§ Amendments made:
§ In page 29, line 36, leave out the word "private."
§ In page 29, line 37, after the word "company," insert the words "to which this Part of this Act applies."—[Mr. P. Snowden.]
§ Major NATHAN
I beg to move, in page 29, line 37, to leave out the word "either."
This is the first of a series of Amendments, and I think it will probably be for the convenience of the Committee, Mr. Young, if you permit me to take the substantive point, which is that paragraph (b) be left out, and then when we reach that point, naturally I shall only move the Amendment in a formal way. Throughout the discussion upon the series of Clauses of which this Clause forms part, we have based our remarks upon the assumption that the Clauses were directed at overcoming tax evasion. In this Clause there has slipped in—it almost seemed, at first sight, inadvertently—a provision which is directed at an entirely different subject matter. It is true that paragraph (a), on which there might be a good deal to say, does follow naturally in sequence upon the provisions which have already been the subject of debate, and if paragraph (b), which carries with it Subsection (2) of this Clause, were omitted, there would be a coherence in this whole series of Clauses. But as things are, it is proposed by paragraph (b), introduced in this way, to suggest an entirely new method of valuing securities upon a death, though neither the securities, the death, the person, nor the company involved may have had anything to do, however remotely, with the question of tax evasion, which is the main subject of this series of Clauses. It is, indeed, nothing less than a plain statement that, irrespective of everything which goes 2168 before it and everything which follows it, there is to be interpolated here in this Finance Bill an irrelevant provision which will revolutionise the whole method of valuing shares in companies of a certain character for the purposes of Death Duty.
The Clause is worthy of close examination. It refers to the control of a company to which the Act applies, but the Act applies to many companies in respect of which no question of tax evasion arises in any way whatever. A company is defined in Clause 33 for the purpose of this part of the Bill. In Sub-section (2) of the present Clause a definition is given of what is meant by the word "control" as it appears in Sub-section (1, b). The learned Attorney-General has throughout these difficult days and difficult Clauses brought so much perspicacity and skill to bear upon the interpretation of these Clauses, that I now ask him if he will be good enough to follow me while I go through the Subsection with a view to seeing exactly what is meant. The word "control" at the beginning of paragraph (b) is defined in Sub-section 2 and the word "company" used in the first line of paragraph (b) in Sub-section (1) is defined in Clause 33. With these two definitions in mind, I would ask the learned Attorney-General to follow with me the reading of the Sub-section for this is, as I understand it, how it would read, taking for the moment the first paragraph only of the definition of "company" in Clause 33. It says that, where on the death of any person that personby virtue of the shares which he controls has control of more than half the voting power of the company .… so constituted as not to be controlled by its shareholders or by any class thereof. …It seems to me that there has been a complete misundertanding in these Clauses and that the two definitions of "control" in Sub-section (2) as applied to Sub-section (1, b), if applied to the first paragraph (i) in Clause 33, are in complete contradiction one to the other and are impossible of reconciliation. If I am correct—I think I may say that I have not spared pains to attempt to understand the matter—in the assumption upon which we start off, that there is to be a control by virture of a shareholder, there is to be a control in a company which under the definition is not 2169 controlled by shareholding, but in some manner other than shareholding. I find that it is impossible to follow the Clause as drafted. I ask for the attention of the Attorney-General to this matter, and I am sure that he will, with his usual courtesy, be good enough to apply himself to this matter which goes to the root of the Clause as it stands. I believe that these provisions are impossible of reconciliation. I will assume for the moment that the learned Attorney-General, with so much greater ability than I possess, will be able to show how these provision scan be reconciled. I come back to my first proposition which is, that here is an entirely new suggestion as to the manner in which shares shall be valued, though neither the shares, the shareholder nor the company may have had anything at all to do with any aspect of tax evasion, nor have had any contact with any provision in any of the Clause's which we have been debating for so long. What does it propose? It proposes that the value of the shares belonging to the deceased, who, admittedly, may not be a wrongdoer, and the shares in the company which admittedly did not arise in respect of any offending transaction, is not to be ascertained under the Act of 1894, but is to be ascertained by reference to something that is entirely different, namely, the total assets of the company. In the past, for a period going back to 1894, the broad principle upon which property has been valued for the purpose of Death Duty has been the property which actually passed at the death. It is now proposed in this Clause that the property which passes at death shall be valued by reference to some entirely different property, namely, according to the value of the total assets of the company. I do not know whether the Attorney-General has been able to give much study to this Clause, because I know how preoccupied he must have been, but let me read words which will possibly amuse and amaze him. They form one of the most remarkable instances of curious drafting in any Statutes that I have come across. In Sub-section (1) these words are to be found:the principal value of those shares. … shall not be ascertained in the manner provided by. … the principal Act, but 2170 shall be ascertained by reference to the value of the total assets of the company:When you come to the "value of the total assets of the company," in Clause 33 you find that the total assets are to be valued by reference to the provisions of the principal Act, which is not to be used according to the words I have quoted. The method which is not to be used there is to be used in Clause 33. The Attorney-General will say, and say with justice, that the subject matter in the first case, namely, shares, differs from the subject matter in the second case, namely, the assets of the company as a going concern, but the measure, the yard-stick—to use the phrase which was used yesterday—is to be the same in either case. Therefore, it becomes clear that it is the subject matter which is altered.
Under the Finance Act, 1894, as amended by the Act of 1909–10, there was a perfectly well-established method of ascertaining the value of shares for Death Duty purposes. It is now proposed to take the valuation of the shares as ascertained by reference to the valuation of the whole assets, of which those shares form only a part, the idea being to attribute to a share-holding carved out of the total value of the assets that proportion of the value so ascertained as the shares bear to the value of the total assets. Let hon. Members note how injustice would be worked and how unreasonable it is. If there is a shareholder who owns 51 per cent. of the shares of a company it by no means follows that the value of his holding is 51 per cent. of the value of the total assets of the company if those assets were available for sale at the moment, and for this reason, that you have 49 per cent. of other shareholders to deal with. It may, indeed, be that your 51 per cent. has no market value at all regarded as a proportion of the shareholding attributed to the total value of the assets. The Committee ought to have a clear explanation why this, proposal, which bears no relation of any kind to the other provisions of this series of Clauses, should have been interpolated here, how the phraseology of the various parts of this Clause and of Clause 33 are reconciled, how it is attempted to justify the proposition that the value of a share-holding is to be ascertained not by reference to 2171 the value of the shares but by reference to the value of an entirety of which those shares form only a part, although the entirety may itself be sadly diminished in value by reason of the fact that the share-holding in question does not absorb the whole of that entirety.
§ Sir HENRY BETTERTON
On a point of Order. Will it be open to us—I gather that it will be, having regard to the speech of the hon. and gallant Member—to raise the whole question of the valuation of shares, which is really the main purpose of the Clause?
§ The CHAIRMAN
These six Amendments raise the question of the leaving out of Sub-section (1, a), paragraph (b) of Sub-section I, and also the leaving out of Sub-section (2). Therefore, the discussion must be rather wide.
§ Sir H. BETTERTON
The speech of the hon. and gallant Member has so fully covered the ground that I wish to do little more than to reinforce and support what he has said. This Clause is one of the most important in the Bill. It cannot be too clearly recognised that it establishes or seeks to establish an entirely fresh system of valuation from that which has hitherto prevailed. I think that it does so in a manner which would be most unfair to the holders of these particular shares, and it proposes to establish a system which the Committee ought to resist. The hon. and gallant Member has pointed out that ever since the passing of the Finance Act of 1894 there has been a perfectly clear definition, laid down in two Acts of Parliament, which states the principle on which the value should be ascertained. The Act of 1894, Section 7 (5), provides:The principal valuation of any property shall be estimated at a price which in the opinion of the commissioners such property would fetch if sold in the open market at the time of the death of the deceased.That is the perfectly well-ascertained principle which has been followed ever since that Act came into operation. The Act of 1910, Section 60 (2), which affirms, the principle, says:In estimating the principal value of any property under Sub-section (5) of Section 7 of the principal Act,from which I have just quoted,in the case of any person dying on and after the thirtieth day of April, nineteen 2172 hundred and nine, the commissioners shall fix the price of the property according to the market price at the time of the death of the deceased, and shall not make any reduction in the estimate on account of the estimate being made on the assumption that the whole property is to be placed on the market at one and the same time.Those two Acts of Parliament state quite clearly that the market price is the price which is to be applied when ascertaining the value of the shares.
That principle, important as it is, has been made more important by this very Bill, because this Bill enlarges the whole definition of the private company. Owing to the enlarged definition and scope of the words "private company" you may get this situation: Under the Bill the shares are to be valued by the commissioners—shares which at the same time are being quoted on the Stock Exchange. You may have the anomaly of the commissioners arbitrarily deciding that the shares are worth so much, when in fact the quotation on the Stock Exchange may be different. The result is really to put into the hands of the commissioners a power which neither they nor anyone else ought to have. The true and only test in valuing these shares is the market price in the open market. To value the shares by reference to the total assets of the company really is applying a test which need not have any relation at all to the value of the shares which a man holds in a private company when he dies. These words have been construed more than once judicially. They were construed by the present Lord Chancellor, then Mr. Justice Sankey, who said:It does not follow at all that the price which he obtains under such circumstances is the price which it would fetch if sold in the open market. What is meant by these words is the best possible price that is obtainable, and that is largely if not entirely a question of fact.That is the true test to apply. I suggest to the Committee that to seek at this time to discriminate and pick out one particular asset and to say that this shall be subject to a capricious and arbitrary valuation which is not applied to any other property, is not only unfair, but is contrary to the principle and the spirit which ought to guide the commissioners.
§ The ATTORNEY - GENERAL (Sir William Jowitt)
I have listened with interest to the two speeches that have 2173 just been delivered. I must confess to the Mover of the Amendment that this is the first time I have heard anyone suggest that in this group of Clauses there is anything which by any stretch of the imagination can be called amusing. It is quite true that Clause 32 does cover ground that is a good deal wider than that covered by the previous Clause. It is desirable that the Committee should understand the difficulties that the Clause is designed to meet. It is true, as has been said, that the law which governs the ascertainment of value of assets for the purpose of Estate Duty is that contained in Sub-section (5) of Section 7 of the Act of 1894, that is to say, the commissioners have to assess the value of the property on the basis of what it would fetch if sold in the open market at the time of the death of the deceased. If we are dealing with a share in a public company that share is quoted on some recognised Stock Exchange and the valuation is easy enough. One of the Amendments which my right hon. Friend the Chancellor of the Exchequer has on the Paper is to except from the operation of this Clause any shares which within a recent period have been quoted or have been the subject of dealings on a recognised Stock Exchange. My right hon. Friend takes them out altogether.
But here you are dealing with what is obviously a one-man company. You have to value the shares in that company. Very often you find that the company has articles which contain some restriction on the right to transfer shares. Think how difficult it is to value shares in such a private company. The shares have never been quoted on a Stock Exchange and have never been dealt in, and perhaps there is the restriction on the right of transfer. You may have the shares held and held only by the deceased and members of his family. How are you going to set about ascertaining what those shares would fetch if sold in the open market? That is the problem. It is a very difficult problem and the commissioners for many years past have been faced with a very real dilemma. On the one hand they have always contended that to ascertain the value of the shares you can only look to the value of the assets of the company and have regard to the extent to which the shareholder is entitled to share in the assets of the 2174 company, and that there is no other basis. On the other hand that has always been contested, and it has been generally argued, on behalf of the deceased person's estate, that you must have regard to the dividends paid on the shares, and that you ought to value on a dividend basis. That has led to very great anomalies.
