Subsection (3) of section twenty-eight of the Finance Act, 1949, shall be amended by adding, at the end, the following proviso:—
Provided that where a person in possession of land or chattels so settled surrenders, assures, divests himself of or otherwise disposes of his interest therein or in any part thereof for the remainder of his life to or for the benefit of the persons successively entitled to the possession of such lands or chattels in remainder or reversion expectant on his death such lands or chattels or the part thereof (as the case may be) shall not for the purposes of those enactments be deemed to pass on his death—
§ Brought up, and read the First time.
§ Sir Hugh Lucas-Tooth (Hendon, South)
I beg to move, "That the Clause be read a Second time."
This is rather a technical Clause and it does not concern a very large number of people, though perhaps rather more than the one person apparently affected by the last Clause. It concerns those estates which are generally known as Parliamentary estates, that is to say, property which was settled by Act of Parliament or by Royal grant, to quote the words of last year's Finance Act, so that:No one of the persons successively in possession thereof is capable of alienating the same.These estates usually took the form of a gift of land, and sometimes chattels, given by the nation to great public figures, great soldiers, sailors and statesmen. Many of them date back to our distant history, though some, of course, date only from the beginning of the last century when the practice ceased. These gifts created what is in effect an unbarrable entail. The property was given usually to the person himself whom Parliament wished to honour and then to the heirs of the title which was usually bestowed 1598 upon him, and as these entails were unbarrable and as the person entitled to the enjoyment of the estate could not part with it in any way, special provision had to be made when our present law of Estate Duty was introduced under the Finance Act, 1894.
There were two privileges which were accorded then to the person in possession of these estates. In the first place, when a person in possession died, it was only the value of the interest taken by his successor which was taken for the purpose of Estate Duty. In the second place, even that value was not aggregated with the rest of his property but was treated as a separate estate. Under Section 28 (3) of the Finance Act last year, these privileges were abolished. The intention of the Government was no doubt to put these estates on the same footing as other classes of property. I think I am right in saying that no dissent from that course was shown in any part of the House. However, it now appears that the intention of the Government and, indeed, of the House may not have been carried out by the Section then passed.
In the case of an ordinary tenant for life of property, he can get rid of his obligation to pay Estate Duty in a simple way by getting rid of the property in respect of which the duty may be payable. It is true, of course, that he may have to survive a certain number of years, but if he survives for five years after parting with all interest in the property, he is no longer liable to pay duty. It is quite otherwise with these people. They can part with the income and the physical enjoyment of the property which has been settled on them, but even if they succeed in getting rid of that there is at least a doubt whether or not they have so parted with their interest as to free them from the burden of Estate Duty in respect of this property when they come to die. I do not wish to suggest that is necessarily so, but that is the probable effect of the Act of last year, and of course doubt in this matter is of great importance to those concerned, because they wish to deal with their property in the meantime, and until they know what is the position they are unable to do so.
Grave hardship may result in individual cases. It may well be that a person who 1599 is in possession or one of these Parliamentary estates has small other means of his own. If he has more than one child, or any child who is not a son, the result will be that he is virtually precluded from making any provision for such children. The result of the passing of the Act of last year means that he cannot get rid of that property. It has all to pass to a single person who may be his eldest son or, indeed, a distant cousin. Estate Duty will have to be paid on this substantial estate on his death even though he has parted with all property in it, and there will be virtually nothing left for his own children.
That is an anomaly and a hardship which I do not think anyone on either side of the Committee contemplates. My own view is that it is high time these old unbearable estates were abolished. I do not know whether that view would be held generally throughout the Committee, but I regard them as being something of an anomaly. I do not think the Finance Bill is the right place to abolish them, but there are difficulties which exist in this connection and I am not sure that they have been considered by the Government.
What is to happen when Estate Duty at the full rate falls on one of these estates when there is no power to sell the property contained in the settlement made by the Act? No such power was given by the Finance Act last year, and real difficulties will arise in that connection. The specific point is not raised in this new Clause, but I mention it to show the kind of difficulty which will arise if the Section I am seeking to amend is not amended fairly substantially in some way.
As a direct result of last years' legislation, those in possession of these estates are put in the awkward position that whereas an ordinary tenant for life has been able probably throughout his life, or at any rate since inheriting the estate, to make some provision for his children, and to hand over the estate to his son if he wishes to do so, these people have been prevented from doing it. So even if this Clause is carried, it will be necessary for them to wait five years before they can take advantage of the law which has been open to every other one of His Majesty's subjects. I do not seek to put that right by this Clause, although it is a matter which should be borne in mind. If the 1600 Government will indicate that they view sympathetically what I am proposing, it is right that I mention this so that it should be considered at the same time.
The purpose of the Clause is to enable those who are in possession of estates of this kind to deal with them as nearly as possible in the same way as other individuals. That was the intention of Parliament when the original Section was passed and I hope that the Government can see their way to accept this proposal.
§ The Solicitor-General
I think that the point which the hon. Member has made is well-founded. It was hoped that it would be dealt with by Section 43 (2) of the Finance Act, 1940, but the question has been further investigated and it is found that that Section does not do so. I hope that the hon. Member will ask the leave of the Committee to withdraw his new Clause upon my undertaking that a new Clause with slightly different wording—the present wording, we think, is not altogether satisfactory—will be put down between now and the Report stage.
§ Sir H. Lucas-Tooth
Before asking the leave of the Committee to withdraw the Motion, may I ask whether such a new Clause as the right hon. and learned Gentleman suggests could be put upon the Order Paper as soon as possible before the Report stage so that an opportunity may be given to consider this extremely technical matter? I do not wish to appear ungrateful for what the Solicitor-General has said but it would be convenient if some reasonable length of time were given to considering this matter.
§ Sir H. Lucas-Tooth
I am grateful to the Solicitor-General, and I hope that he will take the action which I have suggested. I beg to ask leave to withdraw the Motion.
§ Motion and Clause, by leave, withdrawn.