cannot we try something of that kind in connection with Revenue legislation? Why should it not be possible to enact broadly, that transfers and transactions which are devised or designed to evade the taxation which Parliament has decreed should be void? Why should we not make it an offence on the part of anybody to take part in carrying out a transaction, or in attempting to carry out a transaction, which is devised or designed to evade the taxation which Parliament has laid down? You may say, "Oh, that is difficult." Well, the Courts have shown in the case of the criminal law that they are capable of making a distinction in such matters. After all, you are applying the law. You are applying principles to particular facts as they arise. When you do that you have all the circumstances before you. You are not dealing, as you are dealing in this Clause, with wholly artificial standards. If you are applying principles to ascertain facts, you are dealing not with artificial standards but with real circumstances, and with deeds which have actually transpired. Why should it not be possible in those circumstances to build up a prevention of tax evasion which would be certain? I think that you would do something very much more than that. You would stop those people whose sole design is to evade the Revenue laws—to evade their own share of taxation, and to put upon others more than their share. You would go a great deal to prevent those people from going to their solicitors to try to get them to think out for them schemes of tax evasion. I am certain that some of the worst of the tax-evaders in this country—and there are some extremely bad cases of tax evasion—are people who have the most terrible fear even of the shadow of the criminal law. If you once got a prohibition of that kind on to the Statute Book and if you once made it clear that the Courts would have the right to revise transactions which were of the nature of tax evasion, you would do far more to prevent it, and, at the same time, you would avoid the great difficulty which you are in to-day by reason of this method of definition.

If this Clause passes in its present amended form, the business man, and even the most expert lawyer, will be in a position of great difficulty to know whether a transaction is or is not within the law. The effect of that will be to stifle legitimate business, while, at the same time, it will also have the effect of putting those who are ingenious at once into the position of trying to be even more ingenious in order to evade the law even as we have enacted it. In those circumstances you will do no good. You will not prevent evasion by this type of Statute, but you will do a great deal to stifle legitimate business.


I intend to bear in mind the arrangement which has been made that this debate shall be brought to an end at half-past Seven o'Clock. Therefore, I do not propose to traverse the ground that has been covered so often in the course of these debates, except to express to the Chancellor of the Exchequer and to those sitting by him my appreciation of the way in which they have accepted certain of the Amendments which my hon. Friends and I put upon the Paper with a view to dealing with some of the flaws of this Bill. There has been a good deal of reference in the course of this debate to those whom it is hoped to get within the net of the Inland Revenue by means of this Clause. In the course of these discussions and by reason of the fact that this Clause is based upon a Financial Resolution, it is important that the Committee should bear in mind that the Clause is a charging Clause and is imposing a tax where hitherto no tax has existed. It behoves the Committee to scrutinise with the utmost vigilance every attempt, except in the plainest and most explicit terms, to impose fresh taxation upon the already overburdened taxpayer.

A good many references have been made to evasion. It is important tat this Committee should bear in mind what is the converse of evasion. It is invasion, the invasion of the rights and legitimate interests of the ordinary taxpayer and the man-in-the-street by the executive and the authorities of the Inland Revenue. It is the function of this Committee to stand between the Government executive and the Revenue on the one hand and the taxpaying public on the other in this as in all other tax matters. Complaint is made, no doubt legitimately, that taxpayers have taken advantage of the rights which the law permits and have so arranged their affairs in certain instances—just this is the complaint of the Chancellor of the Exchequer—as to minimise liability. In other words, they have taken advantage of the letter of the law. Has the Chancellor of the Exchequer considered the cases where, against the justice and equity of the case, the Inland Revenue have taken advantage of the strict letter of the law? There is growing up in this country—and let there be no doubt or dispute about it—a feeling of profound antagonism to the Inland Revenue. It is not a feeling against any officials, because they discharge their duties with diligence and courtesy, but against the spirit by which they are animated at the instance of this Government or the Government of whatever party they have to serve. It is important that that feeling in the community should be completely recognised. There is a most striking instance, which is to be the subject of debate in this House in the course of the next few days, where the Inland Revenue, contrary, as I believe, to the intentions of Parliament and to the understanding of those members of the Government responsible for the Treasury, contrary to the understanding of what should have taken place and contrary to the understanding by the Courts of what was intended to be the result of legislation, where, as my hon. Friend the Member for Leith (Mr. E. Brown) pointed out, grants made to local authorities for purposes of unemployment were held to hear Income Tax by a strict interpretation——

The CHAIRMAN (Mr. Robert Young)

This matter does not refer to the Bill which is now before the Committee.


I am sorry, Mr. Young, that you should feel that I have been Jed to transgress. I will not pursue the matter any further. The drafting of the Clause is such that, in my judgment, the 2,000 cases or thereabouts which are already referred to in the textbooks on Death Duties will lagely be increased. There has seldom, in my experience, been a Bill more likely to give rise to difficulties and to a greater number of cases being brought before the courts. I suspect that the Government have not really faced up to the problems which confront them under the provisions of this Clause. I should like to put a few questions to the Government. I ask whether these questions have been considered? I will not ask for an answer to them to-night. Is it English property always which is deemed to pass on the death or only if the company is resident in England? What is the position if the deceased dies domiciled abroad and the company is resident abroad? Is the sum exempt from duty or not? If a company is resident in England and the deceased has been domiciled abroad, what is to happen? Does the sum pass in England? A private company incor- porated in England, trading in India, buys property in India from a native by means of an offending transaction. The native dies within three years. Does the company pay Estate Duty on the death of the Indian native in India or not?

7.0 p.m.