The Committee, or anyone who has had to try to value these shares, will realise at once what anomalies may arise. Take two companies in exactly similar circumstances. The policy of the one has been to pay as large dividends as it could; the policy of the other has been to put as large a sum of money to reserve as possible and to pay very small dividends. You get this anomalous result: In the latter case where the dividends have been small the value put upon the shares on the dividend basis will be a lower value, in spite of the fact that they have put money to the reserve, than that in the case of the corresponding company which has paid large dividends and has no reserve at all. There are not a few companies where those in control have deliberately kept down the rate of dividend—the one-man company, though I am not suggesting the smallest impropriety—by seeing that the remuneration paid to directors and governing directors is very high remuneration. Consequently a dividend basis is an unfair basis on which to value shares.
There is the problem. You have to value these shares in a company. You can have no recourse to any dealings; you cannot prove a market in the ordinary sense. I suggest that the dividend method is obviously unfair. The only proper method is to have regard to the assets of the company and to see to what the shareholder is actually entitled. With the greatest respect to the last speaker I fail to see that there is the smallest injustice in doing that. The commissioners are a very competent body of persons, in whom the general taxpayer may well place reliance. They are not mere servants of the Exchequer. A great many of the appeals that I have had to conduct in the courts are appeals from those commissioners and frequently I got the judge to decide in favour of the Revenue. The commissioners are a judicial body, well qualified to determine questions of fact, and they have to determine very difficult questions of fact.
2175 I suggest to the Committee that the only basis upon which you can proceed when you are valuing shares in which there has never been a deal, is to disregard the dividend basis and to look at the assets behind the shares, and to see to what the shareholder is entitled by virtue of those assets. Consequently the Clause provides that in these cases the shares shall be valued on an asset basis. The hon. and gallant Gentleman who moved the Amendment raised two difficulties about the drafting of the Clause. I cannot see that either of them is very important. I agree that we say, with regard to shares, that the value "shall not be ascertained in the manner provided by Sub-section (5) of Section 7 of the principal Act," that is to say, it is no good trying to find out what these shares would fetch in the open market, because you have no criterion. On the other hand, there is no difficulty whatever in applying that to the property of the company. A ship or a building can surely be valued. If that ship or building had passed on the death of a person it would be valued in that way. The hon. Member's further point was this: He turned to page 30 of the Bill and said, "Look at the inconsistency in your drafting. When you are defining control you define it in Sub-section (2, a) by saying:'The control of a company shall be deemed to be in the hands of a person if—(a) by virtue of the shares which he controls he has control of more than half the voting power of the company,'and he compares that with the definition of a company "to which the Act applies." I agree that those two provisions cannot be made to square. But the hon. Member has not realised that there are other provisions. For instance, when you are defining "control" there are paragraphs (b) and (c) of Sub-section (2). There is not really any difficulty here. Take Sub-section (2, a), regarding control. It says:(a) by virtue of the shares which he controls he has control of more than half the voting power of the company.Compare that with paragraph (ii) of Clause 33:(ii) has not issued to the public more than half of the shares by the holders whereof it is controlled.Obviously those two square.
§ The ATTORNEY-GENERAL
Then we are agreed that Sub-section (2, a) of Clause 32 squares with paragraph (ii) of Clause 33, and that Sub-sections (2, b) and (2, c) of Clause 32 square with paragraph (i) of Clause 33. Perhaps it would have been more convenient if we could have placed paragraphs (ii) and (i) in different order, but as a matter of drafting I do not think it matters in which order you put them. I suggest that really there is no difficulty from the point of view of drafting. I had at least thought this with regard to Clause 32, that whereas with regard to Clauses 29 and 30 I at any rate have been willing to confess that I have found the drafting exceedingly difficult, for the drafting of Clause 32, whether it is good or bad policy, there is at least this to be said, that it was clear. I hope the Committee will realise that the object of the Clause is not to resort to the asset basis if there is another and simpler method available, but that we must resort to the asset basis where there is no other means of valuation.
§ Sir LAMING WORTHINGTON-EVANS
This may be a very complicated discussion. The learned Attorney-General has dealt with so many matters in his speech, that perhaps it is not easy to get back to the original point. May I try to get back? As we stand now, the present method is the market value, and this Bill proposes to alter the market valuation and to adopt what the learned Attorney-General called, and I think not wrongly, the "asset value" basis. There are really three methods of valuation. There is the existing method, the market value. That has been in operation for 36 years. Before you scrap that method you have got to have a very good reason for scrapping it, and you have got to be quite sure that you are adopting a better and a fairer method, in lieu of that which has hitherto existed. The learned Attorney-General says that the dividend basis is the wrong basis, because you might have two companies making the same amount of profit, one of which distributed that profit in dividends on a generous scale, and the other of which distributed small dividends and put large sums to reserve. He says it will be un- 2177 fair to value each of these upon the dividend basis. I am not altogether prepared to quarrel with that statement. I think that would be unfair, if that was the actual basis upon which that valuation did take place. It is not the basis of the existing valuation. The existing valuation is on the market value, which is something different both from the asset value and the dividend value.
The Attorney-General quotes the case—he does this so often that we must bear it in mind, as it is a little apt to mislead us if we do not—the case of the one-man company, and he takes only that, and argues from that one case. There are lots of companies to which this Bill will refer which are not one-man companies at all, but which are companies under which someone gets a benefit within the meaning of the Act, and in those companies there may be shareholders quite separate and apart from the person who gets the benefit. To say that the dividend basis is unfair where there is a single man in control is right, and where he himself dictates the rate of dividend for the purpose of reducing the valuation of the shares upon his death. If you get that case I am quite willing it should be met, but that is not the only case. There are many other cases. There is the case of a good many private companies which will come within this Bill where amongst the shareholders there are partners, or people who would be partners if they were not members of a limited company, but virtually partners. You have employés holding the shares. There is a restriction on transfer, but there is very often what is known as a transfer price, that is to say, a price is fixed either in the articles of association or by means of the articles of association through the auditors, or otherwise, where if one of the shareholders dies or retires from the employment of the company, his shares are automatically transferred to the other shareholders.
There is a transfer price fixed in those gases. If you value on the basis of the assets of the company, as the learned Attorney-General suggests, you might value it at a price much higher than the transfer price, because the object of the transfer price is to enable those who succeed to the business to get a bit of he goodwill of the business, and it 2178 always fixes the transfer price under what you might call the asset value. It is done on purpose so that the younger men may be promoted in the interests of the company, and so that the employés themselves may benefit. If there is a transfer price of, perhaps, 20s. a share, and the actual asset value may be able to be proved to be anything up to 30s. a share, you are going to charge the companies with a Death Duty on the basis of 30s., when 20s. is actually the transfer price. That is unfair. The present method of valuation is the market price. The Attorney-General says that that is not possible to ascertain. [An HON. MEMBER: "Impossible!"] It is not so impossible as the asset value. It may be 30s. when the actual transfer value fixed by the company may be 20s. You are, obviously, doing a great injustice. It is no use substituting another form of valuation for the market valuation, unless it is really a fair one to the individuals concerned.
I suggest that while there are cases where the dividend basis is unfair, those cases are comparatively rare. It certainly is true that the asset valuation can often be unfair. For example, there are many shares quoted on the Stock Exchange at a lower price than the break-up value of the assets of the company. It is no use saying that the asset value is the value which any individual who is going to be a member of the company will receive. He cannot go to the company and say, "I have 10,000 shares; give me my proportion of the assets." The company is going on. The assets may be a good deal more than the market value of the shares. So you have three methods of valuation. One has stood the test of 36 years, that is, the market value. Another is the asset value, which can in many cases be unfair. I will admit that the dividend value in certain cases can also be unfair, but, on the whole, less unfair than the asset valuation. I believe that the wisdom of our predecessors has been right. They have deliberately chosen market value, and in that market value you have a combination of asset value and dividend value, and that is the best combination of the two methods of valuation that you can get.
I hope that the Chancellor will not insist upon this definition. Market value is really better. I am not wanting 2179 to let anybody off. I am only trying to point out that if you adopt the method of valuation, the break-up value suggested by this Clause, you will do a great injustice. You must meet the question of transfer value. How are you going to meet it? It applies to hundreds and hundreds of private companies. It has nothing to do with attempting to avoid Death Duties. It is a common practice that there shall be—the learned Attorney-General admitted this—a restriction of transfer. He did not go quite far enough. These restrictions of transfer are accompanied by a transfer price, or a method of ascertaining the transfer price. The method is very often left to the auditors for the time being, to fix a fair price between a willing seller and a willing buyer. That is a frequent clause in the articles. It seems to me that the learned Attorney-General has not made out his case for a change. The wisdom of those who were responsible for the 1894 Act, whoever they were, was right. They got the market value, which was a sort of medium between assets and dividends.
§ Sir SAMUEL ROBERTS
I would like to draw the attention of the Committee to what actually happens when a valuation of this kind is being made. If there is any quotation on the Stock Exchange, the first thing that the Inland Revenue Commissioners ask is, "Have there been any sales at arm's length?" and the particulars of these sales at arm's length, or, if they doubt it, particulars as to whether they were or were not at arm's length are sent up. Then they ask for the dividends over a certain number of years and they almost invariably ask for the last three years' balance sheets and profit and loss accounts. They look at the particulars of the dealings which have taken place, also at the dividends which have been paid, at the assets value, and see whether the assets value properly corresponds with the dividends which have been paid. Then they query, or put up a valuation that has been put upon those shareholders by the executors. The result is usually an interview at Somerset House, where all these things are gone into. The market value may have no possible relation to what the executor could possibly get if those assets were 2180 put into the market. There is such a difference in the way of taking assets, whether you take them individually or take them all together as a going concern, or at the break-up value.
In what way are the commissioners or the executors to know the way in which those assets are to be taken? It seems a difficult thing to do, and it is grossly unfair as between two companies. In one of these companies the deceased might have owned 51 per cent. of the shares, and in another company be only a shareholder to the extent of 20 per cent. The death of the man who held only 20 per cent. means that this process will have to go on just the same, and the Commissioners of Inland Revenue will act in exactly the same way as they have done in the past. With regard to the man who happens to have a 51 per cent. share, then this new form of valuation would have to take place. There is great unfairness between the case of a man who has a share in a private company, and one who has shares in a company where there is a quotation on the Stock Exchange. In times of very deep depression a quotation on the Stock Exchange very often, and in good companies, will go down far below the asset value, and that is all that the man could get if he put them in the market at the time of his death, and that is all that he ought to pay. If you are going to take each individual asset and work on that, you might have an asset paying 25, 50 or even 100 per cent. more than that man could get if the shares had to be sold.
If you are simply to say that as he had the control he could sell the assets, and go out of business, well, I have never heard the suggestion that the Revenue is concerned simply to make people go out of business in order to realise their assets in that way. I think it is a very dangerous method of valuation, because it will cause great injustice, and I do not think there is anything really wrong with the present method. The vast majority of cases are settled amicably between the executors and the Inland Revenue. Probably only the few extra ordinary cases have been brought to the notice of the Chancellor and he does no realise how many there are where there is no difficulty at all.
