HC Deb 22 July 1930 vol 241 cc2045-55

Amendment made: In page 33, line 19, leave out the word "proportional," and insert instead thereof the words "computed by reference."—[Mr. P. Snowden.]


I beg to move, in page 33, line 26, after the word "be," to insert the words: the fair intrinsic value to the deceased at the date of death. It may be convenient to allow this Amendment to be discussed together with the next Amendment, to insert, at the end of the following line the words: and all other, if any, relevant considerations. The two read entirely as one. The Chancellor of the Exchequer and the learned Attorney-General will remember that we had a very long discussion on the points raised by this Amendment on the Committee stage. I am afraid that in the Committee stage occasionally we were not all of us so good-tempered as we have generally been throughout the Report stage, and I am inclined to think that the discussion on this particular point was, perhaps, rather spoilt by heated arguments during the latter part of it. I believe that the Chancellor of the Exchequer and the learned Attorney-General really came to the conclusion that there was some point here which ought to be dealt with and met in some way.

The learned Attorney-General will remember that I pointed out, as an example of the hardship which might happen under this Clause, the case of an employé of a company who was given shares in a company paying a very large dividend and which, on their intrinsic value, were worth £4 or £5 a share, which his representatives upon his death were bound to dispose of to nominees of the company, a benevolent fund of the company, or something of the kind, at their par value of 20s. Under this Clause, as it stands, that fact could not be taken into consideration. The shares will have to be valued by reference to the value of the total assets of the company, and that particular consideration—a remarkably relative consideration—would not be considered or taken into account at all. If the words in these Amendments are inserted, the Revenue will not lose duty in cases where they fairly ought to get it, and they will be protecting the subject against the chance of a very serious miscarriage of justice. I do not want to say more about the matter, as I have no doubt that the learned Attorney-General remembers what took place on the Committee stage.


Looking at this Amendment, I am bound to say that I really fail to understand what the effect of it would be. Is it intended—if I may ask the hon. Member for Watford (Sir D. Herbert)—that the value to the deceased has to be assessed at the moment before death or at the moment after death? May I point out what a very great difference it might well make? One of the illustrations which we had given to us was the fact that sometimes shares are granted to a person and the understanding of the arrangement under the Articles is, that as long as that person is alive, the particular share shall be a management share which controls the company. On the death of that person, that share loses its peculiar privileges and sinks down to the level of an ordinary share. Supposing you are to value that share to the deceased at the date of death, all sorts of complications will arise. Valuing it at present, you would undoubtedly have the value as an ordi- nary share only. Under the Amendment of the hon. Member it would be at best very questionable whether you would not have to value it on the assumption that it still had attached to it the right of control. It might impose very great hardship.

We see no reason to depart from the words we have adopted. We think that the words are better than those of the Amendment. We think, if I may say so, that the words which the hon. Member has inserted in his Amendment are of exceedingly doubtful meaning. Those who are very frequently advising me in these matters have no clear idea as to what may be the effect of it. Although the hon. Member may have some view of what the words mean—he will forgive my saying so—it does not settle the matter. These words are exceedingly ambiguous, and may work very hardly upon the taxpayer. In the circumstances, the Chancellor of the Exchequer cannot possibly see his way to accept these words.

Amendment negatived.


I beg to move, in page 33, line 27, at the end to insert the words, "and all other, if any, relevant considerations."

I said that I would not discuss this Amendment at any length, as I have already referred to it.

Mr. DEPUTY-SPEAKER (Mr. Robert Young)

I called upon the hon. Member to move his Amendment in line 35.


I understood you were going to allow me formally to move the second Amendment which is on line 27.


I understood Mr. Speaker to say that one Amendment was covered by the other.


