§ (1) Where land or chattels are so settled, whether by Act of Parliament or royal grant, that no one of the persons successively in possession thereof is capable of alienating the same, then notwithstanding anything in subsection (3) of section twenty-eight of the Finance Act 1949 (which directs that the estate duty law shall apply to land and chattels so settled in the same way as to other settled property), on the death of a tenant in tail of the property comprised in the settlement estate duty shall not be chargeable as respects any part of that property in the case of which he has disposed of his personal interest to or for the benefit of the person who may from time to time be his successor and in the case of which the conditions of the next following subsection are satisfied.
§ (2) The conditions to be satisfied are—
- (a) that the disposition of the tenant in tail's personal interest was bona fide effected five years before his death;
- (b) that bona fide possession and enjoyment of the property was assumed immediately after the disposition by the tenant in tail' successor and thenceforward retained to the entire exclusion of the tenant in tail
53 and of any benefit to him by contract or otherwise or (bona fide possession and enjoyment of the property having been so assumed) the property was enjoyed to the entire exclusion as aforesaid for the five years before the tenant in tail's death;
- (c) that there is not (by reason of any subsequent disposition of the tenant in tail's personal interest or otherwise) any change on the tenant in tail's death in the person beneficially entitled to possession of the property or the income arising there from:
§ Provided that for the purposes of paragraph (b) of this subsection, subsection (2) of section thirty-eight of this Act shall apply in relation to any disposition of a tenant in tail's personal interest as it applies for the purposes of the enactments therein mentioned in relation to a disposition of an interest limited to cease on a death.
§ (3) For the purpose of paragraph (c) of the last foregoing subsection there shall not be deemed to be a change on a tenant in tail's death in the person beneficially entitled to the income arising from any property by reason only that a jointure or other annuity payable out of that income arises on the tenant in tail's death under the settlement comprising the property or ceases on the tenant in tail's death, but nothing in this section shall affect the duty chargeable on any property on the tenant in tail's death by reason of some other person's having or having had in that property an interest limited to cease on that death.
§ (4) In this section the expression "tenant in tail" means tenant in tail in possession within the meaning of the Settled Land Act, 1925, and references to a tenant in tail of any property include one of two or more tenants in tail in common or tenants in tail in co-parcenery of that property; and in relation to any tenant in tail of property—
- (a) the expression "personal interest" means his right as tenant in tail to possession of the property or the income arising there-from or a share thereof during his life; and
- (b) the expression "successor" means the person who, if the tenant in tail were dead, would be tenant in tail in his place, whether as heir under the entail or as tenant in tail in remainder.—[The Solicitor-General.]
§ Brought up, and read the First time.
§ The Solicitor-General
I beg to move, "That the Clause be read a Second time."
In Committee, when we discussed the Clauses relating to disposition of life interests, the hon. Member for Hendon, South (Sir H. Lucas-Tooth) pointed out that tenants in tail of estates settled by Act of Parliament or Royal grant might be in a position of considerable hardship as compared with the ordinary life tenant of settled land. The life tenant of settled land has certain protection given to him by Section 43 (2) of the Finance Act, 1940, and under the provisions of that Section, if he disposes of the life interest to the remainder man more than five years 54 before his death and does not retain any benefit to himself, Death Duty is not payable.
It was pointed out that in the case of a tenant in tail, who is the possessor of an estate settled by Act of Parliament or Royal grant, that protection will not apply inasmuch as he cannot by statute of grant divest himself of the estate, although in point of fact he may have entirely divested himself of all beneficial enjoyment of it—that is to say, actual possession of it and the enjoyment of the rents. It was represented by the hon. Gentleman that there was really no reason for that disparity in the situation between such a tenant in tail and a tenant for life of ordinarily settled land.