§ Sir DENNIS HERBERT
The Attorney-General has put up a good case as to the need for some alteration in the law in regard to the valuing of shares of a particular type. I do not think he has hit upon the right course of doing it. I am going to make a suggestion as to the way he could meet this criticism, and, at the same time, achieve the object of this part of the Bill. The hon. Member for Ecclesall (Sir S. Roberts) has referred to the practice at the present moment, and his description is perfectly correct. Strictly speaking it may not be authorised by the law. Instead of this peculiar arrangement of arriving at asset value I would suggest that in those cases where there is no market value, or where the actual market value is not a proper criterion of the read value, you should endeavour to put in words to this effect: the intrinsic value to the deceased at the time of his death. That would work out very well.
Let me give one or two illustrations to show how absolutely and impossibly unfair the method proposed may be in some cases. The Chancellor of the Exchequer smiled when the right hon. Member for St. George's (Sir L. Worthington-Evans) was speaking, but I think he will recognise that the case I am going to submit is one that is really serious, if the shares are valued on an asset basis. I know one or twit big businesses which would come under this Clause. If the owner or controller of a business desires to give his employés or his principal employés a certain interest in the business, under a kind of profit-sharing arrangement, a very common method is to give these employés ordinary or deferred shares, but only on the express condition that at their death the shares are to be transferred back to him at their par value. In the case I have in mind, the company has paid dividends between 12½ per cent. and 25 per cent. on its ordinary shares. The employés hold these shares, and during their lifetime they are the absolute owners. They take the dividends; but on their death their executors are bound to dispose of them to the former owner at par value. If you are to arrive at the value of these shares on an asset basis, it would certainly be over £2, and I do not think the Chancellor of the Exchequer will suggest that comparatively poor people, the employés of a business like this, should 2182 have their small estate mulcted in Death Duties on shares valued at over £2 on an asset basis when their executors are bound to accept £1 for them.
Let me give an example of a different type of case. It is not an uncommon thing, in these days when the speculative builder and the land developer are looked upon with fear by those who want to preserve the beauties of our countryside, for patriotic people who are fairly well off and living in a beautiful part of the country to form a company if they find that a large estate is to be cut up and sold and likely to be developed in such a way as to ruin a great part of that district. They form a company and purchase the essential portions of the estate, and they so arrange matters that under the regulations of the company which holds the land that has been purchased none of the land is ever to be sold without the consent of all the owners. In the meantime nothing is to be done with it which will in any way spoil its amenity value to the district; and in many places to the country as a whole. If you value the shares of a man in that company on an asset basis it would be presumably on the price that land would fetch if it were sold in the open market. That may be anything from £500 to £1,000 an acre, yet that property is probably not producing more than 10s. or £1 per acre, if as much. In the meantime the man who owns shares and thereby his interest in that land can never sell his shares except to persons in the same company who would never agree to take them at par value. Certainly such shares will never be intrinsically worth anything like their asset value if the company is broken up.
I suggest that I have made an absolutely unanswerable case for the contention that the proposals in this Clause will work most unfairly in a large number of cases; which, I say, deserve the utmost sympathy. I admit that the Attorney-General has made a good case for some alteration, but I hope that the Chancellor of the Exchequer will endeavour to see if it is not possible to hit upon some other form of valuation, somewhat on the lines I have suggested, that is, the basis of their intrinsic value to the deceased at the time of his death.
§ Sir ALFRED LAW
The Minister, I think, has made a very good reply to the 2183 criticisms of this Clause. It must be remembered that we are not dealing with public but with private companies. I have two cases in mind. It may happen that the value of the assets of a company may be much less than the price at which the shares change hands, it may also be more, and that is the obvious reason for this Clause: to ascertain some kind of real value of the shares possessed by the deceased. That, I presume, is after deducting what is due from the company to his creditors. This, however, is a rather roundabout way of doing it, and I would suggest that in the case of private companies the fairest thing to do is to leave the matter to the honesty of the directors to say what they consider to be the value of the shares held by the deceased. I have had to do that myself. I have had to value shares in the case of a deceased person who held shares in a particular company, and the directors have always been most scrupulous not to put too low a value upon them for probate. It is much better to trust to the honesty of directors and not devise a scheme whereby they will be put to a tremendous lot of trouble to value their assets. They know the real value of the shares.
§ Mr. SMITHERS
We have had a special definition of a company, now we have a special method for the valuation of shares. The present system has been in existence for over 30 years, and we are now trying to devise some method by which shares which cannot be valued on Stock Exchange quotations may be valued. It is proposed that they shall be valued in relation to the total assets of the company. Is there to be no differentiation between classes of shares? Suppose the deceased held preference shares on which the dividends are limited, or held ordinary shares on which dividends vary. Are these two kinds of holdings to be valued in the same way? During his lifetime the benefit on his preference shares was limited. This is not a fair method of valuation. I want to make a concrete suggestion, and I hope the Attorney-General will follow me through the Bill, because it is a suggestion which, I think, is worthy of his attention. It seems to be taken as the outcome of this discussion that the fairest value, if it can be arrived at, is 2184 the market value and apparently, in essence, the Government agree to that principle. The Chancellor of the Exchequer has an Amendment later on the Paper—to add:(3) This section shall not apply to shares which have, within the period of 12 months immediately preceding the death of the deceased, been the subject of dealings on a recognised stock exchange in the United Kingdom or been quoted in the official list of such a stock exchange."—in which he seems to adopt that principle, as far as it can be adopted. I think that it can be adopted right through the whole of these proceedings and my suggestion is that in line 5, page 30, we should insert the word "market" so that the Clause will read:but shall be ascertained by reference to the market value of the total assets of the company.Then, in the Definition Clause, we might define how that market value is to be arrived at in cases not already provided for. I suggest that there are experts in the City who could deal with the question but, I do not go into that aspect at the moment. It might be possible, however, to insert words in the Definition Clause providing that the market value should be arrived at by the Government broker in consultation with a chartered accountant or in some such way. I have in my own experience known cases of shares for which there was no quotation but the trustees concerned and the Inland Revenue have been willing to accept a valuation for the purposes of probate made by the strockbroke. The stockbroker has had regard to the class of the company and the kind of business which it is doing, and any information available about it, and, on that basis, he has given to the best of his ability an estimate of the value of the shares at the date of the death. The right hon. Gentleman the Member for St. George's (Sir L. Worthington-Evans) has already pointed out that the market value brings in both income value and asset value. I hope that the Attorney-General has followed my point, that he will include the term "market value" and will then indicate how that market value for the purposes of the Clause is to be determined. In all sincerity, I think that is the fairest way of dealing with the valuation of these shares.
§ Mr. ARTHUR MICHAEL SAMUEL
We must not allow ourselves to be lulled into a state of satisfaction by the patience, the courtesy and the eloquence of the Attorney-General. We on this side ought not to assume, because the hon. and learned Gentleman has been so patient and so courteous with us, that he has answered our case. I submit that he has not answered the case put forward from this side. We have heard a great deal in these discussions about the one-man company. Let us take the case of the one-man company. The suggestion put forward by my hon. Friend the Member for Watford (Sir D. Herbert) has brought out the weakness of the case for this Clause. He used the words "the fair intrinsic value to the deceased at the time of his death." Now as the right hon. and learned Gentleman has been harping on the one-man company may I ask what value are the shares in such a concern at the time of the death of the man whose personality and skill have maintained the earning value of that company? Take, for example, the great Bond Street art firms and dress designers. Take the case of a firm of accountants whose prosperity is based on the skill and personality of one man. I am sure many hon. Members have such cases in mind. There are many firms of different kinds which are dependent on the energy and ability of an individual and the assets of such a firm die when that man dies.
I ask the Attorney-General are we to take the asset value five minutes before the man's death, or at the moment of his death, or five minutes after his death? What is the market value of the shares of a one-man company when the man on whom the whole responsibility for the earning power of that company has rested passes away. If a prospective buyer of shares anticipated that the man who represented the earning power of the concern was about to pass away, he would give nothing for the shares of the company. If known to the buyer the man had passed away the purchaser of shares would put a value on those shares infinitely less than the value which would be assumed by the Revenue. Taking the line of argument adopted by the Attorney-General in reference to the one-man company I say that the earlier asset value has no relation to the actual 2186 value at the time of death and that the method proposed is not a fair method. I repeat my query as to what is to be the moment of valuation. Let us get that one point settled. Let us pin the Attorney-General down to it. Is the actual moment of valuation to be the moment before the man's death, the moment of his death or the moment after his death, because after the death of such a man, in the circumstances which I have already indicated, the shares have no great value?
I do not need to emphasise the point which has already been made about the possible restriction on shares but there is another point. A company may possess assets which have been bought because they have had a what is known as a "nuisance value." How will those be valued? Let it be supposed that I am a manufacturer of a certain article. I am the only owner of the concern and I have a trade mark. There is a competing concern also with a trade mark. I buy that concern and absorb the trade mark and keep it in my possession. It has no asset value whatever because I have killed the business which centred round it in order to prevent competition with my own business. It has had a "nuisance value" but once I have absorbed that trade mark and the goodwill of the business with which it was connected, what asset value has it? Take the case of two newspapers which have been amalgamated. Each has cost a great deal of money but after a few years when two newspapers amalgamate there is no asset value in one of those newspapers. Take two trading concerns competing against each other. The more prosperous one may purchase the less prosperous one with all its trade marks and goodwill and so forth and then kill it. How does the Attorney-General propose to get at the asset value in such a case as that?
Then there is the not unusual case in which the proprietor of a business holds back shares in his own company, and in order to encourage his employés, says to them: "As long as this company is in existence you shall have these shares at a nominal figure." In what way are you to arrive at a valuation of assets hampered thus in cases of that kind? Taking all these matters into account, I hope, as I said before, that hon. 2187 Members on this side will not allow themselves to be bemused by the speeches of the Attorney-General, and will not be persuaded into adopting the method proposed in this Clause. As has been said over and over again, we are all agreed as to preventing tax-dodging, but it does not follow that we should give our approval to slippery and sloppy legislation of this description. [HON. MEMBERS: "Oh!"] I claim that we have every right to use an expression of that kind. During the 12 years that I have been a Member of the House of Commons I have never known Clauses remodelled entirely like Clauses 29 and 30 of this Bill, and there is little reason to assume that the quality of the Clause now under discussion is different from those Clauses. It is, if I may use the expression, equally "riddleable."
§ Mr. SAMUEL
Then, shall I say that it is equally pervious to criticism? We shall certainly go into the Division Lobby againt it. I submit that in these cases, where a property is under the control of one man, the valuation should be made on the capitalisation of the distributable earnings after the death of the man and not before the death. That method certainly would be less unfair than the unsound method laid down in this very "attackable" Clause.
§ Mr. ATKINSON
I have a suggestion to make which may or may not be helpful, but before doing so I wish to point out that the reason why market value is so often taken as the value of anything is because it is generally a value which can be realised. But to apply market value to assets for the purpose of getting at the value of shares is obviously unfair, because that value of course cannot be realised. For all that, the value of a company's assets is an element which ought to be taken into consideration, and I do not set why the Commissioners should be limited as to the matters which they can take into consideration in ascertaining the value of shares.
