HC Deb 06 July 1949 vol 466 cc2293-302

Where any property passing on a death in respect of which estate duty is payable is situate outside the United Kingdom and by reason of any restrictions imposed upon the transfer of money or other securities from the place in which such property is situate it is not possible to obtain from that place money or securities representing the amount of the estate duty attributable to the passing of such property the Commissioners shall accept payment of such duty by the placing at the disposal of the Treasury to the order of the Commissioners in such place of the sums which, at the rate of exchange prevailing at the date of the death upon which the property passed represent the duty attributable to the passing of such property.—[Colonel Hutchison.]

Brought up, and read the First time.

Colonel Hutchison

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

The Clause has been put forward as the result of certain words spoken by the Solicitor-General during the Committee stage. The problem arises from the now fashionable practice in certain foreign countries to block accounts and to hold assets belonging to people in this country in those blocked accounts, in which the capital of the account cannot be touched. The situation can arise, therefore, that when an individual dies in this country and has a large proportion of his estate abroad and held in a blocked account, he could become liable for Death Duties upon not only the estate held in this country but upon the estate held in the blocked account in the foreign country—with Death Duties rising to astronomical heights as we now find them. This is one of the many anomalies—indeed, iniquities—which can come about, because a situation can arise in which the liability for Death Duty of that individual would be greater than the total of his estate in this country, the only estate which is liquid and with which be can meet his Death Duty liability.

When I pointed out this position to the right hon. and learned Gentleman in Committee he said, I think with a touch of unconscious cynicism, that of course the Treasury would not seek to take from that individual more than the total of his estate in Great Britain. That is an intolerable situation. The Clause asks that the Treasury shall accept in blocked currency, taken at the rate of exchange existing on the day of death, the proportion of the liability to which the individual's estate is assessed in respect of that proportion which is held in the foreign country. I hope that the Treasury will see the iniquitousness of the present position and the reasonableness of the suggestions we are making in the Clause and that they will see fit to accept it.

10.30 p.m.

Mr. Selwyn Lloyd

I beg to second the Motion.

My hon. and gallant Friend has put forward his case very clearly and simply. I think he has found a reasonable method of dealing with what I should have thought was an obvious injustice. I hope the Government will consider the matter.

The Solicitor-General

What I said during the Debate referred to, or at any rate intended to say, was that the position under the law was that where part of an estate was situate overseas, the executors were accountable for Estate Duty on the whole estate to the full amount of assets here in their hands in England. That is the position. I say at once that I think that the new Clause does indicate the existence of a real problem, but the proposal in the Clause is not one which I would advise the House to accept.

It has this defect, that the Revenue would have to accept, in discharge of Estate Duty liability, foreign assets which might be so securely frozen nothing could be done with them. All the foreign exchange control systems of different countries are more or less rigorous and it would be an unsatisfactory situation if the Revenue had to accept assets overseas which were virtually frozen, utterly inaccessible and worth little or nothing from the point of view of revenue.

May I give my proposal to the House and hope that hon. Members will think it satisfactory? We would desire to deal with the matter administratively in this way. In the case of a deceased person who leaves substantial assets overseas, we would require the personal representatives to pay the amount of Estate Duty appropriate only to those assets situate in this country, and we would defer the collection of Estate Duty attributable to the amount of the estate situate overseas until it is received. Then, of course, the question arises: At what rate would we value the estate overseas for the purpose of assessing the rate of duty attributable to the estate as a whole?

Colonel Hutchison

The rate of exchange.

The Solicitor-General

Under the present system each asset which goes to make up the estate is valued as at the time of death, and when we are valuing an asset situate abroad, which is subject or likely to be subject to some foreign exchange control system so that the asset is to a greater or lesser extent unusable or inaccessible, we discount the asset in our valuation by taking into account the risk that it might not ultimately get into the hands of any beneficiary. We would not charge Estate Duty on 100 per cent. of the normal valuation of assets, but write it down by taking into account the risks.

What we suggest as the appropriate remedy is this. We have to ascertain the scale appropriate to the whole estate and for that purpose we have to value not only the estate here but also the estate overseas. In valuing the estate overseas we would take into account the risks to which I referred. Having done that and found the scale appropriate to the whole estate, we would then require payment of duty on that part of the estate only which is situated in this country. Then we would hold over, and not collect, the portion of duty attributable to estates overseas until they are actually received by the beneficiary in this country.

That, I think, gets over the difficulties which I indicated at the outset of my remarks, and I think it does justice to the people who are entitled to receive the estate at death. I hope the House will take the view that the right course will be for the hon. and gallant Gentleman to withdraw the Clause on the undertaking being given that the matter will be dealt with administratively in that way.

Colonel Hutchison

Does not the hon. and learned Gentleman's proposal really leave with the estate an enduring liability with respect to the estate abroad, that liability to be discharged when these assets can be liquidated? Would that be a liability in sterling, or in the currency of the country in which the overseas estate is situated? Another complication is introduced, if it is an enduring liability in sterling, if the exchange rate between that country and sterling were to depreciate in the interval.