These are some of the questions. They are not theoretical questions. They are practical questions. They are questions with which many lawyers and business men have to deal every day of the week, and with which the able civil servants and commissioners will have to deal every day in the week. They are cases with which the courts of justice of the country will have to deal, far more than they should be called upon to do and far more than they would have been called upon to do had this Clause been considered and drafted more carefully. I also wish to ask the Chancellor of the Exchequer whether he has visualised what the practical effect of this Clause in ordinary every day commercial life is going to be? I will put only three short points, all arising in the same way. I take the balance sheet of a company. No man knows whether it is or is not an offending company, because it may depend upon circumstances entirely outside the control of that company. How is the auditor to comply with his mandatory obligations under the Companies Acts? How is he to comply with his duty set forth in precise and definite terms in the Companies Acts, of stating in the company's balance sheet what are the liabilities of the company? He does not know. He cannot know. Even if it is an offending transaction, he cannot tell the value of the property which is going to pass, because the value is not going to be ascertained until some future date on the death of the transferor. No one knows what the liability will be, and the result is that one of the great rights of the public of being able to pay a shilling at Somerset House, and inspect the balance sheet of the company, a great safeguard contained in the Companies Act, will very largely disappear.


Public companies.


I mean public. You have a large number of public companies concerned under this Clause. I was saying that those facts cannot be known at the time. It is not known when the man is alive, but is known only after he is dead. Take next the case of a company which wants credit, and takes a balance sheet to the bank certified by its auditors. The auditors may make a proviso saying "There is or may be a liability resting on the company under Section 29 of the Finance Act of 1930. We do not know what it may be or when it will arise. The bank will at once say that they cannot advance money or give credit because they cannot rely on this balance sheet as, although the balance sheet shows the ordinary trading position, there may be this debt, due to the Crown, which ranks in front of other debts. That will be a grave interference with the ordinary conduct and commerce of every-day life, and the facilities of credit will, in my deliberate judgment, be dangerously impaired by the provisions contained in this Clause. I take my third and last case, which is that of a company going to be wound up. The liquidator is under an obligation, before making any distribution of assets of a company which is in course of being wound up, to discharge its liabilities. I assume, as happens to most companies which are wound up, that the company makes a loss, so that every payment made by the company may give rise to a claim under Section 29. The liquidator will have to wait for three years before he can distribute any of the assets of that company, because not for three years will he know whether or not there is a debt due to the Crown under this Clause, or know what are the assets he has available to distribute. It is for these practical business reasons, which are familiar to every man engaged in business in the City of London, that I am forced to go into the Lobby against the Government on this Clause.


I desire, in the first place, to express my own feeling that the task which the draftsman of this Section undertook was almost an impossible task. We have been engaged for many weary hours in endeavouring to stop up a gap in the existing law, which all three parties in the House desire to see stopped up, but the material with which we are endeavouring to stop up the gap is a material which lacks logic in its whole composition. We have adopted and are adopting under this Clause a method of rule and thumb which is likely, in my judgment, to cause con- siderable difficulties, and is at the same time undoubtedly liable to point out to those people, who really do desire to avoid proper payment of Estate Duties, methods by which this further piece of legislation may itself be evaded. There are not wanting a number of us in this House who have watched the formation of this piece of legislation, who already see methods by which, if we chose to make use of that knowledge and give that advice to other people, we could give them hints as to the way in which this legislation can be evaded.

This Clause is fundamentally unsound from its root upwards. It is based entirely on the theory that, first of all, with regard to land and land alone, every company which is brought into existence for the purpose of taking over landed estates, in country districts particularly, is brought into existence for the purpose of evading taxation in one form or another, whereas in my little experience of these matters, so far as I have been able to test them, those companies are very largely brought into existence in order to grapple with the kind of attack so often made on those who have to do with agriculture that they are not putting their house in order, and bringing their methods and systems up to date. The root of this matter is something which is not touched at all by this Clause. What has happened has been this: In times past this House and Parliament generally has thought it wise to promote the principle of limited liability companies. We have promoted that system and that notion, which is after all an invention of the English people, and have allowed it to go to such a point that now you have companies which are companies in form and nothing else but form, and we are finding that this principle, which we introduced for the purpose of helping the trade and industry of the country by encouraging people under the shelter of limited liability, is now being turned against the State with regard to Income Tax.

In the Finance Act of 1922, and again in the Finance Act of 1927, this House attempted to grapple with evasions of Income Tax which had been carried through by reason of the extravagant way in which we had permitted these limited liability companies in name only to operate. Now we are beginning another exception upon limited liability law. That is what this Clause is. I agree most wholeheartedly with the observations made by the hon. and gallant Member for North-East Bethnal Green (Major Nathan), who pointed out the difficulties to which this Clause may give rise in the case of those who have to deal with limited liability companies. That is the real problem which wants to be dealt with. We have permitted limited liability companies of a kind which, although they have the word "limited" after their name, are weapons very often for tax evasion of one sort or another, and very often cloaks or screens of which the less said the better.

The real issue, which I invite the Government to consider in another Finance Bill, is whether the right method of dealing with the question of tax evasion is not to see whether we cannot attack them in some plain and simple form, as suggested by my hon. and learned Friend below the Gangway, rather than by building up exception after exception with all sorts of technical difficulties, trying to express that which we all want to do but which is so difficult to express when you try to put it on paper, and so difficult to make watertight when you try to stop the gap. If this discussion has done nothing more than indicate the possibilities of looking to see whether our limited liability laws have not now got to such a point that they need some more effective control and restriction in the formation of companies, then the considerable time this Committee has spent on this Clause will not have been spent in vain.