I beg to move, in page 33, line 35, after the word "controls," to insert the words: by ownership in his own name or in the name of a nominee. I am rather afraid we shall have the same experience if the learned Attorney-General replies on this Amendment as we had on the last two Amendments, namely, that he will not attempt to answer the serious arguments which we have put forward in favour of the principle of these Amendments. He endeavours to slide off on side issues of no importance, and leaves the real principle at stake absolutely unanswered. I invite him on this Amendment to pursue a different course, and to say something, if he can do so, in answer to the arguments I shall adduce in favour of the principle of this Amendment. I would ask him, instead of sliding off by ridiculing the wording of this Amendment, to give us his opinion on the principle involved, and if he thinks that these words are unsatisfactory, to suggest some revision of words which will meet the point. There is some need for an Amendment of some sort here, and I found my argument upon the actual wording of the Clause in question. It is, apparently, thoght necessary to define what is meant by the "control of a company." The Clause, therefore, says that: For the purposes of this section 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. Now what is the meaning of the word "controls"? I want it to be defined here. We know what the word "owns" means, but the word "controls," unless it is defined in some way or other, may mean all sorts of things. The Attorney-General may have control over my property because of my great love for him and my anxiety to meet his wish to do what he chooses with my property. That would be one form of control. There are other very different forms of control. A man may control shares by virtue of his eloquence at a company meeting, where he turns the votes of the shareholders. That, surely, is not the kind of control that is meant. I would ask the Attorney-General to tell us when he means control of shares whether he means control in any other way than by ownership in the man's own name or in the name of a nominee. If he does mean any other sort of control, I ask that he should add it to the suggested words, in order that we may have a Clause which can be understood. I feel certain that any Judge of the Chancery Division would grumble very much at being asked to say what was the meaning in an Act of Parliament of a man controlling shares, if he was given no sort of indica- tion as to what kind of control was meant. I hope, therefore, that on this occasion our very amateurish attempts at making some improvement in the draft may be met in a kindly spirit by the Attorney-General, and I would ask him to try to improve the wording of the Bill in this particular respect.


I beg to second the Amendment.

It seems to me that the Amendment which has been very carefully thought out, would add a little clarity to the Bill. I do not wish to say anything about the way in which the Attorney-General discussed the other Amendment. I realise that he is in great danger of being affected, from the position in which he sits. I know of no other way in which you can control a company except by the ownership of definite shares in the company, or by having the shares in the name of a nominee. I know of no other way in which you can definitely control a company in such a way that the control may be taxable. That is what we are dealing with. It is no good saying that a man can control a company by his eloquence. You cannot tax eloquence. There is no tax on eloquence, fortunately for some of us in this House. I have taken very little part in the debate in connection with company matters, and I am not sure that my feelings are always as expressed on this side of the House; but I do say that, so far as this matter is concerned, we have put down a reasonable Amendment, which defines clearly what are the forms of control which are meant and which do lead to something which can be taxed. For that reason I think that, in the interests of clarity in the Bill, and particularly after the able exposition that we have had of the Amendment, the Government would be well advised to accept the Amendment. I can conceive no reason why the Amendment should not be accepted. Not only would it give clarity to the Bill, but it would be likely to save in the immediate future a vast number of disputes and a great deal of work in the Law Courts.


I am sorry that on the last two Amendments I completely failed to satisfy the hon. Member for Watford (Sir D. Herbert), or to answer the questions which he put to me. It may be that he is acting under the impression that any question which he asks is unanswerable. Lest that should be so, I would like to advise him to take note of the advice that the hon. Member for Leith (Mr. E. Brown) gave to him that he should cultivate a sense of humour.


When my sense of humour led me to laugh, a few minutes ago, the Attorney-General protested most unhumorously.


