HC Deb 17 June 1936 vol 313 cc1057-62

The provisions of Sub-section (2) of Section five of the Finance Act, 1894, as amended by Section fourteen (a) of the Finance Act, 1914 (which gives relief from a second payment of Estate Duty on the death of a surviving spouse in respect of settled property in cases where Estate Duty has already been paid on the death of the deceased spouse), shall apply and shall he deemed to have always applied notwithstanding the provisions of the Government of Ireland Act, 1920, and of any Order in Council made in pursuance of that Act, so as to afford relief in all cases against a second payment of Estate Duty in the United Kingdom irrespective of whether the prior payment of Estate Duty was made in Great Britain or Northern Ireland and whether the property was situate at the time of such prior payment in Great Britain or Northern Ireland.—[Sir H. O'Neill.]

Brought up, and read the First time.

6.5 p.m.


I beg to move, "That the Clause be read a Second time."

This proposed Clause deals with a point arising out of Estate Duty. The general law is that Death Duties are paid on the death of the individual, but there is one important exception to that general law. That is, that where either a husband or wife leaves property to the other spouse, on the death of the surviving spouse the Death Duties on the same property are not paid for a second time. Recently eases have arisen as between Great Britain and Northern Ireland where Death Duties have been demanded and paid on the death of a surviving widow or widower on property which has already paid Death Duties on the death of the original settlor. The result has been that there has been a definite penalisation of certain taxpayers within the United Kingdom. I should like to give the Committee an example of cases such as I know have occurred. A man owning certain property in Northern Ireland dies. Let us assume that the property consists of a certain amount of War Loan registered on the Belfast Register of War Loan, and of a certain number of bearer bonds deposited in a bank at Belfast. All that property is consequently Northern Ireland property. On the death of the owner, Death Duties are paid in Northern Ireland and the will provides that the property is to go to the widow for life and afterwards to certain other uses.

The widow comes to reside in London. Her trustees, never dreaming that they are doing anything to her prejudice, transfer the War Loan from the Belfast Register to the London Register and take the bearer bonds away from the bank in Belfast and deposit them in a bank in London. They do that thinking that it will be for the convenience of the widow. The widow dies and the Estate Duty Office in London claims Estate Duties on the property which had formerly paid Estate Duty in Northern Ireland on the death of the original settler. The trustees raise the point that the duties have already been paid on the death of the original settlor and that under the general law no further duties become payable on the death of the widow who had a life interest. The answer of the Estate Duty Office is that the original Death Duties were paid to the Northern Ireland Government and that they had no cognisance of that. Consequently, the duties are claimed by the British Estate Office. The rates of Estate Duty are identical. It is, of course, the fact that under the Government of Ireland Act, 1920, Estate Duty is a transferred tax; it was handed over to the Government of Northern Ireland. That Act also specifically provided against the double payment of Estate Duty.

I suggest that what has been taking place in the kind of example which I have given is a double payment of Estate Duty contrary to the whole spirit and intention of the general law and of the Government of Ireland Act, 1920. If the Government were to accept my proposal, the effect on the revenue would be insignificant. I imagine that very few of these cases have arisen and the amount of duty to be returned if my proposed Clause were carried, would be very small. As regards future claims, there will be very little loss to the revenue. In the case that I instanced the widow who came to live in London need never have had the War Loan transferred from Belfast to London. It could have remained in Belfast and the bearer bonds could have remained where they were. The widow could still have lived in London and drawn her income, so that the transfer that took place was unnecessary. It was merely done as a supposed convenience for her and in ignorance that the property would be thereby penalised.

I suggest, therefore, that once this point has been made public people will no longer transfer property during lifetime and, consequently, there will be no loss of revenue in future. If the principle of my suggested Amendment were accepted by the Government, there would have to be reciprocal and similar legislation by the Government of Northern Ireland. I have no doubt that my hon. and learned Friend in any case, whatever his view may be about this proposal, will have to consult with that Government, but I cannot imagine that he will find any difficulty there in putting right what I think is a definite injustice. The United Kingdom is one; Northern Ireland is just as much a part of it as is Wales and Scotland; and I hope that it will be possible for this injustice, which has quite fortuitously arisen, to be put right.

6.13 p.m.