I will give one illustration on this matter, which came to my notice within the last few weeks, to indicate the sort of thing that is a possibility and how easily people can form companies and arrange finance that has a bad effect upon Income Tax and other Revenue returns and a bad effect upon the ordinary citizen who desires to pay his fair share of tax. It is the case of a company registered with a share capital of £100, total number of shares issued five, of £1 each, total capital called up on this company, which has been in existence for seven years, 1s. for each share, actually paid on each share nil. The whole of that, too, is under the control of a gentleman who does not even figure as one of the directors or managers of the company. That is a problem which really wants to be attacked. While those of us possessing some acquaintance with the subject have been pleased to give such assistance as we could in attempting to carry out what the Government have been seeking to carry out by this Measure, speaking for myself, I cannot help feeling that the time given to this subject might perfectly well have been given to dealing with one of the many others of our national problems and would have achieved much better results. This Clause is not likely to produce much in revenue, and I cannot help feeling that it is not going to achieve the object for which it is designed, and that the whole method here is not one which is likely to prove useful in future.


We ought not to be asked to accept this Clause in its present form. I will briefly give the reasons why I say that. First of all it is built on artificialities. Artificiality always lends itself to evasion. Anybody giving his mind to it can drive a carriage-and-pair through any part of this Clause. The next reason why we ought not to be asked to accept it is this: I do not want to be offensive, but everybody will agree that, in its original form, it was very ill thought out. If the Government had offered a prize of £50 for the best-drawn Clause to achieve the object expressed in the marginal note, they would have been supplied with a great many better Clauses. That would not matter if even its present form had shown any evidence of considered judgment, and if even now we could say that it was well thought out. The Clause in truth is in a state of fluidity now. We do not know what form it will take when it comes to the Report stage.

I only want to indicate two or three matters which, I think everybody will agree, are of great importance, and upon which the final view of the Government has not yet been expressed. Let us take this proviso introduced by the Government about the method of assessing the value of the property, whether the date of transfer or the date of death. At any rate they have promised to remove that, but the real trouble about that is, as I have already pointed out, that at present, drawn in the form in which we are asked to pass it, it covers the case of a land company—and most of the companies dealing with land are those which many years ago received, in an objectionable transaction, land of some trifling value and sold it many years ago for a small sum, and now in the hands of the purchasers that land has become something of great value. As I was saying, there must be a tax on the present value of the subject matter of the transfer. When I pointed that out to the Parliamentary Secretary he at once said, "We do not intend any such thing." If that is the fact I hope we are going to change it.

In the following Clause the right hon. Gentleman will see a very good model of what is wanted, the proviso on page 28, which deals with life assets. There you have the way it should be done. You thought of it in connection with Clause 30; why did nobody think of it in connection with Clause 29? Land sold 20 years ago for £100, and coal has been found in it; it is worth many thousands to-day. The Clause that we are being asked to add to the Bill would perpetrate this immense injustice of making the private company liable to pay duty on that greatly increased value of land that they have not heard of or seen for years and years. We ought not to be asked to add to the Bill a Clause which contains injustices of this sort. Then you come to another of the considered Amendments, and that is the addition to the list of excepted transactions: Transfer of personal chattels not yielding income. and Transfers of property made to a company to which this Part of this Act applies in the capacity of trustee, factor, agent, receiver of manager. The Attorney-General and the Chancellor of the Exchequer were both asked, "What do you mean by it? What transactions are they designed to cover? "Nobody knows. Nobody can give a meaning to them because they have not got a meaning. Do not think that I am making any complaint at all with regard to the very courteous way in which our criticisms have been met. Though I am finding fault, I am not finding fault with the way in which we have been met about these things, but about our being asked to add a Clause to the Bill which is admittedly in such a incomplete and unsatisfactory state. What is to be the final form of the excepted transactions in the Clause? We do not know. It is all a matter of uncertainty. Then you come to this method of calculating the income of a company. I cannot help feeling that the method adopted is one which perpetrates a real injustice. I do not think it is sound; the Attorney-General admitted that it was artificial. There is no need for artificiality, if the Government had accepted the suggestions of my right hon. Friend to substitute earnings and, if you like, a lower percentage. You could have got something which would not be artificial. Unnecessarily you are adding to the artificiality, and opening all sorts of doors to those who seek to evade the law.

Why should you have such unnecessary artificiality of that kind in a Clause which is necessarily complicated, however simple you try to make it? The position is that we really do not know what the Clause means. We do not know what form it will take, or what effect it will have in its final form. It would be so much better to let this stand over until we could get it in its final form. We are all in sympathy with its object, although we do not think it will achieve that object. We have not the least idea to which companies it is going to apply, and we ought not to pass the Clause in this hybrid state. I shall vote against it, not because I am not in sympathy with the object, but because of its undigested condition.


I feel that in spite of the fact that an agreement has been made, the fact that the general principle of this Clause has not been fully discussed really throws an obligation on this side of the Committee to register its protest against a piece of legislation which is badly designed and ill-fitted to carry out the purpose for which it is intended. It begins by being entirely wrong in principle. If you find that a gentleman has transferred property to a company and that the company pays annual benefits to him, then you attempt to find the value of his capital at death by a multiplication sum in which you multiply his income by a certain figure in order to arrive at what you say is his asset, that asset being in the possession of a company at his death. It is a wholly artificial and fictitious method of arriving at a man's asset. His income does not matter at all. You want to find the value of the asset which passes at death. This Clause provides a means for finding it which is wholly artificial and wholly unrelated to any experience whatsoever. The Clause is based on a fallacy, that if you transfer capital to a company you transfer X pounds, and if you are receiving Y pounds benefit from the company then the Y pounds benefit that you are receiving is a product of the X pounds that you transfer, and that is not true. It is not true in the case of wasting assets, where the assets may be entirely expired at the time that you are receiving an income from the company, and it is not true in the case of increasing assets which may have been increased to an enormous amount more than would repay the capital value of the income that you are receiving.