As I intimated then, we felt that there was considerable force in this argument, and this new Clause is designed to have the effect of putting a tenant in tail of such land on a par with regard to the protection given to him with the ordinary life tenant of settled land. It provides, in effect, that notwithstanding that he cannot part with the estate, nevertheless if he has parted with the beneficial enjoyment of it—that is to say, if he has parted with the possession and does not draw the rents—subject to certain conditions which are similar to those laid down in Section 43 (2) of the 1940 Act, the tenant in tail of this kind of settled estate enjoys the some protection. Death Duty will not be payable in relation to that estate when he dies. In other words, he is put on an exact par with an ordinary tenant for life of settled land. That is what the Clause does. Subsection (2) sets out the conditions which have to be complied with, and if hon. Members will compare those with the conditions set out in Section 43 (2) of the 1940 Act they will see that, broadly speaking, they are entirely analogous, subject to certain necessary changes which do not alter the substance.
§ 4.15 p.m.
Mr. Leslie Hale
I am sorry to introduce a note of dubiety into this fairly harmonious afternoon, but I think that this explanation which has been given by the Solicitor-General is not quite a sufficient explanation of this, to me at all events, rather surprising Clause. Mr. G. K. Chesterton in one of his most wild extravaganzas once portrayed a Conservative Prime Minister frustrating his Radical opponents by rather cleverly 55 nationalising the land and then giving over the whole of their estates to the ducal and noble owners and paying them a salary for maintaining their estates and living on them. If we couple this Clause with the Gower Report it seems that under a Socialist Government we are getting something like that.
As I understand of the argument of the Solicitor-General, it is that we are merely applying to "Tantivy Towers" in the shires the same procedure as we apply to "Chez Nous" and "Mon Repose" in Peckham; but they are very rarely settled in tail or, indeed, settled for life at all, or the subject of life estates. If that were the case, I would not object to everyone being treated alike, but a glance at the law in this matter shows that people are not being treated alike.
To start with, there is no similarity of treatment even with regard to all estates in tail which are settled by Parliamentary grant or Royal grant. There is a differentiation in the law for estates which are given for services rendered and those which are not given for services rendered. Those which are given for winning a battle are regarded as being given for services rendered, and those which are granted because someone became the mother on the distaff side of young prince-lings are not regarded judicially as given for services rendered. It may be that on the biological ground the services are regarded as rendered to the recipient and not by the recipient. But there is a differentiation, and Section 82 of the Settled Land Act applies to some and not to all.
Furthermore, we have the surprising fact that the Finance Act, 1894, gives substantial Estate Duty concessions to estates in tail, and the matter was never challenged until last year. In Section 28 (3) of the Finance Act, 1949, estates tail for the first time were dealt with on the same basis as most estates; in other words, Estate Duty was payable on the capital value of the estate rather than on the proportion of the capital value which was regarded as the value of the acquisition of the property to the remainder man in tail. It is as recent as 1949 that we introduced what was virtually penal taxation on estates tail, in the sense that we were increasing liability to Estate Duty.
I want to put one simple proposition. I am not trying to make a party point. 56 I am not in the least allergic to dukes, possibly because, as far as I know, I have not met one, but an estate tail is in a very special position. There is the home for the owner of the estate. There is normally the home for the remainder man in tail. There is, of course, the family solicitor who is probably doing fairly well out of it, and there are the estate agents who are collecting the rents and are doing exceeding well out of it. In general, the whole thing is being administered mechanically in terms of accounts being rendered at the bank and taxes being paid in respect of amounts going in repairs and so on.
If the Duke of Omnium, on the advice of the family solicitor, makes an assignment to the remainder man in tail, Lord Tomnoddy, during his lifetime, by any three of the methods open to him, and if he lives in the ducal hall and Lord Tomnoddy lives on the estate in the same way, and if the rents are collected by the estate agent, and the only thing that has happened is that the estate agents have crossed out "The Duke of Omnium" from the top of their monthly accounts and put instead "Lord Tomnoddy," does Estate Duty cease to be payable on the hereditament?
§ The Solicitor-General indicated dissent.
The Solicitor-General shakes his head. I would refer him to the case of The Attorney-General v. Seccombe in 1911. As far as I know, the matter has not been raised since then. In that case the owner of a farm, by deed of gift in 1897 in consideration of natural life and affection, conveyed a farm to his great nephew who resided there and who had in the previous year taken over the management of the farm. The owner of the farm continued to live exactly where he was. The question arose whether he had divested himself of the title in such a way as made the case come within the provisions of this class of Clause; in other words, whether Estate Duty was payable on the death of the owner in 1906. The court said "No." They said that the estate need not pay Estate Duty. The court said that, indeed, one had to establish that in the case I have quoted one would have to retain a contractual liability to oneself in order not to come within the Clause.