The hon. Member proposed an Amendment, and the speech which he made is a typical example of the difficulty which anybody has in answering him. He put down an Amendment, which the hon. Member for Torquay (Mr. C. Williams) tells us is a very carefully thought out Amendment, with a perfectly clear legal effect, as he will realise it if he looks at the Amendment, and he then made a speech which bore no relation whatever to the Amendment or to the effect which the Amendment would have. We all know, all of us except the hon. Member for Torquay, that one of the commonest ways—from my experience it is the commonest way—in which control is now exercised is not by the ownership of shares, either in your own name or in the name of a nominee, but by entering into contracts with people who own shares, that those people shall vote in a particular way. It is very common in the City to find a group of people, each of whom owns beneficially a large block of shares, entering into contracts together to follow the method of voting of some particular member. That is a very common way in which a particular member can get control—a control which does not depend upon ownership of shares, but depends upon the fact that he has contracts with other people who own shares. Our Clause in seeking to deal with control says: by virtue of the shares which he controls he has control of more than half the voting power of the company. The hon. Member for Watford desires to qualify that by the insertion of the words: which he controls by ownership in his own, name or in the name of a nominee. That is to say, he wants to limit it to one particular class of control, the control that springs from ownership, and for some reason he wants to leave out the more common class of control, the control that springs from contracts with other people. That is the Amendment, or the effect of the Amendment, which the hon. Member moved, but the speech which he made borne no relation whatever to that Amendment and did not indicate the kind of control that we are dealing with here. He desires control limited to control by ownership, and that we should not have regard to the control which springs from contracts. My right hon. Friend would not be willing to limit control to control springing from ownership. It seems to him and to me that it matters not one whit from what source the control comes, so long as you have the control there.

The hon. Member for Watford wants me to define control. I cannot define control. Many ideas may materialise, without one being able to define them. The hon. Member cannot define a heap of sand, but he knows it when he sees it. The hon. Member for Torquay exploded one of the hon. Member's theories, that control comes from eloquence. The

type of control is the control which this Clause acknowledges, the control of voting power, and so long as you have that control, whether by ownership, whether by contract or whether you hold your shares in your own name or in the name of a nominee, so long as you have the power to direct the policy of the company by means of votes, that is control, without attempting further to limit the definition. The word which is used in the Clause is not a new one. It is not being used for the first time in an Act of Parliament. It was used by a previous Chancellor of the Exchequer in an Act of Parliament and there has been no criticism of it, so far as I know, and I cannot see why we cannot use the word in that sense. I do not think that any Judge will have any difficulty in coming to a conclusion on the question of fact as to whether a man did or did not control the company.

Question put, "That those words be there inserted in the Bill."

The House divided: Ayes, 120; Noes, 258.