Fundamentally the Clause fails because of its principles, which are absolutely unsound. It can operate with any fairness at all only by assuming the widest possible discretion to the Treasury to pick out those cases which are tax-evading cases and those which are genuine cases. I object to increasing to such an alarming extent the discretionary powers of the Treasury, because it can do such enormous damage to private companies which are carrying on their business and operating with impartiality. I cannot do more than give the merest outline of my case, in the hope that some consideration may be given before the Report stage to some of the phantasies that we have not had explained to us in the course of this Bill. Somebody ought to explain on Report stage where patents stand. I gave a case yesterday. Where do repairing leases stand? Where does livestock stand? These are all cases of wasting assets. Then, on the other hand, take the case of mineral rights, which are discovered after transfer, and where correspondingly the value of the assets has enormously increased. The unfairness of the exclusion of royalties in computing a fixed income has not been stressed at all sufficiently. This Clause presents alarming possibilities to publishing companies, because in computing what is the income of a private publishing company, under the perfectly fantastc income computation Clause, you are to deduct the income from royalties, which may very well be, in the case of a publishing company, practically the main income that the company is going to receive.

It would be impossible to go through in detail the number of cases that I know, all perfectly bona fide and genuine cases, that will be caught by a Clause of this sort if it stands in anything like its present form. We have had no definition of what is a "personal chattel, not yielding income." I can think of some: a penny-in-the-slot machine; a fleet of omnibuses; a Linotype machine; an office safe. Those are some of the simplest that occurred to me this afternoon. Are these "income-yielding, personal fixed assets"? I ought to be blessing the Chancellor of the Exchequer for this Bill. It it going to produce endless work for the Bar in litigation to decide what cases are and what are not within the ambit of the Clause. We know that certain kinds of transfers of property are exempted from the operation of the Clause. The simplest forms are bona fide sales—and when a sale is bona fide and when it is not, passes the wit of man to know. Exchanges find no place in the Bill. What becomes of hire purchase agreements? What becomes of a private company which has a hire purchase agreement with a man and the man dies just after he has made the last payment of hire-purchase rent? What is going to happen to

the asset in that case? That is not a purchase. That is also the case with some other transactions not covered by the Bill.

See how it affects people in the humblest walks of life. A greengrocer owns a farm, and he has been accustomed to supply his greengrocer's shop from his farm. He wants to set his son up in business and so he makes him a present of the shop and then the son goes on dealing with the man. If the amount that the son pays to his father for the produce exceeds 33 per cent. and the father dies, the unfortunate son, instead of finding that he had a wedding present, will find that he has got to pay Death Duties on the death of his father. That is the kind of anomaly. I have had to leave out the details owing to the hasty way in which I am speaking. That case is absolutely watertight and so are many similar cases that I could instance. The whole Clause bristles with absurdities. It is conceived in ineptitude and brought forward in malice, and I hope that the Committee will reject it.

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

The Committee divided: Ayes, 272; Noes, 152.