57 In those circumstances I venture respectfully to submit to the Solicitor-General that the Clause as drafted really means that in the case of any Parliamentary grant or Royal grant of estates in tail—and some are very substantial—for services rendered, it is only necessary for the present owner to execute a form of release in favour of the remainder man in tail and to continue to live precisely as he has done, and to continue to act precisely as he has acted, for the whole of the estates to be relieved of Estate Duty
Mr. Donovan (Leicester, North-East)
I am sorry to interrupt my hon. Friend, but is not that the case with every owner, whether the estate is in tail or not? Does not that follow from the case of the Attorney-General v. Seccombe, which my hon. Friend has quoted?
I am grateful to my hon. and learned Friend for that reinforcement of the point I was making. The case I was making was that it is, of course, very simple, in the instance of the estate I have mentioned, for the whole family to go on exactly as before. One cannot do that in the case of "Chez Nous" in Peckham or of "Mon Repos" because there is not that community of interest, that succession of interest and that organisation which makes it practicable without very grave effects on the person signing the grant. That is precisely the difference I was making; it is a very substantial difference and I think it is a matter which deserves consideration
§ Mr. Speaker
The right hon. and learned Gentleman can speak now only by leave of the House. We are on Report now and hon. Members can speak only once
§ The Solicitor-General
I am sorry that I spoke without asking permission. I was under a misapprehension. I thought that the Minister in charge of a Bill could speak twice. May I have the permission of the House? [HON. MEMBERS: "Yes"] We put this type of estate on the same footing as ordinary settled estates but we found in so doing that, by Section 28 of the 1949 Act, we placed possessors of 58 this type of estate under a disability from which others did not suffer. My hon. Friend the Member for Oldham, West (Mr. Leslie Hale), referred to the case of the Attorney-General v. Seccombe. First of all, that was a case which was decided on very special facts applicable to that case. Other learned judges have from time to time referred to the reasoning in that case.
In the case of the noble Lord mentioned by my hon. Friend the Member for Oldham, West—I forget the name of the noble Lord—
§ The Solicitor-General
If the Duke of Omnium disposed of his estate to the remainder man, in the case of an estate of this sort settled under Act of Parliament, and yet remained there, then if he were to remain in circumstances in which the dicta of the Attorney-General v. Seccombe would apply—under a kind of contractual agreement between him and the person to whom he disposed of the estate—he would be in the same situation as any other tenant for life who had disposed of his life interest. The test is whether it could be said in those circumstances that Subsection (2, b) had been complied with and that, in dispossessing himself of his personal interest, he had entirely divested himself of all interest in the matter. If that could be said, then Estate Duty would not be payable. On the other hand, if he retained any kind of interest, Estate Duty would be payable. In practice this works out perfectly satisfactorily
In order to escape the incidence of Estate Duty within the meaning of the Attorney-General v. Seccombe, the tenant in tail of this land, as in the case of a life tenant of all other types of land, has entirely to divest himself of all rights to enjoy the property or any benefit from it. I think that is a perfectly reasonable situation. It places such people on the same footing as tenants for life of other kinds of land. Whatever can be said, there cannot be very much reason for placing them in a much worse position when our object, under Section 28 of the Finance Act, 1949, was to assimilate, for purposes of Estate Duty this kind of settled land with ordinary settled land.
§ Mr.Selwyn Lloyd
This matter was raised originally by my hon. Friend the Member for Hendon, South (Sir H. Lucas-Tooth) in Committee. He is unfortunately prevented by his duties on the Select Committee on Estimates from being here today and he has asked me to thank the Solicitor-General for moving this new Clause, which meets the point that my hon. Friend put forward. The Clause appears to benefit a very limited class and to iron out an anomaly. For those reasons, we welcome it.
§ Question put, and agreed to.
§ Clause read a Second time, and added to the Bill.