The Solicitor-General

I do not think that that gives rise to any difficulty. If you are valuing an estate overseas you will discount the value of the asset by reference to all the risks attending it. You take into account many other risks, such as a change in the rate of exchange, the possibility that you may never be able to realise it and obtain it in this country. There are all sorts of possibilities, including the possibility of confiscation.

Mr. Jennings (Sheffield, Hallam)

Would it be possible for the view expressed by the Solicitor-General to be communicated to the taxation authorities, and for them to be advised to deal with these estates in a sympathetic way? The Solicitor-General has expressed a view with which I agree. It may be that these overseas estates may be discounted altogether and be worthless. But that may not be the view of some other person in the Department. He may seek to drive a hard and fast bargain. I should like the Solicitor-General to express the view that the Department should deal with this matter in a sympathetic way. I think that would go a long way towards solving the difficulties with which we have been dealing.

Mr. Frederic Harris

In delaying payment for a number of years, would it be the Government's intention eventually to try to charge interest upon the amount outstanding, or would the deferred payments be free of interest?

Mr. Mott-Radclyffe

May I ask the Solicitor-General whether the value of the asset is added to the estate income for the purpose of assessing the duty attributable to the English estate?

Mr. Assheton (City of London)

The proposition of the Solicitor-General commends itself to hon. Members in all parts of the House, but I do suggest that it really is asking perhaps rather more than the right hon. and learned Gentleman should ask of the House, that this should be done entirely by administrative means. Surely the taxpayer is entitled, in a matter of this sort, to have the law clearly stated and laid down by statute. I would ask the Solicitor-General to consider carefully, before we meet again, whether he cannot find it possible to put these excellent sentiments of his into a Clause which the House can consider on the next occasion.

Mr. Harris

May I have an answer to the question which I asked, Mr. Speaker?

Mr. Speaker

By leave of the House only.

The Solicitor-General

If I may have the leave of the House to say one word, I would explain that the foreign asset at reduced value is, of course, aggregated with the general amount of the estate. As regards the question of sympathetic treatment, I would remind the House that there is already a perfectly well recognised machinery for writing down, as in the case of reversions. Interest would naturally be charged because the person concerned has the use of the money until such time as he pays it.

Colonel Hutchison


Mr. Speaker

I am afraid that the hon. and gallant Member has not the right to speak again.

Question put, and negatived.

Mr. James Hudson (Ealing, West)

On a point of Order. I realise, Mr. Speaker, that you are not calling the new Clause in my name—(Allowance for capital expenditure in connection with certain buildings subject to war damage)—but I wish to ask if you would consider this point? Not only had I expected, but the Treasury, through the mouth of the Financial Secretary on 15th February last, had expected that this matter would be raised again this year. There is great disappointment in the Co-operative movement which is concerned with their temporary buildings, and if it the Clause cannot be called, I must, of course, accept that Ruling; but may I ask if it is impossible for it to be discussed?

Mr. Speaker

I am sorry, but this is one of the new Clauses that I have not called. If it is any consolation to the hon. Member I can tell him that I also did not accept a similar Clause from an hon. Member on the opposite side. So it is "fair do's all round."

Mr. Hudson

I am never consoled by anything that happens on the other side.

Mr. Glenvil Hall

I beg to move, in Clause 22, page 15, line 25, to leave out from "arrangements" to "provision" in line 26, and to insert: made on or after the seventh day of April, nineteen hundred and forty-nine.

Mr. R. A. Butler

On a point of Order, Mr. Speaker. I understood we were going to start on the Bill proper on Monday with a view to getting as early as possible to what we consider the main Debate on the subject of the Death Duties. It would be from our point of view convenient if we finished our work now, because I am sure we have plenty of time. We have made good progress and I understood that we would finish today when we had completed the new Clauses.

Mr. Speaker

I have called the next Amendment.

Mr. Glenvil Hall

Perhaps I might be allowed to make this observation. I quite agree with what the right hon. Gentleman has just said, because somewhere about here would be a convenient place to stop, but as you, Mr. Speaker, have said you have called on me—[Interruption]. This is not a rehearsal of "The Snake Pit." I wonder what the noise was about.

Mr. Butler

I am unable to move another Motion because you, Sir, have already called an Amendment. But, on a point of Order, I understood quite definitely that we would finish tonight at the end of the new Clauses. I have an hon. Friend who wishes to put down an Amendment to Clause 13, but his opportunity will be eliminated if we proceed with Clause 22 now.

Mr. Speaker

If we adjourned at the end of the new Clauses on the Paper, it would be open to anybody to put down further new Clauses. When the right hon. Gentleman has finished his speech, we can adjourn the proceedings, but up to that point it would have been open for hon. Members to put down new Clauses.

10.45 p.m.

Mr. Assheton

That deprives the Solicitor-General of the opportunity of putting down a new Clause to meet the very important point he has just conceded in the last Debate.