I am particularly interested in this matter because recently I have had to deal with this very problem as an arbitrator. It was the case of a private company. The man who held the bulk 2188 of the shares died and under an agreement—I forget whether it formed part of the articles or not, but at any rate under an existing agreement—the other shareholders had to take his shares at a valuation. That valuation had to be fixed by arbitration, and I was appointed to act as the arbitrator. It was an interesting case, but one of a kind Ns which is not at all uncommon. This was a trading concern and if I had simply valued the assets, including the goodwill, it would have been quite an easy matter, but then the price fixed would not have been nearly high enough. The profits had been very big for some time because there was a price ring to which the firm belonged. As long as the price ring continued the profits of the company would be very high. That point was conceded, and the whole difficulty was to say how long the price ring was going to last. If one could have been sure that the price ring was going to last indefinitely the value of those shares would have been very high, but if the ring were to come to an end at once, or if it was likely to come to an end in the immediate future, then the value of the shares would be much lower. The whole difficulty which I had and which all the witnesses had was how to value the probability of the continuance in existence of that price ring. It was not goodwill. It was something quite apart from goodwill, but it was a material element which I had to take into consideration in trying to get at the value of the shares.
The test which I laid down for myself in that case, and the test which I suggest should be incorporated in this Clause is one which has been applied over and over again, and that is "the price which a willing purchaser would pay to a willing seller." That test has been recognised by the law. It is one with which accountants and valuers are perfectly familiar and it takes into consideration everything which has a bearing upon value. I am not sure that it is very different from the suggestion of my hon. Friend the Member for Watford (Sir D. Herbert), but I think it presents a method of ascertainment in a simpler way. A willing purchaser takes into consideration the assets of the company. He looks into those to see where he is, in the event of a winding-up of the company. He also takes into consideration past 2189 earnings, but what really actuates the willing purchaser are the chances of earnings in the future. If the probabilities are good he is ready to pay a bigger price. I do not think he is influenced very much by the market value of the shares, because, of course, the market value of the shares in a private company is very often far below the real value, as there is a very limited market far them. What really interests the purchaser is the question of the profits which that company is going to make. If these words, "the price which a willing purchaser would pay to a willing seller" were incorporated, the commissioners could take into consideration the value of the assets, the dividends in the past, and the chances of earnings in the future, and thus arrive at a really fair value upon which taxation should be levied. I submit that it would meet every objection which has been urged.
May I ask two questions? In the last line of Sub-section (1), what is the meaning of "the sum of money therein referred to"? I do not know what the "therein" is, because we have two Subsections, and looking at both I cannot see any reference to a sum of money, but perhaps I have overlooked something. The other question is this—and you are only dealing with a company which is a private company within the definition. If this deceased person held and had held from the outset 51 per cent. of the shares, he comes within this Clause, but if the public had subscribed 51 per cent. of the shares and the deceased had acquired by purchase a majority of the shares——
§ Mr. ATKINSON
I am only wanting to point out an inconsistency. You are going to set up a method of valuation which will apply in the case of a man who from the outset has had 51 per cent. of the shares, but you would have to adept a different valuation if he had become the main shareholder by purchase. You are going to have two different methods of valuation for really the same position. I should have thought it would be easy, in all these cases of 2190 private companies, to have a method of valuation on the lines I have suggested. It would be fairer, and in many cases it would be better for the Revenue.
§ Captain BOURNE
Will the Attorney-General reconsider this method of valuation? I fear that many private companies will come within this Clause which are not the one-man companies aimed at, and I am frightened of the case where you are dealing with a private company, formed for purely commercial reasons, which carries on a somewhat speculative business. I can think of several such companies, which at fairly regular intervals make rather large profits, but in between those intervals they may have a series of lean years. Such a company may put a large amount of money to reserve so as to be able to equalise its dividends year in and year out. I take it that the real value of the shares in that company is roughly the market value, or what a willing purchaser will give for them. If a man dies at the end of a lean period, the assets of the company will be very low, but, roughly speaking, what any willing purchaser would give for the shares is more or less a constant sum in such a case. He knows fairly well what the average dividends amount to and what the risks and the assets of the company are.
It seems to me that we want to keep, as far as we can, that principle of market value—the transfer between a willing buyer and a willing seller—which enters so much into our law of values. Surely, when you have a judicial body of experience dealing with these cases, it is far better to lay it down in some way that the value shall be arrived at on the basis of the price agreed between a willing buyer and a willing seller, and leave this very wise judicial body to make up its own mind how far the assets should be taken into account and how far the dividends should be taken into account, and so on. I support the suggestion made by my hon. and learned Friend the Member for Altrincham (Mr. Atkinson).
§ Sir BOYD MERRIMAN
I do not propose to add anything to the general discussion, but I want to ask the Attorney-General a specific point in regard to one of the Amendments which is included in the group with which we are dealing. It is a condition of bringing into effect 2191 this particular method of valuation, whatever method is adopted, thatthere is deemed by virtue of the provisions of this Part of this Act to pass on the death a sum of money proportional to the value of the total assets of the company.That is Sub-section (1, a) of Clause 32, and obviously, when that was drafted, it was intended to catch, and did catch, the whole of the cases indicated in Clause 29, because that Clause was then based on a calculation which simply took into account the proportion to the total assets of the company arrived at by taking the proportion between the value of the benefit and the value of the total income of the company; but owing to the way in which Clause 29 has been amended, that is no longer true of Clause 29. We will say, for the sake of argument, that you find your proportion between the value of the benefit and the value of the total income of the company to be 60 per cent. You apply that 60 per cent. to the total assets of the company, as Clause 29 originally stood, but as it now stands—it is rather a roundabout way of doing it—you reduce that sum by the amount which the original subject matter of the transfer, as valued at the date of death, falls short of that sum; in other words, what you really do, as has been pointed out over and over again, is to limit the sum deemed to pass at death to the value, at the date of death, of the subject matter of the transfer, provided always that it does not amount to more than the proportion or more than the whole of the assets of the company.
In a case, therefore, where what really passes at death is only the present value of the subject matter of the transfer, does this Clause apply at all, or does it not? It is impossible to say of that case that there is then passing a sum which is proportional to the value of the total assets of the company, except in the sense that any sum which is smaller than another is proportional to the higher sum. The point that I am trying to make is that the whole basis of that particular form of definition has really gone, by virtue of the alteration of Clause 29, which reduces the amount to the amount representing the value, at the date of death, of the subject matter of the transfer.
2192 That is the first question, and the second is this: There is a proviso in line 6, on page 30 of the Bill, and quite frankly I am puzzled by it, and I want the Attorney-General to tell us what it means. Supposing a case in which the amount being transferred to the company does in fact represent the total assets of the company, either because it has very greatly increased in value or because it was the only thing transferred to the company, and supposing that that is the position at the date of death, so that there is no question of any falling short or of any reduction of that sum, the thing that passes is 100 per cent. of the total assets of the company. The proviso says:Provided that in cases falling within paragraph (a) of this sub-section, the value of the total assets of the company shall, for the purposes of this section, be deemed to be reduced by the sum of money therein referred to.The sum of money that is referred to in paragraph (a), as I understand it, is thesum of money proportional to the value of the total assets of the company,which in the case supposed is a sum proportional to 100 per cent. of the total assets. Does that mean that the value of the total assets of the company is reduced by 100 per cent. of the total value of the assets of the company, and, if so, what happens? If you have reduced 100 per cent. by 100 per cent., how then do you assess the value of the shares by reference to the value of the total assets of the company? If the Attorney-General will give me an answer to those questions, I shall be much obliged to him.
§ The ATTORNEY-GENERAL
The hon. and learned Member for Altrincham (Mr. Atkinson) asked what I understood by the words "therein referred to" in the proviso at the end of Sub-section (1). I understood, as the hon. and learned Member for Rusholme (Sir B. Merriman) understands, that the words "sum of money therein referred to" mean the sum of money referred to in line 40, on page 29, that is to say:a sum of money proportional to the value of the total assets of the company.Then he asked me—though I rather doubt whether you, Mr. Young, would let me pursue the matter at any length—a question which I venture to think arises on Clause 33, but it can be answered very shortly.
§ The CHAIRMAN
What I am afraid of is that when we get to Clause 33 we shall be having it all over again.
§ The ATTORNEY-GENERAL
I will deal with that then in due course. The hon. and learned Member for Rusholme was good enough to call attention to the use of the word "proportional." Of course, when you have drafted a whole group of Clauses, you want to consider very carefully whether language that was perfectly appropriate when drafted has become inappropriate by reason of alterations made in the Clause since. I shall certainly look into that point, but, as it occurs to me at the moment, I do not think the word has become meaningless, because, after all, under Clause 29 you always proceed still by means of the proportional sum as the first step in your machinery. It is true that under Clause 29 you may in certain events have to deduct something very different, but the whole thing is based upon a proportional sum. However, I will consider what the hon. and learned Member says.
Then he asked what was the effect of the proviso on page 30. I think that I am right in saying that under Clause 29 it is provided that in any case you make certain reductions in respect of the value of the shares; it follows, therefore, that you are not dealing with a case where you are taxing 100 per cent. Under Clause 29, where you are dealing with a sum of money which is due to pass, you must make certain deductions in respect of the shares held by the deceased. We are here dealing only with a case where shares were held by the deceased. That being so, it follows that under Clause 29 you cannot tax the full 100 per cent. The proviso is to guard against the possibility of double taxation.
§ Mr. SMITHERS
Three of us, with the utmost desire to help the Government, put forward three concrete suggestions. The hon. and learned Member for Altrincham (Mr. Atkinson) put forward one, the hon. Member for Watford (Sir D. Herbert) put forward one, and I put forward another, but we have not had a reply.
§ The ATTORNEY-GENERAL
I did not mean to be discourteous, but I confined myself to answering specific questions, because hon. Members will realise 2194 that, having thought that this basis which we have put down is the right one, and having considered various other bases, we considered it necessary to adhere to the proposal which we have suggested.
§ Sir D. HERBERT
Does the hon. and learned Gentleman adhere to it to such an extent that he answers my question in the negative, and that he will not consider the special cases which I put to him and the question whether he cannot get some words which would be good enough for him, but would not be unfair to the particular cases to which I referred?
§ The ATTORNEY-GENERAL
I always consider any observations which the hon. Gentleman makes, but I cannot hold out any hope that we shall be able to accept his suggestion.
§ Mr. SMITHERS
I take it that the Government accept in principle that the market value is the value to arrive at, because the Chancellor has put down an Amendment to deal with that later. Will the Attorney-General at least promise that, if that is the principle of the Government, he will, without committing himself, read through this debate between now and the Report stage, and see if it is not a fact that the Government really and truly mean to arrive at a fair market value, and consider if it is possible to put in some words to bring about that much desired thing?
§ Mr. SMITHERS
I must protest against being treated in this jocular way. This is a very serious thing. I do not want the hon. and learned Gentleman to read what I have said, but three or four suggestions have been made, and I ask him to consider them, and if he sees that there is any force in the arguments, to do something on the Report stage.
