CLAUSE 26.—(Estate Duty in respect of annuities and other interests.) (Hansard, 5 June 1934)

§ Mr. SPENS
I beg to move, in page 16, line 1, to leave out from "ascertainable," to the end of the Clause and to insert: on the footing that a beneficial interest is not to be treated as having accrued or arisen until and except so far as it confers an immediate right to beneficial enjoyment. Provided that this section shall not apply to a beneficial interest accruing or arising under a disposition of property made by a person who died before the passing of this Act, if no estate duty was paid in respect of the beneficial interest before the eighth day of December, nineteen hundred and thirty-two. This Clause has been inserted to endeavour to rectify the effect of a decision in a recent case. The object of the Clause is to enable the revenue to tax at the ascertained value any beneficial interest which arises or accrues on the death of a person who has made a disposition of property in favour of other persons during his lifetime. No difficulty arises in respect of beneficial interest which arises for the first time on a person's death, for instance, the beneficial interest in policy money which did not exist in the lifetime of the person who takes out the policy, 906 but difficulty has arisen in respect of interest which accrues on something which already exists before the death. In this particular case the effect of the decision of the House of Lords has been that where a beneficial interest accrues on the death, only that portion of the additional interest, that is to say, the difference between the interest which falls into possession on the death and that which the person had in settlement before death, is to be taxable.
The object of this Clause is to make the total interest in the property which falls into possession on the death, taxable, and it is suggested that it can be done by a Clause stating that the property shall be valued and so always be deemed to have been ascertainable without regard to any expectant interest the beneficiary may have had therein before death. The technical point is that "an expectant interest" is not a phrase which, in the view of myself and many others, is really definite. What the Crown wants to do is to tax the actual beneficial interest to which an immediate right of beneficial enjoyment arises at the death.
In my submission the words of the Amendment will have the effect of 907 enabling the Crown on each case to tax, to the full value, the beneficial interest to which an immediate right of enjoyment arises on the death, and that is the intention of the Clause, and of the proviso, to carry out the promise given by the learned Attorney-General, that the particular subjects who were successful in the House of Lords case should not suffer as a result of the new Clause. But having regard to the fact that paragraph (a) is put in, and having regard to the actual circumstances of that case, if paragraph (a) remains those particular subjects will not get any benefit whatever out of the proviso, because the facts in that case were these: A father many years ago transferred to trustees for the benefit of three children a fairly substantial sum of property. He denied himself every shape and sort of beneficial interest; but he did reserve during his lifetime the power to direct by writing any part of the income or capital to be paid over to any of these children. But until his death the children took no absolute defined interest either in capital or income. The effect of paragraph (a), if it is left in, will give no benefit at all to those particular children, whose interest the Crown can claim to tax in full on the basis on which the Crown made this claim. In those circumstances I suggest other words, and seek to strike out words to which it is difficult to attach a meaning. If hon. Members will look at the proviso they will see it says: In a case where the deceased died before the passing of this Act, this section shall not apply to a beneficial interest accruing or arising under a disposition of property which was in possession during the lifetme of the deceased. The words have no meaning at all, in my submission. It goes on: and produced income falling to be dealt with under the disposition during his lifetime. Of course every disposition of property produces some income to be dealt with under the disposition, but in my submission the proviso, as worded, is not easy to understand, and in any event it does not except from the operation of the Clause the particular subjects for whose benefit the proviso was specially intended and inserted.

§ The SOLICITOR-GENERAL (Sir Donald Somervell)
This is a benevolent Amendment in that it is to enable, what I think is common ground between my hon. and learned Friend and myself, a desirable intention to be carried out. My hon. and learned Friend thinks that the words suggested in his Amendment would carry out our common intention better than the words in the Clause. I cannot accede to that view, at any rate, at the moment. I listened attentively to what he said. I think that the words he has used might be construed as merely referring to the time at which the beneficial interest is to be treated as having accrued and might entirely pass by what is the real matter it is desired should be put right, namely, how that beneficial interest shall be valued and whether there shall be any deduction. There is further the question whether these words would apply to a trust in favour of a class where it might be said that there was a beneficial interest. I do not want to go into the matter at too great a length. I assure him that what he has said will carefully be considered, and, if it leads us to think that our words do not carry out the purpose intended, we will certainly reconsider them.
As far as the second part of the Amendment is concerned, the attitude I have taken up is very similar. I do not accept at the moment at all his argument that paragraph (a), for the reasons which he stated, would cut out the purpose of the Addison case. I do not think that in that case any body was indefeasibly entitled under the disposition. Here, again, I hope that the Committee will not feel that it is in any way disrespectful to them to treat this highly technical matter in this way. We will consider the wording of the Amendment, and if any improvements can be made we will certainly carry them out. I shall be very glad to discuss-the matter with my hon. and learned Friend at any time, and in view of that fact, I hope that he will see his way to-withdraw the Amendment.

§ Mr. SPENS
I confess that I am not particularly interested in the first part of my Amendment, which is to help the-Crown to tax what they hope to tax, but 909 I am very interested in the second. If the learned Solicitor-General will assist me to arrive at a form of words which will make the matter clear, I would beg to ask leave to withdrawn the Amendment.