SETTLEMENTS AND DISPOSITIONS (Hansard, 21 April 1943)

§ Mr. Benson
May we have an explanation of this?

§ The Attorney-General (Sir Donald Somervell)
There are certain Sections of the Finance Acts, 1922, 1936 and 1938 which were designed to prevent tax-evading schemes involving settlements from producing the tax results which their devisers intended. I think it is quite clear from the Sections that they are applicable, and were certainly intended to be applicable, in cases where there was more than one settlor, that is to say, that Parliament never intended that you could, as it were, get round the clear intention of the Section by getting a friend to collaborate and having in fact two settlements in one document. In a recent case which came before the Courts, and which of course will not in any way be disturbed by this declaratory legislation, the point was suggested, though it was not the point that decided in the case that there might be difficulties in applying some of the provisions of this Section to cases where there were two settlors and that they were not quite clear as to how you applied them. My right hon. Friend, therefore, proposes to put forward in the Finance Bill a declaratory Clause laying down that these Sections in the earlier Acts do apply, and always have applied, to cases where there was more than one settlor, and it is also intended to set out in some detail how they 1781 apply when there is more than one settlor.
As far as that part of the Clause is concerned, it will be designed to make it clear that you do not, as it were, tax the same income twice over. That is to say, if you have two settlors, each will only be concerned with that part of the property in the settlement, and the income from it, which is attributable to him. That, plainly, is the fair way of dealing with it, and I think would have been the result, perhaps must have been the result, of any litigation on the point assuming that the Crown had tried to put forward any other view, but it is desirable that it should be cleared up, and that is the particular nature of the problem with which the Clause will deal.

§ Mr. Benson
I understood the right hon. and learned Gentleman to say that this declaration was felt to be necessary owing to some indecision on the matter in the courts.

§ The Attorney-General
In the course of an argument in a case, though it was not the point that was decided, it was suggested that some of these provisions might not apply if there was more than one settlor. The practice has always been to the contrary, but doubt emerged in the course of the argument, and that is why the Clause is put forward.

§ Mr. Benson
The point that interests me is rather this, that when one gets legislation dealing with tax avoidance, it is generally the outcome of the experience of the Board of Inland Revenue, an experience perhaps two, three or four years old when eventually it reaches the House. When I saw more tax-avoidance legislation down, I wondered how far it was based on experience of actual avoidance before or during the period of the war. It is pure curiosity on my part, but I was wondering how far the effect of the war had nullified the savage increase in Surtax and how far Surtax payers were now, in the stress of war, bearing that tax with less wriggling than before the war.

§ The Attorney-General
That raises a very general issue, while this is a very minor point. The Inland Revenue always assumed that these provisions covered cases where there was more than one settlor, but doubt was suggested in argument, and, on looking at it we thought it 1782 desirable to clear the matter up by a declaratory Clause.