Division No. 401.] AYES. [7.28 p.m.
Adamson, Rt. Hon. W. (Fife, West) Cameron, A. G. Gossling, A. G.
Adamson, W. M. (Staff., Cannock) Cape, Thomas Gould, F.
Addison, Rt. Hon. Dr. Christopher Charieton, H. C. Graham, D. M. (Lanark, Hamilton)
Aitchison, Rt. Hon. Craigie M. Chater, Daniel Graham, Rt. Hon. Wm. (Edin., Cent.)
Alexander, Rt. Hon. A. V. (Hillsbro') Church, Major A. G. Gray, Milner
Alpass, J. H. Clarke, J. S. Grenfell, D. R. (Glamorgan)
Ammon, Charles George Cluse, W. S. Griffiths, T. (Monmouth, Pontypool)
Arnott, John Clynes, Rt. Hon. John R. Groves, Thomas E.
Aske, Sir Robert Cocks, Frederick Seymour Grundy, Thomas W.
Attlee, Clement Richard Collins, Sir Godfrey (Greenock) Hall, F. (York, W. R., Normanton)
Ayles, Walter Compton, Joseph Hall, G. H. (Merthyr Tydvil)
Baker, John (Wolverhampton, Bilston) Cove, William G. Hall, Capt. W. P. (Portsmouth, C.)
Baldwin, Oliver (Dudley) Cowan, D. M. Hamilton, Mary Agnes (Blackburn)
Barr, James Daggar, George Hardie, George D.
Beckett, John (Camberwell, Peckham) Dallas, George Harris, Percy A.
Bellamy, Albert Dalton, Hugh Hartshorn, Rt. Hon. Vernon
Benn, Rt. Hon. Wedgwood Davies, E. C. (Montgomery) Hastings, Dr. Somerville
Bennett, Capt. Sir E. N. (Cardiff C.) Day, Harry Haycock, A. W.
Bennett, William (Battersea, South) Dickson, T. Hayes, John Henry
Benson, G. Dukes, C. Henderson, Rt. Hon. A. (Burnley)
Bentham, Dr. Ethel Duncan, Charles Henderson, Arthur, Junr. (Cardiff, S.)
Bevan, Aneurin (Ebbw Vale) Ede, James Chuter Henderson, Thomas (Glasgow)
Bilndell, James Edmunds, J. E. Henderson, W. W. (Middx., Enfield)
Bondfield, Rt. Hon. Margaret Edwards, C. (Monmouth, Bedweilty) Herriotts, J.
Bowen, J. W. Edwards, E. (Morpeth) Hirst, G. H. (York W. R. Wentworth)
Bowerman, Rt. Hon. Charles W. Egan, W. H. Hirst, W. (Bradford, South)
Brockway, A. Fenner Elmley, Viscount Hoffman, P. C.
Brooke, W. Evans, Capt. Ernest (Welsh Univer.) Horrabin, J. F.
Brothers, M. Foot, Isaac Hudson, James H. (Huddersfield)
Brown, C. W. E. (Notts, Mansfield) Gardner, B. W. (West Ham, Upton) Hunter, Dr. Joseph
Brown, Ernest (Leith) Gardner, J. P. (Hammersmith, N.) Hutchison, Maj.-Gen. Sir R.
Brown, Rt. Hon. J. (South Ayrshire) George, Megan Lloyd (Anglesea) Isaacs, George
Brown, W. J. (Wolverhampton, West) Gibbins, Joseph Jenkins, W. (Glamorgan, Neath)
Buchanan, G. Gibson, H. M. (Lancs, Mossley) John, William (Rhondda, West)
Burgess, F. G. Gill, T. H. Johnston, Thomas
Buxton, C. R. (Yorks. W. R. Elland) Gillett, George M. Jones, F. Llewellyn- (Flint)
Caine, Derwent Hall- Glassey, A. E. Jones, Henry Haydn (Merioneth)
Jones, J. J. (West Ham, Silvertown) Milner, Major J. Sinkinson, George
Jones, Rt. Hon Leif (Camborne) Montague, Frederick Sitch, Charles H.
Jones, Morgan (Caerphilly) Morgan, Dr. H. B. Smith, Ben (Bermondsey, Rotherhithe)
Jones, T. I. Mardy (Pontypridd) Morley, Ralph Smith, Frank (Nuneaton)
Jowett, Rt. Hon. F. W. Morris, Rhys Hopkins Smith, H. B. Lees (Keighley)
Jowitt, Rt. Hon. Sir W. A. Morris-Jones, Dr. J. H. (Denbigh) Smith, Rennie (Penistone)
Kelly, W. T. Morrison Herbert (Hackney, South) Smith, Tom (Pontefract)
Kennedy, Thomas Morrison, Robert C. (Tottenham, N.) Smith, W. R. (Norwich)
Kenworthy, Lt.-Com. Hon. Joseph M. Mort, D. L. Snell, Harry
Kinley, J. Moses, J. J. H. Snowden, Rt. Hon. Philip
Kirkwood, D. Mosley, Lady C. (Stoke-on-Trent) Sorensen, R.
Lang, Gordon Mosley, Sir Oswald (Smethwick) Stamford, Thomas W.
Lansbury, Rt. Hon. George Muff, G. Stephen, Campbell
Lathan, G. Muggeridge, H. T. Stewart, J. (St. Rollox)
Law, Albert (Bolton) Murnin, Hugh Strachey, E. J. St. Loe
Law, A. (Rosendale) Naylor, T. E. Sullivan, J.
Lawrence, Susan Newman, Sir R. H. S. D. L. (Exeter) Sutton, J. E.
Lawrie, Hugh Hartley (Stalybridge) Owen, Major G. (Carnarvon) Thomas, Rt. Hon. J. H. (Derby)
Lawson, John James Palin, John Henry Thurtle, Ernest
Lawther, W. (Barnard Castle) Palmer, E. T. Tinker, John Joseph
Leach, W. Perry, S. F. Tout, W. J.
Lee, Frank (Derby, N. E.) Pethick-Lawrence, F. W. Townend, A. E.
Lee, Jennie (Lanark, Northern) Phillips, Dr. Marion Trevelyan, Rt. Hon. Sir Charles
Lees, J. Pole, Major D. G. Vaughan, D. J.
Lewis, T. (Southampton) Potts, John S. Viant, S. P.
Lloyd, C. Ellis Price, M. P. Walkden, A. G.
Logan, David Gilbert Quibell, D. J. K. Walker, J.
Longbottom, A. W. Ramsay, T. B. Wilson Wallace, H. W.
Longden, F. Raynes, W. R. Wallhead, Richard C.
Lowth, Thomas Richards, R. Watkins, F. C.
Lunn, William Richardson, R. (Houghton-le-Spring) Watson, W. M. (Dunfermline)
Macdonald, Gordon (Ince) Riley, Ben (Dewsbury) Watts-Morgan, Lt.-Col. D. (Rhondda)
MacDonald, Rt. Hon. J. R. (Seaham) Ritson, J. Wedgwood, Rt. Hon. Josiah
MacDonald, Malcolm (Bassetlaw) Roberts, Rt. Hon. F. O. (W. Bromwich) Wellock, Wilfred
McElwee, A. Romeril, H. G. Welsh, James (Paisley)
McEntee, V. L. Rosbotham, D. S. T. Welsh, James C. (Coatbridge)
McGovern, J. (Glasgow, Shettleston) Rowson, Guy West, F. R.
McKinlay, A. Russell, Richard John (Eddisbury) Westwood, Joseph
MacLaren, Andrew Salter, Dr. Alfred White, H. G.
Maclean, Sir Donald (Cornwall, N.) Samuel Rt. Hon. Sir H. (Darwen) Whiteley, Wilfrid (Birm., Ladywood)