§ The ATTORNEY-GENERAL
If I say that I will consider this matter, I may so easily lead the Committee to form a false impression. Of course I will read what has been said, but I do not want the Committee to be under the impression that we are prepared in any way to depart from our proposal.
§ Question put, "That the word 'either' stand part of the Clause."2196
§ The Committee divided: Ayes, 254; Noes, 132.2197
|Division No. 407.]||AYES.||[5.20 p.m.|
|Adamson, Rt. Hon. W. (Fife, West)||Hartshorn, Rt. Hon. Vernon||Mort, D. L.|
|Adamson, W. M. (Staff., Cannock)||Hastings, Dr. Somerville||Moses, J. J. H.|
|Addison, Rt. Hon. Dr. Christopher||Haycock, A. W.||Mosley, Lady C. (Stoke-on-Trent)|
|Alpass, J. H.||Henderson, Right Hon. A. (Burnley)||Mosley, Sir Oswald (Smethwick)|
|Ammon, Charles George||Henderson, Arthur, Junr. (Cardiff, S.)||Muggeridge, H. T.|
|Arnott, John||Henderson, Thomas (Glasgow)||Murnin, Hugh|
|Aske, Sir Robert||Henderson, W. W. (Middx., Enfield)||Naylor, T. E.|
|Attlee, Clement Richard||Herriotts, J.||Newman, Sir R. H. S. D. L. (Exeter)|
|Ayles, Walter||Hirst, G. H. (York W. R. Wentworth)||Noel Baker, P. J.|
|Baker, John (Wolverhampton, Bliston)||Hirst, W. (Bradford, South)||Oldfield, J. R.|
|Baldwin, Oliver (Dudley)||Hoffman, P. C.||Palin, John Henry.|
|Barnes, Alfred John||Hollins, A.||Paling, Wilfrid|
|Barr, James||Horrabin, J. F.||Palmer, E. T.|
|Batey, Joseph||Hudson, James H. (Huddersfield)||Parkinson, John Allen (Wigan)|
|Bellamy, Albert||Hunter, Dr. Joseph||Perry, S. F.|
|Benn, Rt. Hon. Wedgwood||Hutchison, Maj.-Gen. Sir R.||Pethick-Lawrence, F. W.|
|Bennett, Capt. Sir E. N. (Cardiff C.)||Isaacs, George||Phillips, Dr. Marion|
|Bennett, William (Battersea, South)||Jenkins, W. (Glamorgan, Neath)||Pole, Major D. G.|
|Benson, G.||John, William (Rhondda, West)||Potts, John S.|
|Bentham, Dr. Ethel||Johnston, Thomas||Price, M. P.|
|Bevan, Aneurin (Ebbw Vale)||Jones, F. Llewellyn- (Flint)||Quibell, D. J. K.|
|Bondfield, Rt. Hon. Margaret||Jones, J. J. (West Ham, Silvertown)||Ramsay, T. B. Wilson|
|Bowen, J. W.||Jones, Rt. Hon. Leif (Camborne)||Raynes, W. R.|
|Bowerman, Rt. Hon. Charles W.||Jones, Morgan (Caerphilly)||Richards, R.|
|Brockway, A. Fenner||Jones, T. I. Mardy (Pontypridd)||Richardson, R. (Houghton-le-Spring)|
|Brothers, M.||Jowett, Rt. Hon. F. W.||Riley, Ben (Dewsbury)|
|Brown, C. W. E. (Notts, Mansfield)||Jowitt, Rt. Hon. Sir W. A.||Riley, F. F. (Stockton-on-Tees)|
|Brown, Ernest (Leith)||Kelly, W. T.||Ritson, J.|
|Brown, W. J. (Wolverhampton, West)||Kennedy, Thomas||Romeril, H. G.|
|Buchanan, G.||Kenworthy, Lt.-Com. Hon. Joseph M.||Rosbotham, D. S. T.|
|Burgess, F. G.||Kinley, J.||Rowson, Guy|
|Buxton, C. R. (Yorks. W. R. Elland)||Knight, Holford||Russell, Richard John (Eddisbury)|
|Caine, Derwent Hall-||Lang, Gordon||Salter, Dr. Alfred|
|Cameron, A. G.||Lansbury, Rt. Hon. George||Samuel, Rt. Hon. Sir H. (Darwen)|
|Cape, Thomas||Lathan, G.||Samuel, H. Walter (Swansea, West)|
|Charleton, H. C.||Law, Albert (Bolton)||Sanders, W. S.|
|Chater, Daniel||Law, A. (Rosendale)||Sandham, E.|
|Church, Major A. G.||Lawrence, Susan||Sawyer, G. F.|
|Clarke, J. S.||Lawrie, Hugh Hartley (Stalybridge)||Scrymgeour, E.|
|Cluse, W. S.||Lawther, W. (Barnard Castle)||Scurr, John|
|Clynes, Rt. Hon. John R.||Leach, W.||Sexton, James|
|Cocks, Frederick Seymour||Lee, Frank (Derby, N. E.)||Shaw, Rt. Hon. Thomas (Preston)|
|Compton, Joseph||Lee, Jennie (Lanark, Northern)||Shepherd, Arthur Lewis|
|Cove, William G.||Lees, J.||Sherwood, G. H.|
|Daggar, George||Lewis, T. (Southampton)||Shield, George William|
|Dallas, George||Lindley, Fred W.||Shillaker, J. F.|
|Davies, E. C. (Montgomery)||Lloyd, C. Ellis||Shinwell, E.|
|Day, Harry||Logan, David Gilbert||Simmons, C. J.|
|Ede, James Chuter||Longbottom, A. W.||Sinkinson, George|
|Edmunds, J. E.||Longden, F.||Sitch, Charles H.|
|Edwards, C. (Monmouth, Bedwellty)||Lowth, Thomas||Smith, Ben (Bermondsey, Rotherhithe)|
|Edwards, E. (Morpeth)||Lunn, William||Smith, Frank (Nuneaton)|
|Egan, W. H.||Macdonald, Gordon (Ince)||Smith, H. B. Lees (Keighley)|
|Elmley, Viscount||MacDonald, Rt. Hon. J. R. (Seaham)||Smith, Tom (Pontefract)|
|Evans, Capt. Ernest (Welsh Univer.)||MacDonald, Malcolm (Bassetlaw)||Smith, W. R. (Norwich)|
|Foot, Isaac||McElwee, A.||Snell, Harry|
|Forgan, Dr. Robert||McEntee, V. L.||Snowden, Rt. Hon. Philip|
|Gardner, B. W. (West Ham, Upton)||McGovern, J. (Glasgow, Shettleston)||Snowden, Thomas (Accrington)|
|Gardner, J. P. (Hammersmith, N.)||McKinlay, A.||Sorensen, R.|
|George, Megan Lloyd (Anglesea)||MacLaren, Andrew||Stamford, Thomas W.|
|Gibbins, Joseph||Maclean, Neil (Glasgow, Govan)||Stephen, Campbell|
|Gibson, H. M. (Lancs, Mossley)||MacNeill-Weir, L.||Strachey, E. J. St. Loe|
|Gill, T. H.||Mander, Geoffrey le M.||Strauss, G. R.|
|Gillett, George M.||Mansfield, W.||Sullivan, J.|
|Glassey, A. E.||March, S.||Sutton J. E.|
|Gossling, A. G.||Marcus, M.||Thomas, Rt. Hon. J. H. (Derby)|
|Graham, D. M. (Lanark, Hamilton)||Markham, S. F.||Tinker, John Joseph|
|Graham, Rt. Hon. Wm. (Edin., Cent.)||Marshall, Fred||Toole, Joseph|
|Granville, E.||Mathers, George||Tout, W. J.|
|Gray, Milner||Matters, L. W.|
|Greenwood, Rt. Hon. A. (Colne)||Maxton, James||Townend, A. E.|
|Grenfell, D. R. (Glamorgan)||Messer, Fred||Turner, B.|
|Griffith, F. Kingsley (Middlesbro' W.)||Middleton, G.||Vaughan, D. J.|
|Groves, Thomas E.||Millar, J. D.||Viant, S. P.|
|Grundy, Thomas W.||Montague, Frederick||Walker, J.|
|Hall, F. (York, W. R., Normanton)||Morgan, Dr. H. B.||Wallace, H. W.|
|Hall, G. H. (Merthyr Tydvil)||Morley, Ralph||Wallhead, Richard C.|
|Hall, Capt. W. P. (Portsmouth, C.)||Morris, Rhys Hopkins||Walters, Rt. Hon. Sir J. Tudor|
|Hamilton, Mary Agnes (Blackburn)||Morris-Jones, Dr. J. H. (Denbigh)||Watkins, F. C.|
|Hardle, George D.||Morrison, Herbert (Hackney, South)||Watson, W. M. (Dunfermline)|
|Williams, Dr. J. H. (Llanelly)||Wilson, R. J. (Jarrow)||TELLERS FOR THE AYES.—|
|Wilson, C. H. (Sheffield, Attercliffe)||Winterton, G. E. (Leicester, Loughb'gh)||Mr. Hayes and Mr. Whiteley.|
|Wilson, J. (Oldham)||Wood, Major McKenzie (Banff)|
|Wedgwood, Rt. Hon. Josiah||Dudgeon, Major C. R.||Oliver, P. M. (Man., Blackley)|
|Welsh, James (Paisley)||Edmondson, Major A. J.||Ormsby-Gore, Rt. Hon. William|
|Welsh, James C. (Coatbridge)||Elliot, Major Walter E.||Peake, Captain Osbert|
|West, F. R.||Erskine, Lord (Somerset, Weston-s-M.)||Penny, Sir George|
|Westwood, Joseph||Everard, W. Lindsay||Percy, Lord Eustace (Hastings)|
|White, H. G.||Falle, Sir Bertram G.||Peto, Sir Basil E. (Devon, Barnstaple)|
|Whiteley, Wilfrid (Birm., Ladywood)||Fermoy, Lord||Pownall, Sir Assheton|
|Wilkinson, Ellen C.||Fielden E. B.||Ramsbotham, H.|
|Williams, David (Swansea, East)||Forestier-Walker, Sir L.||Reid, David D. (County Down)|
|Acland-Troyte, Lieut.-Colonel.||Ganzonl, Sir John||Remer, John R.|
|Albery, Irving James||Gibson, C. G. (Pudsey & Otley)||Rentoul, Sir Gervais S.|
|Allen, Sir J. Sandeman (Liverp'l., W.)||Gower, Sir Robert||Roberts, Sir Samuel (Ecclesall)|
|Allen, W. E. D. (Belfast, W.)||Grattan-Doyle, Sir N.||Rodd, Rt. Hon. Sir James Rennell|
|Ashley, Lt.-Col. Rt. Hon. Wilfrid W.||Hacking, Rt. Hon. Douglas H.||Ruggles-Brise, Lieut.-Colonel E. A.|
|Astor, Viscountess||Hamilton, Sir George (Ilford)||Russell, Alexander West (Tynemouth)|
|Atholl, Duchess of||Hammersley, S. S.||Salmon, Major I.|
|Atkinson, C.||Hartington, Marquess of||Samuel, A. M. (Surrey, Farnham)|
|Baillie-Hamilton, Hon. Charles W.||Harvey, Major S. E. (Devon, Totnes)||Sandeman, Sir N. Stewart|
|Beamish, Rear-Admiral T. P. H.||Haslam, Henry C.||Sassoon, Rt. Hon. Sir Philip A. G. D.|
|Beaumont, M. W.||Henderson, Capt. R. R. (Oxf'd, Henley)||Smith, R. W. (Aberd'n & Kinc'dine, C.)|
|Berry, Sir George||Herbert, Sir Dennis (Hertford)||Smithers, Waldron|
|Betterton, Sir Henry B.||Hills, Major Rt. Hon. John Waller||Somerville, A. A. (Windsor)|
|Birchall, Major Sir John Dearman||Horne, Rt. Hon. Sir Robert S.||Southby, Commander A. R. J.|
|Bird, Ernest Roy||Howard-Bury, Colonel C. K.||Spender-Clay, Colonel H.|
|Birkett, W. Norman||Hudson, Capt. A. U. M. (Hackney, N.)||Steel-Maitland, Rt. Hon. Sir Arthur|
|Boothby, R. J. G.||Hurd, Percy A.||Stewart, W. J. (Belfast, South)|
|Bourne, Captain Robert Croft.||King, Commodore Rt. Hon. Henry D.||Stuart, Hon. J. (Moray and Nairn)|
|Bowater, Col. Sir T. Vansittart||Lamb, Sir J. Q.||Thomas, Major L. B. (King's Norton)|
|Bowyer, Captain Sir George E. W.||Lambert, Rt. Hon. George (S. Molton)||Thomson, Sir F.|
|Brown, Brig.-Gen. H. C. (Berks, Newb'y)||Lane Fox, Col. Rt. Hon. George R.||Tinne, J. A.|
|Buchan, John||Law, Sir Alfred (Derby, High Peak)||Train, J.|
|Bullock, Captain Malcolm||Leighton, Major B. E. P.||Tryon, Rt. Hon. George Clement.|
|Burton, Colonel H. W.||Lewis, Oswald (Colchester)||Ward, Lieut.-Col. Sir A. Lambert|
|Butler, R. A.||Locker-Lampson, Rt. Hon. Godfrey||Wardlaw-Milne, J. S.|
|Cadogan, Major Hon. Edward||Long, Major Eric||Warrender, Sir Victor|
|Cayzer, Sir C. (Chester, City)||Lymington, Viscount||Waterhouse, Captain Charles|
|Cayzer, Maj. Sir Herbt. R. (Prtsmth, S.)||McConnell, Sir Joseph||Williams, Charles (Devon, Torquay)|
|Chadwick, Capt. Sir Robert Burton||Macquisten, F. A.||Wilson, G. H. A. (Cambridge U.)|
|Christie, J. A.||Margesson, Captain H. D.||Windsor-Clive, Lieut.-Colonel George|
|Colman, N. C. D.||Marjoribanks, E. C.||Withers, Sir John James|
|Courthope, Colonel Sir G. L.||Merriman, Sir F. Boyd||Wolmer, Rt. Hon. Viscount|
|Crichton-Stuart, Lord C.||Mitchell, Sir W. Lane (Streatham)||Womersley, W. J.|
|Cranborne, Viscount||Monsell, Eyres, Com. Rt. Hon. Sir B.||Wood, Rt. Hon. Sir Kingsley|
|Croft, Brigadier-General Sir H.||Moore, Sir Newton J. (Richmond)||Worthington-Evans, Rt. Hon. Sir L.|
|Crookshank, Capt. H. C.||Morrison, W. S. (Glos., Cirencester)|
