ESTATE DUTY (Hansard, 2 May 1944)

§ The Attorney-General
There are a number of rather complicated Clauses, which will not be found very easy reading, based on this Resolution, but their main purpose is to amend some Sections in the Finance Act of 1940 dealing with avoidance of Estate Duty. The form of avoidance which was dealt with by those Sections was as follows. A man transferred his estate or property to a company. He may have retained some shares in the company, but the benefits which he continued to draw from the company were in excess of the share interest which he had as the legal holder of shares on ordinary principles. When he died, therefore, the estate only paid on the share rights, whereas, in fact, he had been enjoying a much larger proportion of the company's income. Very broadly, that was dealt with by taking the amount of the income of the company he had had in the last three years before he died, and, supposing that that was one-third of the whole of the income 1247 of the company, then collecting tax on a third of the estate of the company. It has been found that the machinery which was then set up was defective in a number of ways.
In the main the alterations which these Clauses will make remove certain anomalies and hardships which were pointed out to my right hon. Friend the Chancellor of the Exchequer by the Law Society. It would not be right to say that the changes are all in favour of the taxpayer, because it would not be true. In some cases we are simplifying the machinery and making it, as we think, more just, but it will work in favour of the Revenue. Broadly speaking, it is the representation by the Law Society as to the injustice in certain cases of these provisions that has led to this Resolution and the Clauses which have been based on it. I do not think that the House would want me at this stage to go into any great details. Obvious anomalies have arisen on the way in which you calculate the portions of the income; other anomalies have arisen in the way the net income is calculated. Under the law as it is at present, you collect this amount of duty from the company and it has been represented, on behalf of shareholders, that that is unfair to them. Though the Clauses will be found rather difficult to follow, they do not raise any great point of principle. We are taking this rather complicated code and making it more efficient, workable and just, as a result of four years' experience.

§ Sir R. Tasker
It is very comforting to learn that the chief legal luminary agrees that these Income Tax provisions are complicated and difficult. I am absolutely fogged by them and do not understand them at all. I rise not to tell my right hon. and learned Friend about my own ignorance, but to call attention to the method by which Estate Duty is levied. The object of this Resolution apparently is to deal with the man who turns his estate into a company.

§ The Attorney-General
No, Sir.

§ Sir R. Tasker
Perhaps not quite so, but in general terms that is the object, and I want to draw attention to the man who does not wish to turn his estate into a company. The value of an estate. is determined by the district valuer. I will give my right hon. and learned Friend 1248 the case of a man who died in 1939. The district valuer valued his house at £1,250, upon which duty was levied and paid. The widow died in January of this year, when the district valuer said that the value of that house was £2,200. In the issue of the OFFICIAL REPORT, of 27th April, there appears the following: Mr. STOKES asked the Chancellor of the Exchequer whether any data exist whereby he can now ascertain what was the value of land as in March, 1939. The answer was in the affirmative. The Chancellor was further interrogated by the hon. Member for South Croydon (Sir H. Williams): Does the right hon. Gentleman keep the same data for the purpose of Death Duty valuations?— and the answer was Yes, Sir."—[OFFICIAL REPORT, 27th April, 1944; cols. 925–926, Vol. 399.] Where is the consistency between this class and what the Chancellor stated applied to the individual? I cannot see the difference between Mr. "A" being a private individual and Mr. "B" being a company or part of a company. This Resolution does not appear to go far enough and does not clear up the situation. What people want to-day is a common measure of justice but that is denied them. What is the remedy in the case that I am stating?

§ Mr. Deputy-Speaker (Major Milner)
I do not think the remarks of the hon. Member are relevant to the Resolution before the House, which clearly deals with the charge of duty in respect of the estates of a company. I do not think that that is the case of the hon. Member at all.

§ Sir R. Tasker
I am aware that I am treading on very thin ice. My right hon. and learned Friend said that he wanted to remove anomalies and hardships, and so do I. He wants to remove anomalies and hardships of a company and I want to remove anomalies and hardships as they apply to the individual. You have ruled that that is not in Order, Mr. Deputy-Speaker, I have incurred the frown of Jove, and I will therefore resume my seat. I give fair warning that the Government have not heard the last but only the beginning of my complaint.