Maclean, Neil (Glasgow, Govan) Sanders, W. S. Whiteley, William (Blaydon)
McShane, John James Sandham, E. Williams, David (Swansea, East)
Malone, C. L' Estrange (N'thampton) Sawyer, G. F. Williams, Dr. J. H. (Llanelly)
Mansfield, W. Scrymgeour, E. Wilson, C. H. (Sheffield, Attercliffe)
March, S. Scurr, John Wilson, J. (Oldham)
Marcus, M. Sexton, James Wilson, R. J. (Jarrow)
Markham, S. F. Shaw, Rt. Hon. Thomas (Preston) Winterton, G. E. (Leicester, Loughb'gh)
Marley, J. Sherwood, G. H. Wise, E. F.
Marshall, Fred Shield, George William Wood, Major McKenzie (Banff)
Mathers, George Shiels, Dr. Drummond Wright, W. (Rutherglen)
Matters, L. W. Shillaker, J. F. Young, R. S. (Islington, North)
Maxton, James Shinwell, E.
Messer, Fred Short, Alfred (Wednesbury) TELLERS FOR THE AYES.
Millar, J. D. Simmons, C. J. Mr. Allen Parkinson and Mr. Paling
Mills, J. E. Sinclair, Sir A. (Caithness)
Acland-Troyte, Lieut.-Colonel Burgin, Dr. E. L. Dugdale, Capt. T. L.
Albery, Irving James Cadogan, Major Hon. Edward Eden, Captain Anthony
Allen, Sir J. Sandeman (Liverp'l., W.) Cayzer, Sir C. (Chester, City) Edmondson, Major A. J.
Amery, Rt. Hon. Leopold C. M. S. Cayzer, Maj. Sir Herbt. R. (Prtsmth, S.) Elliot, Major Walter E.
Ashley, Lt.-Col. Rt. Hon. Wilfrid W. Chadwick, Capt. Sir Robert Burton England, Colonel A.
Astor, Viscountess Chamberlain, Rt. Hn. Sir J. A. (Birm., W.) Erskine, Lord (Somerset, Weston-s.-M.)
Atholl, Duchess of Chamberlain, Rt. Hon. N. (Edgbaston) Everard, W. Lindsay
Atkinson, C. Christie, J. A. Falle, Sir Bertram G.
Balfour, George (Hampstead) Churchill, Rt. Hon. Winston Spencer Fermoy, Lord
Balniel, Lord Colfox, Major William Philip Fielden, E. B.
Beaumont, M. W. Colman, N. C. D. Ford, Sir P. J.
Berry, Sir George Colville, Major D. J. Forestler-Walker, Sir L.
Betterton, Sir Henry B. Courthope, Colonel Sir G. L. Fremantle, Lieut.-Colonel Francis E.
Bevan, S. J. (Holborn) Cranborne, Viscount Galbraith, J. F. W.
Birchall, Major Sir John Dearman Crichton-Stuart, Lord C. Ganzoni, Sir John
Bird, Ernest Roy Crookshank, Capt. H. C. Glyn, Major R. G. C.
Bourne, Captain Robert Croft Croom-Johnson, R. P. Gower, Sir Robert
Bowater, Col. Sir T. Vansittart Culverwell, C. T. (Bristol, West) Graham, Fergus (Cumberland, N.)
Bowyer, Captain Sir George E. W. Cunliffe-Lister, Rt. Hon. Sir Philip Grattan-Doyle, Sir N.
Bracken, B. Dalkeith, Earl of Greaves-Lord, Sir Walter
Braithwaite, Major A. N. Dalrymple-White, Lt.-Col. Sir Godfrey Greene, W. P. Crawford
Brass, Captain Sir William Davies, Dr. Vernon Guinness, Rt. Hon. Walter E.
Briscoe, Richard George Davies, Maj. Geo. F. (Somerset, Yeovil) Hacking, Rt. Hon. Douglas H.
Brown, Col. D. C. (N'th'l'd., Hexham) Davison, Sir W. H. (Kensington, S.) Hall, Lieut.-Col. Sir F. (Dulwich)
Buchan, John Dixon, Captain Rt. Hon. Herbert Hanbury, C.
Bullock, Captain Malcolm Duckworth, G. A. V. Harvey, Major S. E. (Devon, Totnes)
Haslam, Henry C. O'Neill, Sir H. Steel-Maitland, Rt. Hon. Sir Arthur
Henderson, Capt. R. R. (Oxf'd, Henley) Ormsby-Gore, Rt. Hon. William Stuart, Hon. J. (Moray and Nairn)
Hennessy, Major Sir G. R. J. Peake, Capt. Osbert Sueter, Rear-Admiral M. F.
Herbert, Sir Dennis (Hertford) Percy, Lord Eustace (Hastings) Thomas, Major L. B. (King's Norton)
Hills, Major Rt. Hon. John Waller Pownall, Sir Assheton Thomson, Sir F.
Hoare, Lt.-Col. Rt. Hon. Sir S. J. G. Ramsbotham, H. Titchfield, Major the Marquess of
Hurd, Percy A. Rawson, Sir Cooper Tryon, Rt. Hon. George Clement
Jones, Sir G. W. H. (Stoke New'gton) Reid, David D. (County Down) Vaughan-Morgan, Sir Kenyon
Kindersley, Major G. M. Remer, John R. Wallace, Capt. D. E. (Hornsey)
King, Commodore Rt. Hon. Henry D. Rentoul, Sir Gervais S. Ward, Lieut.-Col. Sir A. Lambert
Lamb, Sir J. Q. Reynolds, Col. Sir James Wardlaw-Milne, J. S.
Lambert, Rt. Hon. George (S. Molton) Roberts, Sir Samuel (Ecclesall) Warrender, Sir Victor
Lane Fox, Col. Rt. Hon. George R. Ross, Major Ronald D. Waterhouse, Captain Charles
Law, Sir Alfred (Derby, High Peak) Ruggles-Brise, Lieut.-Colonel E. A. Wayland, Sir William A.
Locker-Lampson, Rt. Hon. Godfrey Russell, Alexander West (Tynemouth) Wilson, G. H. A. (Cambridge U.)
Locker-Lampson, Com. O. (Handsw'th) Salmon, Major I. Windsor-Clive, Lieut.-Colonel George
Lymington, Viscount Samuel, A. M. (Surrey, Farnham) Winterton, Rt. Hon. Earl
Macdonald, Capt. P. D. (I. of W.) Sandeman, Sir N. Stewart Withers, Sir John James
Merriman, Sir F. Boyd Sassoon, Rt. Hon. Sir Philip A. G. D. Wolmer, Rt. Hon. Viscount
Monsell, Eyres, Com. Rt. Hon. Sir B. Smith, Louis W. (Sheffield, Hallam) Womersley, W. J.
Morrison, W. S. (Glos., Cirencester) Smith, R. W. (Aberd'n & Kinc'dine, C.) Worthington-Evans, Rt. Hon. Sir L.
Nathan, Major H. L. Smith-Carington, Neville W. Young, Rt. Hon. Sir Hilton
Nelson, Sir Frank Smithers, Waldron
Newton, Sir D. G. C. (Cambridge) Somerville, D. G. (Willesden, East) TELLERS FOR THE NOES.—
Nicholson, Col. Rt. Hn. W. G. (Ptrsf'ld) Spender-Clay, Colonel H. Captain Margesson and Sir George Penny.
O'Connor, T. J. Stanley, Lord (Fylde)