|Dalrymple-White, Lt.-Col. Sir Godfrey||Muirhead, A. J.||TELLERS FOR THE NOES.—|
|Davies, Dr. Vernon||Nathan, Major H. L.||Major the Marquess of Titchfield|
|Davies, Maj. Geo. F. (Somerset, Yeovil)||Nicholson, Col. Rt. Hn. W. G. (Ptrsf'ld)||and Captain Wallace.|
|Dugdale, Capt. T. L.||O'Connor, T. J.|
§ The CHAIRMAN
The next Amendment I select is that in the name of the hon. Member for Chislehurst (Mr. Smithers). May I point out that there has been a wide discussion on the valuation of these assets, and I hope that the hon. Member will confine himself strictly to the Amendment?
§ Mr. SMITHERS
I beg to move, in page 30, line 5, to leave out the words "the value of the total assets of the company," and to insert instead thereof, the words:ten times the income computed in accordance with the provisions of the Income Tax Acts accruing to the benefit of those shares calculated on the average of the last three accounting periods of the company completed before the date of death.The Chancellor of the Exchequer, having 2198 used the steam-roller of the Government majority to overcome the practical suggestions which we have made from this side, I now move this Amendment. This is an attempt to relate the valuation of the property that passes, not to the value of the total assets of the company, but to the income during the previous three years. I have put down 10 times the value, so that if the income were 10 per cent. the value would be 10 times that amount. The Chairman has said we have had a long discussion, and I want to obey his ruling, and I will not say more.
§ The FINANCIAL SECRETARY to the TREASURY (Mr. Pethick-Lawrence)
I am afraid it is quite impossible for the Government to accept this Amendment. 2199 Perhaps the best answer I could give to the hon. Member would be to refer him to the speech of the right hon. Member for St. George's (Sir L. Worthington-Evans) a little earlier in the debate, in which he pointed out that of the three possible methods of making the valuation that on a dividend basis would be the most unsuitable. [Interruption.] I understood the right hon. Gentleman to say that there were three possible methods by which the value could be ascertained. One was to take the market value; one was the dividend method; and one was the method suggested by this Clause. I understood the right hon. Gentleman to say the dividend method was thoroughly unsuitable.
§ Sir L. WORTHINGTON-EVANS
I said there were certain cases in which it would be undesirable, but I did not say it was the worst method.
§ Mr. PETHICK-LAWRENCE
I am sorry if I exaggerated the statement of the right hon. Gentleman, but I think in the form in which he has now put it it is an answer to the hon. Member for Chislehurst (Mr. Smithers). In cases where, owing to the peculiar character of these companies and the peculiar power of controlling them held by the deceased, it is in any way difficult to ascertain the market value of the shares, a value placed on them according to the dividends paid would not provide the correct answer. It would be possible for the company to bring down its dividends for certain purposes, and it would be quite improper to fix the value of the shares on that basis. Let me give an illustration which came under my own notice. A shipping company thought it desirable to put a very large part of its profits to reserve in order to build up a larger fleet, and in consequence it paid a very small dividend. It would be quite improper in such a case as that to suppose that the value of the shares is only to be ascertained by multiplying the dividend paid by a certain number.
§ Sir ASSHETON POWNALL
I think the Financial Secretary has really misunderstood or misrepresented this Amendment. It is not a question of dividends at all. We know that in many cases the dividend declared has very little relation 2200 to the income. A company may not distribute its profits up to the hilt, or it may. This is a question of the income, and in the case mentioned by the Financial Secretary, where a company thought it necessary to put large sums to reserve, that amount would have to pay tax, and therefore would be taken to be part of the income, in accordance with the provisions of the Income Tax Acts. There might be cases, as in the case of a very old man who might be expected to die in the course of a few years, where a company might deliberately try to keep the income down in the three years before his death; but ordinarily there is no precise relation between the income of a company and the dividend it pays, and while I quite appreciate the difficulties of the Financial Secretary, the word "dividend" being there, I do submit that we get much nearer the real value of the concern if we take the income which has been made according to the very careful computation of the Income Tax Acts, because the authorities take great care that the full income shall be disclosed. There could not be a better basis than this.
§ Sir S. ROBERTS
I want to ask my hon. Friend the Member for Chislehurst (Mr. Smithers) not to press this Amendment, and I will give him one reason. I want him to assume the case of a company which is formed to operate a patent for seven years. In the last three years of those seven the company may make very considerable profits. If at the end of the seven years, the shareholder were to die, the value of the company would be calculated on the basis of the profits for the last three years, although the patents which had produced those profits would by that time be dead.
Major-General Sir NEWTON MOORE
I understand that under the existing law the value of shares in a company is estimated for Estate Duty purposes on the basis of market transactions at that date. I have in my mind a case where shares were valued at 21s. The total of the estate was £540,000, and the duty on it was £140,000. Arrangements were made to defer the payment of duty, because it was realised that if a large block of shares were thrown on the market the effect might be to bring the price down to 5s. [Interruption.] This is a case which actually occurred. The shares were valued at 21s. It was impossible for the 2201 widow to pay the duty at once, and consequently she made an arrangement with the Treasury to allow the duty to stand over on a basis of 4 per cent. interest. Instead of the shares appreciating in value, however, they depreciated, with the result that the widow, who was assumed to be worth at least £10,000 or 12,000 a year, was allowed by the probate authorities only £2,000 a year at first, subsequently £400 a year, and subsequently nothing. In the end the whole of the shares were sold, and brought in £130,000. She owes £30,000 for interest. The whole of the estate has been taken over. It is absolutely a case of confiscation. I am quoting this to point out the injustice which arises at the present time, and I think we ought to be exceptionally careful in the steps taken to arrive at value. The suggestion made by an hon. Friend that the Commissioners should see what a willing purchaser would pay for the shares——
§ Mr. SMITHERS
In view of what has been said, and seeing that we wish to get on with the business, I ask permission to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Sir D. HERBERT
I beg to move, in page 30, line 12, to leave out from the word "if," to the end of the Clause, and to insert instead thereof the words:such company would be deemed to be under the control of that person under Section twenty-one, Sub-section (6), of the Finance Act, 1922.In view of the circumstances I do not propose to say very much about this Amendment, which is more or less related to an Amendment which I have put down to the next Clause. If I may be allowed to treat the two Amendments as being more or less one in this speech, it may be unnecessary for me to do more than formally move my Amendment on the next Clause. The object of this Amendment and the other one is to simplify this legislation by getting rid of the necessity for defining the exact kind of company to which this part of the Bill applies and defining what is meant by "controlling a company." I am glad the Attorney-General is back, because he will 2202 appreciate my point. Under the Finance Act of 1922 an attempt was made for the first time to deal with the one-man company. Parliament was attempting to deal with the avoidance of payment of Super-tax by a company not distributing its income. That Measure enacted certain legislation which was to apply to what I may perhaps best describe as controlled companies of a private nature. In course of time that legislation was found to be not quite water-tight, and in 1927 the right hon. Member for Epping (Mr. Churchill), when he was Chancellor of the Exchequer, determined to make it more water-tight. After a great deal of negotiation the 1922 Act was amended by the Finance Act of 1927. The result arrived at in the Act of 1927 worked satisfactorily, I believe, from the point of view of the Revenue, with regard to the particular companies affected by that legislation. I believe I am right in saying that it has acted satisfactorily from the point of view of the stock exchanges of the country and others interested in large and important businesses and companies more or less of a private nature. In the circumstances I feel that it would simplify legislation and shorten it if we were to insert here words to say that a company should be deemed to be under the control of a person if it would be deemed to be under his control according to the Act of 1922 as amended by the Act of 1927. My later Amendment would propose——
§ The CHAIRMAN
The hon. Member is going on to discuss an Amendment to the next Clause. He is assuming that I am going to call it.