Division No. 451.] AYES. [8.56 p.m.
Acland-Troyte, Lieut.-Colonel Eden, Captain Anthony O'Connor, T. J.
Albery, Irving James Edmondson, Major A. J. O'Neill, Sir H.
Allen, Sir J. Sandeman (Liverp'l., W.) Erskine, Lord (Somerset, Weston-s-M.) Peto, Sir Basil E. (Devon, Barnstaple)
Allen, Lt.-Col. Sir William (Armagh) Everard, W. Lindsay Pownall, Sir Assheton
Amery, Rt. Hon. Leopold C. M. S. Falle, Sir Bertram G. Ramsbotham, H.
Ashley Lt.-Col. Rt. Hon. Wilfrid W. Ferguson, Sir John Rawson, Sir Cooper
Atholl, Duchess of Fermoy, Lord Reid, David D. (County Down)
Atkinson, C. Fielden, E. B. Richardson, Sir P. W. (Sur'y, Ch'te'y)
Baldwin, Rt. Hon. Stanley (Bewdley) Ford, Sir P. J. Roberts, Sir Samuel (Ecclesall)
Balfour, Captain H. H. (I. of Thanet) Forestier-Walker, Sir L. Ross, Major Ronald D.
Balniel, Lord Galbraith, J. F. W. Ruggles-Brise, Lieut.-Colonel E. A.
Betterton, Sir Henry B. Ganzoni, Sir John Samuel, A. M. (Surrey, Farnham)
Bevan, S. J. (Holborn) Gibson, C. G. (Pudsey & Otley) Sandeman, Sir N. Stewart
Birchall, Major Sir John Dearman Glyn, Major R. G. C. Shepperson, Sir Ernest Whittome
Bird, Ernest Roy Greene, W. P. Crawford Sinclair, Col. T. (Queen's U., Belfst)
Bourne, Captain Robert Croft Grenfell, Edward C. (City of London) Smith, Louis W. (Sheffield, Hallam)
Bowyer, Captain Sir George E. W. Gunston, Captain D. W. Smith-Carington, Neville W.
Bracken, B. Hacking, Rt. Hon. Douglas H. Smithers, Waldron
Braithwaite, Major A. N. Hammersley, S. S. Somerville, A. A. (Windsor)
Brown, Col. D. C. (N'th'l'd., Hexham) Haslam, Henry C. Southby, Commander A. R. J.
Brown, Brig.-Gen. H. C. (Berks, Newb'y) Henderson, Capt. R. R. (Oxf'd, Henley) Stanley, Maj. Hon. O. (W'morland)
Buckingham, Sir H. Herbert, Sir Dennis (Hertford) Sueter, Rear-Admiral M. F.
Burton, Colonel H. W. Howard-Bury, Colonel C. K. Thomas, Major L. B. (King's Norton)
Butler, R. A. Hunter-Weston, Lt.-Gen. Sir Aylmer Thomson, Sir F.
Carver, Major W. H. Hurd, Percy A. Titchfield, Major the Marquess of
Cautley, Sir Henry S. Iveagh, Countess of Todd, Capt. A. J.
Cayzer, Maj. Sir Herbt. R. (Prtsmth, S.) Jones, Sir G. W. H. (Stoke New'gton) Tryon, Rt. Hon. George Clement.
Chadwick, Capt. Sir Robert Burton King, Commodore Rt. Hon. Henry D. Turton, Robert Hugh
Chapman, Sir S. Lamb, Sir J. Q. Ward, Lieut.-Col. Sir A. Lambert
Christie, J. A. Leighton, Major B. E. P. Waterhouse, Captain Charles
Cobb, Sir Cyril Lewis, Oswald (Colchester) Wayland, Sir William A.
Croft, Brigadier-General Sir H. Llewellin, Major J. J. Wells, Sydney R.
Crookshank, Capt. H. C. Lymington, Viscount Williams, Charles (Devon, Torquay)
Croom-Johnson, R. P. Macdonald, Capt. P. D. (I. of W.) Wilson, G. H. A. (Cambridge U.)
Culverwell, C. T. (Bristol, West) Maitland, A. (Kent, Faversham) Windsor-Clive, Lieut.-Colonel George
Dalrymple-White, Lt.-Col. Sir Godfrey Makins, Brigadier-General E. Withers, Sir John James
Davies, Dr. Vernon Merriman, Sir F. Boyd Womersley, W. J.