I beg to, move, "That the Chairman do report Progress, and ask leave to sit again."

It would be convenient at this stage, when we have reached the business which we prescribed for this afternoon, that I should invite the Chancellor of the Exchequer to state on behalf of the Government what he has in mind for our labours this evening and also possibly for tomorrow. It will be for the convenience of everyone to know what the outlook of the Government is at this moment. I reserve any further remarks that I have to make, in pursuance of the Motion that I have made, until I have heard the Chancellor of the Exchequer.


I thank the Opposition for having so faithfully kept to the arrangement that was made with respect to our business for this afternoon. With regard to the future, I think the next three or four Clauses will not raise matters of such intensity as the Clause with which we have been dealing. The next Clause deals with Estate Duty where life interest is transferred to a private company, and Clause 31 deals with the charge of duty and powers of recovery. I do not think those Clauses are very controversial. Clause 32 raises the question of the valuation of shares in private companies, of which we have heard a good deal in the discussion of Clause 29. This is the ninth day of the Committee stage of the Bill. I should be surprised to hear that any Finance Bill for the last 20 years has taken nine days in Committee. I suggest that we should try to get to the end of Clause 33 to-night. I have no desire to have an all-night sitting, but I am very much afraid that unless we make rapid progress—I mean reasonably rapid progress—before to-morrow evening it will be necessary, however disagreeable, to sit very late, and possibly very early.


And late again.


That is all that I can say at the moment. I hope that the Opposition will meet me and enable us to get the Clauses which I have mentioned.


The right hon. Gentleman is asking what is physically impossible when he suggests that we should dispose of Clauses down to 32 and 33 in the bare four hours that remain before the House would be sitting at a time that would cause considerable inconvenience to a number of hon. Members. Of course, more progress would be made if we sat until 2 or 3 o'clock, as has often been done in former times, but that leads to great inconvenience in regard to Members getting away from the House after the public conveyances have ceased to run or ply for hire. In consequence, it is often found that once we have passed the witching hour of 12.30, things tend to resolve themselves into trials of physical endurance. It seems to me that the right hon. Gentleman might be asking not more than can be accomplished reasonably to suggest that we should dispose of the Clauses down to Clause 33 before midnight tomorrow night. That, I think, would be a very reasonable proposal and scheme for laying out our work. We should certainly endeavour to compress our criticism into that space of time.

That would enable us next week to address ourselves to the very important Clause 12, which has now been put down in its new form. The new form removes a good many of the objections that were entertained to that Clause, and I believe that it is now founded on a large measure of agreement with some of the great life insurance companies. That would seem to be a Clause which might well form the subject of our discussion on whatever day is chosen for the resumption of the Finance Bill discussions next week. After that, we have the whole range of the new Clauses, to which the utmost importance is attached. Some of them embody provisions on which the main shock on this Budget will be taken. I have frequently endeavoured, sometimes perhaps in a controversial style but more often in a friendly manner, to suggest to the Chancellor of the Exchequer that the time has come when he ought to address himself to this problem on wider lines than hitherto. It is not a question of proceeding night after night with amicable arrangements for the conduct of business and the acceptance of Amendments, such as have been readily accepted by the Government during the debates. That is quite all right as far as it goes, but it is not really a method which is adequate for the handling of the great problems with which the right hon. Gentleman is now confronted.

It seems to me that over the week-end some efforts should be made to see whether the differences which exist on this Budget cannot be more or less resolved without the right hon. Gentleman being deprived of the power of balancing his Budget, for which undoubtedly he is bound to fight to the last, or the proceedings of the Committee being unduly protracted. We all wish to avoid such sittings. Meanwhile, the days are slipping rapidly away, and although there remains for the Opposition an enormous amount of work, which we could if necessary discharge in the examination of these proposals and in the moving of new Clauses, as well as in the final revision of the Bill with Mr. Speaker in the Chair on the Report stage, nevertheless, the sooner we come to some general understanding so that the Budget has upon it the imprint of the House of Commons as a whole, although it involves much with which we on this side do not agree, it should be possible to accelerate our discussions. I will not say more at this moment, because it may be irritating and perhaps an impediment to the course I am suggesting. But we can hold out no hope of finishing Clause 33 by to-night; even if we sat until 2 or 3 or 5 o'clock in the morning we should not succeed in doing that. The Chancellor of the Exchequer would be quite fortunate if he achieved that by 12 o'clock to-morrow night. He may do that, and it might be possible to break in on one or two of the earlier new Clauses, but certainly not on the new Clause 12. I am giving no undertaking at all; I am only indicating my position as to the time which is required.