I have listened with sympathy to the speech of my right hon. Friend. I think that he has foreseen some of the objections to a proposal to include this new Clause in the Bill at this stage. The first objection which occurs to me is the fact that under the Government of Ireland Act Estate Duty is a transferred tax and by Clause 29 (6) of the present Bill it is provided that such of the provisions of this Act as relate to matters with respect to which the Parliament of Northern Ireland have power to make laws shall not extend to Northern Ireland. I apprehend the result will be that this proposal could not be made reciprocal without some corresponding legislation on the other side. My right hon. Friend does not suggest that a one-sided bargain like this could be entered into. There is also the further grave objection to our taking a step which might affect the finances of Northern Ireland without consultation with that Government. There is the objection, too, that the Clause appears to be retrospective, and I view that with some apprehension. I cannot, therefore, advise the Committee to give the Clause a Second Reading. I undertake to say, however, that I will examine this matter with sympathy and will consult with the Government of Northern Ireland to see whether we cannot get the principle which the right hon. Gentleman has urged without some of the objections to which I have drawn attention. I hope that that will satisfy my right hon. Friend.

6.15 p.m.


I rise only to make one observation, which arises out of a remark made by the right hon. Member for Antrim (Sir H. O'Neill). He made the observation, which interested me very much, that the United Kingdom is one, and that Northern Ireland is as much a part of the United Kingdom as Scotland or Wales. I hope that he will continue to take that view. I hope he will take it when on any future occasion in this House he raises the Special Powers Act passed by the Northern Ireland Government, under which a state of virtual despotism exists there.

6.16 p.m.


The Financial Secretary has said that he will give sympathetic consideration to the proposal before us and I wish to ask him a question on one point. Do I understand that if a widow enjoys a life interest in a sum of money left in this way for a period of 20 or 30 years, it is still exempt from paying Estate Duty on her death? Surely after the lapse of such a period Death Duties ought to be paid on the money in precisely the same way as on any other money. Why, because it has been left on the terms of a life interest, and duty has been paid on it once, should it be exempt from duty in the future?

6.17 p.m.


The Financial Secretary has, I understand, expressed the view that on a matter of legislation such as this it is quite competent, and, indeed, proper for a Minister in this Government to get into negotiation with a Minister in the Northern Ireland Government with a view to concerting measures for the protection of the subject—the subject who is dead. I should like to ask him whether, when he is engaged in those negotiations, he will extend them to the welfare of the living subject in Northern Ireland as well as the dead subject, and whether he will make it a condition of coming to any arrangement by which the inhabitants of Northern Ireland get this advantage that the legislation at present in force in Northern Ireland with regard to the suppression of the subject shall be withdrawn.

6.19 p.m.


The hon. and learned Member for East Bristol (Sir S. Cripps) wishes to drag me from my own wide enough territory into a region where I am not so much at home. I think the only way in which I can deal with the point he has raised is to repudiate in toto all the suggestions he has made and to say that I cannot undertake to go outside my ordinary duties in regard to this question of the Estate Duty. In reply to what the hon. Member for Jarrow (Miss Wilkinson) said, the hon. Lady should understand that this exemption from Estate Duty applies only to settled property in the case of spouses, where duty had been paid on the death of a husband or wife. It is only in such circumstances that the Estate Duty is not again charged on death of the other spouse. That treatment is not out of accord with the fact that for purposes of Income Tax the incomes of a husband and wife are aggregated. The provision in this proposed new Clause applies only to Estate Duty on settled property, but in the general Income Tax law there is, of course, the general provision that for the purposes of taxation of income husbands and wives are regarded as one person.


When my hon. and learned Friend says that he will give this matter sympathetic consideration with a view, if possible, to remedying the grievance I take it that means that any existing demands which have been made and which are now outstanding will be held over until some decision is reached?


I am afraid I do not quite appreciate what my right hon. Friend means by that question. All that I have undertaken to do is to consult with the appropriate Department in the Government of Northern Ireland to see whether on this proposal—with the principle of which I have some sympathy, though I cannot accept the wording of the Clause—we cannot arrive at some reciprocal arrangement which might make it possible to give effect to it. That is all I can undertake to do, and my undertaking extends to nothing beyond the contents of the Clause.

6.22 p.m.


Will my hon. and learned Friend hasten these discussions with the Northern Ireland Government so that, if possible, we may get something on the Report stage which will remedy what, quite clearly, is an accident in the law creating an injustice? It is clearly a technical flaw which should be remedied. I do not ask him to give an undertaking, but I hope that he will go into the matter with the greatest promptitude.

6.23 p.m.


A promise has been given by the Financial Secretary which I hope will be clearly understood not only in its fullness but in its restrictions. I take it that the Financial Secretary, by giving an undertaking to go into this matter, has not pledged himself to deal with this matter retrospectively.


One of the objections to which I drew attention was the element of retrospection in the Clause.


I thought it was only fair that the Clause should be retrospective. This is a matter which has only arisen within the last year. In view of what my hon. and learned Friend has said as to giving the subject sympathetic consideration I ask leave to withdraw the Clause.

Motion and Clause, by leave, withdrawn.