Davies, Maj. Geo. F. (Somerset, Yeovil) Monsell, Eyres, Com. Rt. Hon. Sir B. Young, Rt. Hon. Sir Hilton
Dixey, A. C. Morden, Col. W. Grant
Duckworth, G. A. V. Morrison, W. S. (Glos., Cirencester) TELLERS FOR THE AYES.—
Dugdale, Capt. T. L. Muirhead, A. J. Sir George Penny and Sir Victor
Adamson, Rt. Hon. W. (Fife, West) Haycock, A. W. Noel Baker, P. J.
Adamson, W. M. (Staff., Cannock) Hayday, Arthur Noel-Buxton, Baroness (Norfolk, N.)
Addison, Rt. Han. Dr. Christopher Hayes, John Henry Oldfield, J. R.
Aitchison, Rt. Hon. Craigie M. Henderson, Arthur, Junr. (Cardiff, S.) Oliver, George Harold (Ilkeston)
Alexander, Rt. Hon. A. V. (Hillsbro') Henderson, Thomas (Glasgow) Oliver, P. M. (Man., Blackley)
Ammon, Charles George Henderson, W. W. (Middx., Enfield) Palin, John Henry
Arnott, John Herriotts, J. Palmer, E. T.
Aske, Sir Robert Hirst, G. H. (York W. H. Wentworth) Parkinson, John Allen (Wigan)
Attlee, Clement Richard Hirst, W. (Bradford, South) Perry, S. F.
Baker, John (Wolverhampton, Bilston) Hoffman, P. C. Peters, Dr. Sidney John
Barr, James Hollins, A. Pethick-Lawrence, F. W.
Batey, Joseph Hopkin, Daniel Phillips, Dr. Marion
Benn, Rt. Hon. Wedgwood Hore-Belisha, Leslie Potts, John S.
Bennett, Capt. Sir E. N. (Cardiff C.) Horrabin, J. F. Price, M. P.
Benson, G. Hudson, James H. (Huddersfield) Quibell, D. F. K.
Bentham, Dr. Ethel Hunter, Dr. Joseph Ramsay, T. B. Wilson
Birkett, W. Norman Isaacs, George Raynes, W. R.
Blindell, James Jenkins, W. (Glamorgan, Neath) Richards, R.
Bondfield, Rt. Hon. Margaret John, William (Rhondda, West) Richardson, R. (Houghton-le-Spring)
Bowen, J. W. Johnston, Thomas Riley, F. F. (Stockton-on-Tees)
Bowerman, Rt. Hon. Charles W. Jones, Rt. Hon. Leif (Camborne) Ritson, J.
Broad, Francis Alfred Jones, Morgan (Caerphilly) Roberts, Rt. Hon. F. O. (W. Bromwich)
Bromfield, William Jowett, Rt. Hon. F. W. Romeril, H. G.
Bromley, J. Jowitt, Sir W. A. (Preston) Rosbotham, D. S. T.
Brooke, W. Kedward, R. M. (Kent, Ashford) Rowson, Guy
Brothers,. M. Kelly, W. T. Salter, Dr. Alfred
Brown, C. W. E. (Notts. Mansfield) Kennedy, Thomas Sanders, W. S.
Brown, Ernest (Leith) Kinley, J. Sawyer, G. F.
Brown, Rt. Hon. J. (South Ayrshire) Kirkwood, D. Scrymgeour, E.
Brown, W. J. (Wolverhampton, West) Lang, Gordon Scurr, John
Buchanan, G. Lathan, G. Sexton, James
Burgess, F. G. Law, Albert (Bolton) Shaw, Rt. Hon. Thomas (Preston)
Buxton, C. R. (York. W. R. Elland) Law, A. (Rosendale) Shepherd, Arthur Lewis
Caine, Derwent Hall- Lawrence, Susan Sherwood, G. H.
Cameron, A. G. Lawrie, Hugh Hartley (Stalybridge) Shield, George William
Carter, W. (St. Pancras, S. W.) Lawther, W. (Barnard Castle) Shillaker, J. F.
Charleton, H. C. Leach, W. Shinwell, E.
Clarke, J. S. Lee, Frank (Derby, N. E.) Short, Alfred (Wednesbury)
Cluse, W. S. Lee, Jennie (Lanark, Northern) Simmons, C. J.
Clynes, Rt. Hon. John R. Lees, J. Sinkinson, George
Cocks, Frederick Seymour Lewis, T. (Southampton) Sitch, Charles H.