§ Sir D. HERBERT
I do not propose to discuss it, but only to show how this Amendment is to some extent inevitably linked up with the other Amendment. I will not discuss the merits of it, but the effect of it would be to refer back to the Acts of 1922 and 1927 for a definition of the company of a private nature which is deemed to be controlled. That would mean that two and a-half lines would take the place of about 15 lines. The Attorney-General has found it necessary in this Clause to define what is meant by "the control of a company" and he proposes to do so by using the word "control" twice over without defining it. A person can control a company if "he has control of more than half the voting 2203 power of the company," by virtue of the shares which he controls. What is the meaning of control in that case? All these methods of control are contained in the Act of 1922, and if the Attorney-General thinks that there is any particular class of control not covered by these Acts I would suggest that it would be better for him to adopt the definition of control which we have in the Finance Act, 1922 and add something to it. The Attorney-General will realise that I am trying to make a contribution towards rendering this legislation watertight.
§ The ATTORNEY-GENERAL
Perhaps it will be convenient for me to reply at this stage. I am surprised to hear the hon. and learned Member asking the Government to insert words which would mean more legislation by reference. Here we have a case in which an hon. Member is asking for lgislation by reference to be substituted for the words in an Act of Parliament.
§ The ATTORNEY-GENERAL
I am afraid that I cannot accept this Amendment. In the first place I do not like to extend the principle of legislation by reference. Secondly, it seems illogical, when dealing with a group of Clauses concerning Estate Duties, to expect anybody clearly to understand the position by referring them back to an Act of Parliament which is eight years old and deals with quite a different topic. That Act was directed to the case where control was concentrated in one or two families and was not in the hands of an individual.
Under the 1922 Act it will be found that shares held by a man's near relative are treated as shares held by him for determining control. It is wholly inappropriate where you are dealing with a question of Estate Duties to address your mind to shares held by the deceased individual's relatives. Therefore, for these reasons, quite apart from other reasons which I could give, the suggestion made by the hon. Member would not work. The circumstances are different, and in this Act we have a wider definition than that contained in the Act of 1922, in that we include under control a case where an individual has the right 2204 or power to dispose of more than half of the income of the company. That has no counterpart in the Act of 1922. For these reasons I regret that we cannot accept the suggestion put forward by the hon. and learned Member for Watford (Sir D. Herbert).
§ Sir D. HERBERT
I beg to ask leave to withdraw my Amendment.
I do so with the object of saving time, but I should like to say that my reason for taking this course is that I do not think it is any use pressing the matter further. I am not convinced by the arguments of the Attorney-General, and I think I could show that they do not apply to the case which I have put before the Committee.
§ Amendment, by leave, withdrawn.
§ Sir L. WORTHINGTON-EVANS
I beg to move, in page 30, line 21, after the word "director" to insert the words:or the right to nominate a majority of the directors or the power to veto the appointment of a director.I move this Amendment with the intention of completing the conditions under which a person is deemed to have control of the company. I think Subsection (2, b) leaves an obvious gap, and I suggest the filling up of that gap by inserting the words of my Amendment.
§ Mr. PETHICK-LAWRENCE
The Chancellor of the Exchequer agrees that these words would be an advantage and he is pleased to accept this Amendment.
§ Amendment agreed to.
§ Mr. PETHICK-LAWRENCE
I beg to move, in page 30, line 22, at the beginning, to insert the word "he."
This is a purely drafting Amendment.
§ Sir L. WORTHINGTON-EVANS
We are now nearing the time when it was contemplated that we should finish Clauses 32 and 33. It is obvious that the Committee has been going on with the business as fast as it can, and not a minute has been wasted. A good many hon. Members on this side have abstained from moving their Amendments. There is only about one hour and a half left to dispose of Clauses 32 and 33, under the arrangement which we came to yesterday, and I suggest that that arrangement should be varied so that we can get Clause 33 before dinner and after that start with Clause 12.
§ The CHANCELLOR of the EXCHEQUER (Mr. Philip Snowden)
I have no objection to acceding to an extension of time for these Clauses, and if we get through Clauses 32 and 33 by 7.30 that will leave about four and a half hours for Clause 12. As I have already indicated, I do not think that Clause 12 is very controversial, and I hope it will be passed without any very lengthy discussion. I agree that we should conclude the discussion on Clauses 32 and 33 by 7.30 and then proceed to discuss Clause 12. If we finish Clause 12 earlier than midnight perhaps we might be able to proceed with some of the other Clauses.
§ Sir L. WORTHINGTON - EVANS: rose——
§ 6.0 p.m.
§ The CHAIRMAN
I cannot allow this discussion to continue on the Amendment. I will now put the Question on the Amendment, and, if the right hon. Gentleman desires to continue the discussion concerning how many of the new Clauses we will consider to-night he can put himself in order by moving to report Progress.
§ Amendment agreed to.
§ Sir L. WORTHINGTON-EVANS
I beg to move, "That the Chairman do report Progress, and ask leave to sit again."
I make this Motion to put myself in order, as I should like to say a word upon what the Chancellor of the Exchequer has just said. I am grateful to him for agreeing with us. It is obvious that we ought to discuss Clause 33 a little longer, and then we shall come to the postponed Clause 12. That Clause has never been read a Second time, and, therefore, there will be the Second Reading of the Clause before it goes into Committee, and I know that some of my hon. Friends want to review the provisions in regard to insurance in a Second Reading debate. That, of course, is quite right and proper. The Chancellor of the Exchequer has undoubtedly gone a long way towards meeting the objections which were raised when we discussed this matter before, but I think there are two or three Amendments which will have to be moved and discussed, and I hope that that discussion will be concluded certainly by midnight, 2206 and before time becomes so precious as to interfere with the next day. But whether we can get on to any other new Clause or not must depend upon progress, and, while we shall not delay progress at all, I cannot say that we shall be able to get any other new Clause. There was no such stipulation yesterday; there was no suggestion that we were going to take other Clauses unless we asked the Chancellor of the Exchequer to postpone Clause 12. If we asked him to postpone Clause 12, it was understood that the other new Clauses would be dealt with, but not on the top of Clause 12. The Committee, however, is getting on very well, and I hope that it will continue to do so, and that no time will be lost. Having made these remarks, Mr. Young, as soon as you have put the Question, I shall ask leave to withdraw my Motion.
§ Motion, by leave, withdrawn.
§ Mr. P. SNOWDEN
I beg to move, in page 30, line 24, at the end, to add the words:(3) This section shall not apply to shares which have, within the period of twelve months immediately preceding the death of the deceased, been the subject of dealings on a recognised stock exchange in the United Kingdom or been quoted in the official list of such a stock exchange.The purpose of this Amendment was explained by the Attorney-General in what I might almost describe as the general debate which took place earlier this afternoon, when we were discussing the valuation of securities. It was then argued that the basis of valuation should be the market value. I am going some distance towards meeting that suggestion by this Amendment, which I hope will commend itself to the Committee.
§ Sir H. BETTERTON
This Amendment deals, as the Chancellor of the Exchequer has said, with the point that I raised earlier in the afternoon. It does not, of course, go so far as we should have wished, since the exception is limited to shares in which there have been dealings on a stock exchange within the 12 months preceding the death; but, inasmuch as the Amendment is an 2207 instalment of what we asked, and the Chancellor of the Exchequer has met us to some small extent, we accept the Amendment.
§ Amendment agreed to.2208
§ Motion made, and Question put, "That the Clause, as amended, stand part of the Bill."
§ The Committee divided: Ayes, 255; Noes, 139.2209
|Division No. 408.]||AYES.||[6.6 p.m.|
|Adamson, Rt. Hon. W. (Fife, West)||Hall, F. (York, W. R., Normanton)||Matters, L. W.|
|Adamson, W. M. (Staff., Cannock)||Hall, G. H. (Merthyr Tydvil)||Messer, Fred|
|Addison, Rt. Hon. Dr. Christopher||Hall, Capt. W. P. (Portsmouth, C.)||Middleton, G.|
|Alpass, J. H.||Hamilton, Mary Agnes (Blackburn)||Millar, J. D.|