Mr. Speaker

It may deprive him too, but it deprives everybody of the opportunity.

Captain Crookshank

Further to that point of Order, if there was an arrangement between the two sides that they would go as far as the new Clauses and no further, it is implicit in such an arrangement—it always has been—thatno one is going to start the Order Paper by producing a whole lot of new Clauses before the next stage of the Bill. Therefore, when the words "at the end of the new Clauses" are colloquially used, it is always the practice for a right hon. Gentleman or for somebody on that Bench to move the adjournment of the consideration of the Bill. It is quite well understood on this side of the House, and I understand the Government have sufficient control over their own supporters, to see also they do not put down new Clauses, which it would be open to them to do. There are lots of things open to hon. Members to do in this House, which no hon. Gentleman on either side of the House would think of doing.

Mr. Glenvil Hall

Further to that point of Order. It is news to me that an undertaking was given that we should stop when we reached the last of the new Clauses and disposed of them. I understood that so far as we are concerned, we thought that if we reached the first of the Amendments to the Bill proper even if we did not finish, we should have reached a stage when it would have been reasonable to adjourn. I may say that I think that if an arrangement had been made, I should have been made aware of it. This is the first that I, for one, have heard of the arrangement that has just been spoken of. That being so, my purpose was to move this Amendment which, if I may say so, is an Amendment in line with the wishes of hon. Gentlemen opposite. It is one which we need not necessarily argue unless the Opposition desire to do so, and if they do so desire to argue it, I am quite content, Mr. Speaker, if that is your wish, and will formally move it and leave an explanation of it, if it is needed, until we meet again.

Mr. Butler

Further to that point of Order. I should like to put my cards on the table. I understood we were going to the end of the new Clauses. I had a word with the Chief Patronage Secretary and I understood that I had explained my point of view on this to him. I do not want to bring him into a further odious situation because he has been sufficiently embarrassed by the Minister of Health in the last few days. I should like to retain my own amicable and friendly relations with him.

Apart from that, my hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) had wanted to move an Amendment to Clause 13 which deals with the position of the remission of customs duties on certain aircraft and parts and equipment therefor. I had agreed with him that we should not take very long on that and I had asked him, Mr. Speaker, to speak to you on this subject. If this Amendment of the Government is persisted in, it automatically cuts out my hon. and learned Friend's Amendment to Clause 13 and therefore breaks my faith with the hon. and learned Member and with the Chief Patronage Secretary. I find myself in an impossible position with my two hon. Friends and I am put in an embarrassing position with you, Mr. Speaker, if we proceed with the Government's Amendment. We should not lose ten minutes of time on Monday if we take my hon. and learned Friend's Amendment. I guarantee that we shall finish it in very good time.

The Secretary of State for the Home Department (Mr. Ede)

We are anxious to meet the very reasonable point of view of the right hon. Member for Saffron Walden (Mr. R. A. Butler) and the right hon. and gallant Member for Gains-borough (Captain Crookshank) in regard to this matter, but I am not quite sure how we can now get out of the position which has been created by the Amendment having been called. We accept the statement of the right hon. and gallant Member for Gainsborough that if we could get to the position where we were merely at the end of the new Clauses no further new Clauses would be put down—at any rate with his approval—and, I gather, he would not support anyone who tried on the next occasion to down some new Clause. We do not wish to exclude the hon. and learned Member for Wirral from putting down his Amendment to Clause 13 on the assumption that has been put forward by the right hon. Member for Saffron Walden that it will be moved briefly and that then we shall get on with the business. I am bound to say that we would not look favourably on Amendments coming between Clause 13 and the Amendment which has been called, but if a way can be found by which the hon. and learned Member for Wirral can get his opportunity, we shall be very willing to acquiesce in it.

Mr. Speaker

I think I have the answer to the question. As I have not yet proposed the Question on the Amendment of the Financial Secretary to the Treasury, then if the hon. and learned Member for Wirral will put in a Manuscript Amendment to Clause 13 I will accept it. Then consideration of the Bill can be adjourned and he will start with that Amendment on Monday. I think that that is the answer.

Mr. Selwyn Lloyd

That Amendment was handed in, in manuscript, earlier in the day.

Mr. Speaker

I am very sorry, but none of us has seen it here. Anyhow, I will ask the hon. and learned Member to move his Amendment formally.

Mr. Selwyn Lloyd

Would it not be possible for me to begin my speech moving the Amendment to Clause 13—

Mr. Speaker

One cannot interrupt a speech; one can go to the end of the speech, but, if the hon. Member will formally move and have his Amendment seconded, I think he can, by leave of the House, address himself to the Amendment when we start again.

Mr. Selwyn Lloyd

I beg to move formally, to leave out Clause 13.

Lieut.-Commander Braithwaite (Holderness)

I beg to second the Amendment.

Debate adjourned.—[Mr. Ede.]

Question proposed, "That the words proposed to be left out stand part of the Bill."

Debate to be resumed Tomorrow.