Cove, William G. Lloyd, C. Ellis Smith, Ben (Bermondsey, Rotherhithe)
Cowan, D. M. Logan, David Gilbert Smith, Frank (Nuneaton)
Daggar, George Longbottom, A. W. Smith, H. B. Lees- (Keighley)
Dallas, George Longden, F. Smith, Tom (Pontefract)
Davies, E. C. (Montgomery) Lovat-Fraser, J. A. Smith, W. R. (Norwich)
Davies, Rhys John (Westhoughton) Lowth, Thomas Snell, Harry
Day, Harry Lunn, William Snowden, Rt. Hon. Philip
Denman, Hon. R. D. Macdonald, Gordon (Ince) Snowden, Thomas (Accrington)
Dukes, C. MacDonald, Rt. Hon. J. R. (Seaham) Sorensen, R.
Duncan, Charles MacDonald, Malcolm (Bassetlaw) Stamford, Thomas W.
Ede, James Chuter McElwee, A. Stephen, Campbell
Edge, Sir William McEntee, V. L. Stewart, J. (St. Rollox)
Edmunds, J. E. McGovern, J. (Glasgow, Shettleston) Strachey, E. J. St. Loe
Edwards, C. (Monmouth, Bedwellty) McKinlay, A. Sullivan, J.
Edwards, E. (Morpeth) MacLaren, Andrew Sutton, J. E.
Egan, W. H. McShane, John James Taylor, R. A. (Lincoln)
Elmley, Viscount Mansfield, W. Taylor, W. B. (Norfolk. S. W.)
Forgan, Dr. Robert March, S. Thomas, Rt. Hon. J. H. (Derby)
Gardner, B. W. (West Ham, Upton) Marcus, M. Thorne, W. (West Ham, Plaistow)
George, Major G. Lloyd (Pembroke) Markham, S. F. Thurtle, Ernest
Gibson, H. M. (Lancs, Mossley) Marley, J. Tinker, John Joseph
Gill, T. H. Marshall, Fred Tout, W. J.
Gillett, George M. Mathers, George Townend, A. E.
Glassey, A. E. Matters, L. W. Trevelyan, Rt. Hon. Sir Charles
Gossling, A. G. Melville, Sir James Vaughan, D. J.
Gould, F. Messer, Fred Viant, S. P.
Graham, D. M. (Lanark, Hamilton) Middleton, G. Walkden, A. G.
Graham, Rt. Hon. Wm. (Edin., Cent.) Montague, Frederick Walker, J.
Gray, Milner Morgan, Dr. H. B. Wallace, H. W.
Greenwood, Rt. Hon. A. (Colne). Morley, Ralph Wallhead, Richard C.
Grenfell, D. R. (Glamorgan) Morris, Rhys Hopkins Watkins, F. C.
Griffith, F. Kingsley (Middlesbro' W.) Morrison, Herbert (Hackney, South) Watson, W. M. (Dunfermline).
Griffiths, T. (Monmouth, Pontypool) Morrison, Robert C. (Tottenham, N.) Wedgwood, Rt. Hon. Josiah
Groves, Thomas E. Mort, D. L. Wellock, Wilfred
Gundy, Thomas W. Moses, J. J. H. Welsh, James (Paisley)
Hall, F. (York. W. R., Normanton) Mosley, Sir Oswald (Smethwick) Welsh, James C. (Coalbridge)
Hall, G. H. (Merthyr Tydvil) Muff, G. West, F. R.
Hall, Capt. W. G. (Portsmouth, C.) Muggeridge, H. T. Westwood, Joseph
Hamilton, Mary Agnes (Blackburn) Murnin, Hugh White, H. G.
Harris, Percy A. Nathan, Major H. L. Whiteley, Wilfrid (Birm., Ladywood)
Hartshorn, Rt. Hon. Vernon Naylor, T. E. Whiteley, William (Blaydon)
Hastings, Dr. Somerville Newman, Sir R. H. S. D. L. (Exeter) Wilkinson, Ellen C.
Williams, David (Swansea, East) Wilson, J. (Oldham) Young, R. S. (Islington, North)
Williams, Dr. J. H. (Llaneily) Wilson, R. J. (Jarrow)
Williams, T. (York, Don Valley) Winterton, G. E. (Leicester, Loughb'gh) TELLERS FOR THE NOES.—
Wilson, C. H. (Sheffield, Attercliffe) Wright, W. (Rutherglen) Mr. A. Barnes and Mr. Paling.