|Ammon, Charles George||Hardie, George D.||Montague, Frederick|
|Arnott, John||Harris, Percy A.||Morgan, Dr. H. B.|
|Aske, Sir Robert||Hartshorn, Rt. Hon. Vernon||Morley, Ralph|
|Attlee, Clement Richard||Hastings, Dr. Somerville||Morris, Rhys Hopkins|
|Ayles, Walter||Hayes, John Honry||Morrison, Herbert (Hackney, South)|
|Baker, John (Wolverhampton, Bliston)||Henderson, Rt. Hon. A. (Burnley)||Morrison, Robert C. (Tottenham, N.)|
|Baldwin, Oliver (Dudley)||Henderson, Arthur, Junr. (Cardiff, S.)||Mort, D. L.|
|Barr, James||Henderson, Thomas (Glasgow)||Moses, J. J. H.|
|Batey, Joseph||Henderson, W. W. (Middx., Enfield)||Mosley, Lady C. (Stoke-on-Trent)|
|Bellamy, Albert||Herriotts, J.||Mosley, Sir Oswald (Smethwick)|
|Benn, Rt. Hon. Wedgwood||Hirst, G. H. (York W. R. Wentworth)||Muggeridge, H. T.|
|Bennett, William (Battersea, South)||Hirst, W. (Bradford, South)||Murnin, Hugh|
|Benson, G.||Hoffman, P. C.||Nathan, Major H. L.|
|Bentham, Dr. Ethel||Horrabin, J. F.||Naylor, T. E.|
|Bevan, Aneurin (Ebbw Vale)||Hudson, James H. (Huddersfield)||Noel Baker, P. J.|
|Birkett, W. Norman||Hunter, Dr. Joseph||Oldfield, J. R.|
|Bondfield, Rt. Hon. Margaret||Hutchison, Maj.-Gen. Sir R.||Oliver, P. M. (Man., Blackley)|
|Bowen, J. W.||Isaacs, George||Palin, John Henry|
|Bowerman, Rt. Hon. Charles W.||Jenkins, W. (Glamorgan, Neath)||Paling, Wilfrid|
|Brockway, A. Fenner||John, William (Rhondda, West)||Palmer, E. T.|
|Brooke, W.||Johnston, Thomas||Parkinson, John Allen (Wigan)|
|Brothers, M.||Jones, F. Llewellyn- (Flint)||Perry, S. F.|
|Brown, C. W. E. (Notts, Mansfield)||Jones, J. J. (West Ham, Silvertown)||Pethick-Lawrence, F. W.|
|Brown, Ernest (Leith)||Jones, Rt. Hon. Leif (Camborne)||Phillips, Dr. Marion|
|Buchanan, G.||Jones, Morgan (Caerphilly)||Pole, Major D. G.|
|Burgess, F. G.||Jones, T. I. Mardy (Pontypridd)||Potts, John S.|
|Buxton, C. R. (Yorks. W. R. Elland)||Jowett, Rt. Hon. F. W.||Price, M. P.|
|Caine, Derwent Hall-||Jowitt, Rt. Hon. Sir W. A.||Quibell, D. J. K.|
|Cameron, A. G.||Kelly, W. T.||Ramsay, T. B. Wilson|
|Cape, Thomas||Kennedy, Thomas||Rathbone, Eleanor|
|Charleton, H. C.||Kenworthy, Lt.-Com. Hon. Joseph M.||Raynes, W. R.|
|Chater, Daniel||Kinley, J.||Richards, R.|
|Church, Major A. G.||Knight, Holford||Richardson, R. (Houghton-le-Spring)|
|Clarke, J. S.||Lambert, Rt. Hon. George (S. Molton)||Riley, Ben (Dewsbury)|
|Cluse, W. S.||Lang, Gordon||Riley, F. F. (Stockton-on-Tees)|
|Clynes, Rt. Hon. John R.||Lathan, G.||Ritson, J.|
|Cocks, Frederick Seymour||Law, Albert (Bolton)||Romeril, H. G.|
|Compton, Joseph||Law, A. (Rosendale)||Rosbotham, D. S. T.|
|Cove, William G.||Lawrence, Susan||Rowson, Guy|
|Daggar, George||Lawrie, Hugh Hartley (Stalybridge)||Russell, Richard John (Eddisbury)|
|Dallas, George||Lawther, W. (Barnard Castle)||Salter, Dr. Alfred|
|Davies, E. C. (Montgomery)||Leach, W.||Samuel Rt. Hon. Sir H. (Darwen)|
|Day, Harry||Lee, Frank (Derby, N. E.)||Samuel, H. Walter (Swansea, West)|
|Dudgeon, Major C. R.||Lee, Jennie (Lanark, Northern)||Sanders, W. S.|
|Ede, James Chuter||Lees, J.||Sandham, E.|
|Edmunds, J. E.||Lewis, T. (Southampton)||Sawyer, G. F.|
|Edwards, E. (Morpeth)||Llndley, Fred W.||Scrymgeour, E.|
|Egan, W. H.||Lloyd, C. Ellis||Scurr, John|
|Elmley, Viscount||Logan, David Gilbert||Sexton, James|
|Evans, Capt. Ernest (Welsh Univer.)||Longbottom, A. W.||Shaw, Rt. Hon. Thomas (Preston)|
|Foot, Isaac||Longden, F.||Sherwood, G. H.|
|Freeman, Peter||Lowth, Thomas||Shield, George William|
|Gardner, B. W. (West Ham, Upton)||Lunn, William||Shillaker, J. F.|
|Gardner, J. P. (Hammersmith, N.)||Macdonald, Gordon (Ince)||Shinwell, E.|
|George, Megan Lloyd (Anglesea)||McElwee, A.||Short, Alfred (Wednesbury)|
|Gibbins, Joseph||McEntee, V. L.||Simmons, C. J.|
|Gibson, H. M. (Lancs, Mossley)||McGovern, J. (Glasgow, Shettleston)||Simon, Rt. Hon. Sir John|
|Gill, T. H.||McKinlay, A.||Sinkinson, George|
|Gillett, George M.||MacLaren, Andrew||Sitch, Charles H.|
|Glassey, A. E.||Maclean, Neil (Glasgow, Govan)||Smith, Ben (Bermondsey, Rotherhithe)|
|Gossling, A. G.||MacNeill-Weir, L.||Smith, Frank (Nuneaton)|
|Graham, D. M. (Lanark, Hamilton)||Mander, Geoffrey le M.||Smith, H. B. Lees (Keighley)|
|Graham, Rt. Hon. Wm. (Edin., Cent.)||Mansfield, W.||Smith, Rennie (Penistone)|
|Gray, Milner||March, S.||Smith, Tom (Pontefract)|
|Greenwood, Rt. Hon. A. (Colne)||Marcus, M.||Smith, W. R. (Norwich)|
|Grenfell, D. R. (Glamorgan)||Markham, S. F.||Snell, Harry|
|Griffith, F. Kingsley (Middlesbro' W.)||Marley, J.||Snowden, Rt. Hon. Philip|
|Groves, Thomas E.||Marshall, Fred||Snowden, Thomas (Accrington)|
|Grundy, Thomas W.||Mathers, George||Sorensen, R.|
|Stamford, Thomas W.||Viant, S. P.||Whiteley, William (Blaydon)|
|Stephen, Campbell||Walker, J.||Wilkinson, Ellen C.|
|Strachey, E. J. St. Loe||Wallace, H. W.||Williams, David (Swansea, East)|
|Strauss, G. R.||Walters, Rt. Hon. Sir J. Tudot||Williams, Dr. J. H. (Llanelly)|
|Sullivan, J.||Watkins, F. C.||Wilson, C. H. (Sheffield, Attercliffe)|
|Sutton, J. E.||Watson, W. M. (Dunfermline)||Wilson, J. (Oldham)|
|Taylor, R. A. (Lincoln)||Wellock, Wilfred||Wilson, R. J. (Jarrow)|
|Thomas, Rt. Hon. J. H. (Derby)||Welsh, James (Paisley)||Winterton, G. E. (Leicester, Lough D'gh)|
|Toole, Joseph||Welsh, James C. (Cuatbridge)||Wise, E. F.|
|Tout, W. J.||West, F. R.||Wood, Major McKenzie (Banff)|
|Townend, A. E.||Westwood, Joseph|
|Turner, B.||White, H. G.||TELLERS FOR THE AYES.—|
|Vaughan, D. J.||Whiteley, Wilfrid (Birm., Ladywood)||Mr. Charles Edwards and Mr. A.|
|Acland-Troyte, Lieut-Colonel||Falle, Sir Bertram G.||O'Connor, T. J.|
|Albery, Irving James||Fermoy, Lord||O'Neill, Sir H.|
|Allen, Sir J. Sandeman (Liverp'l., W.)||Fielden E. B.||Ormsby-Gore, Rt. Hon. William|
|Allen, W. E. D. (Belfast, W.)||Forestier-Walker, Sir L.||Peake, Capt. Osbert|
|Amery, Rt. Hon. Leopold C. M. S.||Galbraith, J. F. W.||Penny, Sir George|
|Ashley, Lt.-Col. Rt. Hon. Wilfrid W.||Ganzoni, Sir John||Percy, Lord Eustace (Hastings)|
|Astor, Viscountess||Gibson, C. G. (Pudsey & Otley)||Pownall, Sir Assheton|
|Atholl, Duchess of||Gower, Sir Robert||Ramsbotham, H.|
|Atkinson, C.||Grattan-Doyle, Sir N.||Reid, David D. (County Down)|
|Baldwin, Rt. Hon. Stanley (Bewdley)||Greaves-Lord, Sir Walter||Remer, John R.|
|Berry, Sir George||Gretton, Colonel Rt. Hon. John||Rentoul, Sir Gervais S.|
|Betterton, Sir Henry B.||Guinness, Rt. Hon. Walter E.||Roberts, Sir Samuel (Ecclesall)|
|Birchall, Major Sir John Dearman||Hacking, Rt. Hon. Douglas H.||Rodd, Rt. Hon. Sir James Rennell|
|Bird, Ernest Roy||Hamilton, Sir George (Ilford)||Ruggles-Brise, Lieut.-Colonel E. A.|
|Boothby, R. J. G.||Hartington, Marquess of||Russell, Alexander West (Tynemouth)|
|Bourne, Captain Robert Croft||Harvey, Major S. E. (Devon, Tothes)||Salmon, Major I.|
|Bowyer, Captain Sir George E. W.||Haslam, Henry C.||Samuel, A. M. (Surrey, Farnham)|
|Bracken, B.||Henderson, Capt. R. R. (Oxf'd, Henley)||Sandeman, Sir N. Stewart|
|Braithwaite, Major A. N.||Herbert, Sir Dennis (Hertford)||Sassoon, Rt. Hon. Sir Philip A. G. D.|
|Brown, Brig.-Gen. H. C. (Berks, Newb'y)||Hills, Major Rt. Hon. John Waller||Smith, R. W. (Aberd'n & Kinc'dine, C.)|
|Buchan, John||Hoare, Lt.-Col. Rt. Hon. Sir S. J. G.||Smith-Carington, Neville W.|
|Bullock, Captain Malcolm||Horne, Rt. Hon. Sir Robert S.||Smithers, Waldron|
|Butler, R. A.||Howard-Bury, Colonel C. K.||Somerville, A. A. (Windsor)|
|Cadogan, Major Hon. Edward||Hudson, Capt. A. U. M. (Hackney, N.)||Southby, Commander A. R. J.|
|Cayzer, Sir C. (Chester, City)||Hurd, Percy A.||Spender-Clay, Colonel H.|
|Cayzer, Maj. Sir Herbt. R. (Prtsmth, S.)||Iveagh, Countess of||Stanley, Lord (Fylde)|
|Chadwick, Capt. Sir Robert Burton||King, Commodore Rt. Hon. Henry D.||Steel-Maitland, Rt. Hon. Sir Arthur|
|Chamberlain, Rt. Hn. Sir J. A. (Birm., W.)||Knox, Sir Alfred||Stuart, Hon. J. (Moray and Nairn)|
|Chamberlain, Rt. Hon. N. (Edgbaston)||Lamb, Sir J. Q.||Train, J.|
|Christie, J. A.||Lane Fox, Col. Rt. Hon. George R.||Tryon, Rt. Hon. George Clement.|
|Churchill, Rt. Hon. Winston Spencer||Law, Sir Alfred (Derby, High Peak)||Ward, Lieut.-Col. Sir A. Lambert|
|Colman, N. C. D.||Leighton, Major B. E. P.||Wardlaw-Milne, J. S.|
|Colville, Major D. J.||Lewis, Oswald (Colchester)||Warrender, Sir Victor|
|Courthope, Colonel Sir G. L.||Llewellin, Major J. J.||Waterhouse, Captain Charles|
|Crichton-Stuart, Lord C.||Locker-Lampson, Rt. Hon. Godfrey||Williams, Charles (Devon, Torquay)|
|Cranborne, Viscount||Long, Major Eric||Wilson, G. H. A. (Cambridge U.)|
|Croft, Brigadier-General Sir H.||Lymington, Viscount||Windsor-Clive, Lieut.-Colonel George|
|Crookshank, Capt. H. C.||Macquisten, F. A.||Winterton, Rt. Hon. Earl|
|Cunliffe-Lister. Rt. Hon. Sir Philip||Margesson, Captain H. D.||Withers, Sir John James|
|Dalrymple-White, Lt.-Col. Sir Godfrey||Marjoribanks, E. C.||Wolmer, Rt. Hon. Viscount|
|Davies, Dr. Vernon||Merriman, Sir F. Boyd||Womersley, W. J.|
|Davies, Maj. Geo. F. (Somerset, Yeovil)||Monsell, Eyres, Com. Rt. Hon. Sir B.||Wood, Rt. Hon. Sir Kingsley|
|Dawson, Sir Philip||Mobre, Sir Newton J. (Richmond)||Worthington-Evans, Rt. Hon. Sir L.|
|Dugdale, Capt. T. L.||Moore, Lieut.-Colonel T. C. R. (Ayr)|
|Edmondson, Major A. J.||Morrison, W. S. (Glos., Cirencester)||TELLERS FOR THE NOES.—|
|Elliot, Major Walter E.||Muirhead, A. J.||Sir Frederick Thomson and Major|
|Erskine, Lord (Somerset, Weston-s.-M.)||Newton, Sir D. G. C. (Cambridge)||the Marquess of Titchfield.|
|Everard, W. Lindsay||Nicholson, Col. Rt. Hn. W. G. (Ptrsf'ld)|