I do not wish to be in the least unreasonable, but I really cannot agree with the suggestion of the right hon. Member for Epping (Mr. Churchill) that we should be content to get through these Clauses by 12 o'clock to-morrow night. I am not quite sure what the right hon. Gentleman meant, but my impression was that we should devote the whole of the day following to the discussion of Clause 12.


It would form the staple part of the discussion at the opening of the next day.


I do not think that Clause ought to take any time at all. It is a new Clause, and, I understand, is to be called first. It has been agreed with the life insurance societies, and ought not to take very long. If I could get that Clause and Clauses 30, 31, 32 and 33 by to-morrow night—and in making this suggestion I am conceding a great deal—I might be satisfied. Possibly the observations of the right hon. Member for Epping as to the Budget receiving the imprint of the House of Commons may be somewhat of a mystery to most hon. Members. May I interpret them by saying that what the right hon. Gentleman means by the imprint of the House of Commons is the imprint of the right hon. Gentleman himself. This Bill, as far as it has gone, has got the imprint of the House of Commons. The right hon. Gentleman has often taunted us with being a minority Government, but we certainly have not been a minority Government on these matters, because our proposals have been carried by large majorities. If the Opposition are willing to agree to the suggestion that we should get through these Clauses and also the new Clause 12 by midnight to-morrow, I would be satisfied. If not, I shall have to ask the Committee to sit very late to-morrow night.


I think that the offer of the Chancellor of the Exchequer is a very fair one. If we make the same rate of progress as we have to-day, we should finish Clause 33 by half-past seven o'clock to-morrow evening, and the rest of the evening could be devoted to the consideration of Clause 12.


The new Clause 12 was put on the Order Paper only last night, and we have never seen it until to-day. It is a long Clause. The Chancellor of the Exchequer says that it represents an agreement with the insurance companies. The right hon. Gentleman has no doubt agreed with the insurance companies, but this Committee certainly ought to be able to consider it and see how far it meets the points we raised, as well as meeting the points of insurance companies. I do not suspect that there will be many points which will take a long time to discuss; at the same time, to ask the Committee to get it through by tomorrow evening is asking too much. The right hon. Gentleman has seen the rate of progress that can be made when he and the Opposition are trying to get through a reasonable day's work in a reasonable time. We will be reasonable, but we cannot promise him that Clause to-morrow night without having read it.


The right hon. Member for St. George's (Sir L. Worthington-Evans) is quite right in referring to the rights of the Committee, but what the Committee is concerned with are points which are real and points which are not real. The fact that the views of those who are vitally interested in Clause 12, the insurance companies, have been met suggests that there is no reason for taking a long time in making other points, because I cannot conceive that hon. Members will be able to make more real points than those which have been met in the discussions with the insurance companies. The offer of the Chancellor of the Exchequer is a fair one, and I do not see why we should not get through these Clauses and Clause 12 without any trouble by tomorrow night.


I have taken a great interest in Clause 12, but I have not had time to do more than read it. I do not for a moment say that I shall not, in the main, be satisfied with the Clause, but at the moment I am not able to say whether all the points which seem to me to require attention have been met by the new Clause. I am going to suggest a method by which we may get on quickly. If it is found, and we intimate to the right hon. Gentleman tomorrow, that we are likely to want further time to consider this new Clause, I hope that he will make some arrangement to take other new Clauses first. That would give us more time to consider Clause 12.

8.0 p.m.


I do not think we can carry the matter further than where it was left by the right hon. Member for St. George's (Sir L. Worthington-Evans) and the comment which has been made by the hon. Member for Watford (Sir D. Herbert). In principle, the desire of the Chancellor of the Exchequer to obtain Clause 12 before we separate to-morrow is not necessarily unattainable, but whether it is attainable or not depends on a study of the Clause in the brief time which remains before it is debated. If it should be found that, contrary to our belief, it still contains many controversial points and that the difficulties have not been met by the discussions between the Government and the life assurance societies, it will be necessary for us to suggest to the right hon. Gentleman that one or two of the other new Clauses should be given precedence. I am not giving any pledge, but it would be premature to assume at this stage that the Clause is not in a form which would enable us to dispose of it to-morrow night.


I think the statement has been made that it is desirable that the Opposition should have a little more time in which to consider Clause 12, and it is quite true that the Clause, in its altered form, was placed on the Paper only to-day. If the Opposition find, on an examination of Clause 12 as it has been altered, that they can accept it, practically in the form in which it appears on the Paper, we might take it to-morrow, but if they find that they require a longer time in which to consider it, I am willing that we should take some of the new Clauses instead. Of course that arrangement assumes that we should get to the end of Clause 33 in a reasonable time, but in those circumstances I should be willing to fall in with that course.


In order to save any trouble, may I suggest that a "reasonable time" would be between six o'clock and seven o'clock?


There is one thing which I think the Leaders of both the Opposition and the Government ought to know in reference to this Clause. Reference has been made to this Clause as an agreed Clause, but I happen to know that already two Amendments of substance, in opposition to the views of the insurance companies, have been handed in, and those Amendments are being submitted without any desire at all to delay the proceedings.


May I ask leave to withdraw the Motion to report Progress?


The Chancellor of the Exchequer will forgive me if I remark at this stage that I and those at the Table were not informed that the new Clause put down by the Chancellor will take the place of the postponed Clause 12.

Motion, by leave, withdrawn.