§ Where the property passing on the death of any person either includes any contract approved by the Commissioners of Inland Revenue under section eighteen of this Act, being a contract providing for an annuity to become payable on the death to any widow, widower or other dependant of that person, or includes any annuity so payable under such a contract, then the contract so passing, in so far as it provides for payment of that annuity, or the annuity so passing, as the case may be, shall be treated for purposes of estate duty on that death as a life insurance within the meaning of subsection (2) of section thirty-three of the Finance Act, 1954 (which makes special provision as to aggregation in the case of policies of assurance in which the deceased never had an interest), and shall be so treated whether or not the deceased at any time had an interest therein.—[The Solicitor-Generall.]
§ Brought up, and read the First time.
§ 10.30 p.m.
§ The Solicitor-General (Sir Harry Hylton-Foster)
I beg to move, "That the Clause be read a Second time."
This is about annuities for widows, and it is thought that the Committee would wish such annuities to be treated for Estate Duty purposes on a uniform basis and a moderate basis. The Committee will remember that Clause 18 contemplates that an approved contract for the purposes of the Bill will provide for an annuity payable to an individual's widow, or widower, or in certain events some other dependant. It is convenient to talk about the widow only to explain the meaning of the new Clause.
As the law now stands, the Estate Duty payable might just depend on the form. If it so happened that the only two parties to the contract were the insured person and the insurance company, then for Estate Duty purposes the annuity would rank as an item in which the deceased had had an interest and would have to be aggregated with the entirety of his free estate. If, on the other hand, the widow was herself a party to the contract of insurance, or there was some express trust declared in her favour, or in certain other events, then as the law now stands it would not rank as part of the deceased's free estate; it would not be aggregable. What a terrible word!
§ The Solicitor-General
If the right hon. Gentleman finds it impossible, I will not repeat it again. It should not be aggregated with the deceased's free estate. It would, on the other hand, be aggregated with other similar annuities to the widow, or, say, an ordinary life insurance policy for her benefit in which the deceased had not had an interest and never had an interest—for instance, a policy taken out under the Married Women's Property Acts.
The second class of treatment is obviously, in the vast bulk of cases, much more favourable to the taxed person than the other, and it did not seem to us to be right that the burden of Estate Duty on these annuities should vary with the form of the contract, or indeed that it was desirable to leave Insurance companies in a position where they would have to fidget the contract into the realms of artificiality in order—
§ The Solicitor-General
I am particularly relieved to hear applause emerging from the Opposition Front Bench. Never mind; words or no words, the merits are that it is not desirable that the actual form of the contract should have such a large effect upon the death duties. Accordingly, this new Clause brings all these benefits, which are in fact akin, within the provisions appropriate to those cases where the deceased person never had an interest in the property.
§ Mr. G. R. Mitchison (Kettering)
I am sorry to introduce even a slightly discordant note in the legal vespers so melodiously sung by the hon. and learned Gentleman. We on this side of the Committee do not particularly like any addition to the number of contracts—if I may use a general word—which are to be aggregated under special arrangements, resulting in fact in a lower rate of death duty for the persons concerned. For that reason, we are not particularly enamoured of this further concession in that direction. At the same time, I would agree that, though the addition may well be a substantial one, it is certainly difficult to distinguish it from what was done 1187 in the 1954 Act. For that reason, we shall accept the addition, while pointing out at the same time that the use that is made in practice of this power of aggregation requires watching.
§ Sir Patrick Spens (Kensington, South)
I am glad to hear that the Opposition will not oppose the Clause. Hon. and right hon. Gentlemen opposite did not seem to be frightfully pleased with it, and I am not awfully pleased with it myself. I have on the Order Paper a proposed new Clause which has the effect of excluding from Estate Duty annuities in favour of certain widows, because the law on the Estate Duty on widows' annuities is just as full of anomalies as almost any part of our law can possibly be. Under a number of statutes a large number of widows' annuities are not taken into account for Estate Duty at all. All widows of civil servants get annuities free of Estate Duty and all aggregation, and under a number of statutes exactly the same thing happens in the case of a large number of other widows.
When Clause 18 was inserted in the Bill, the question immediately arose of what would be the position of widows under that Clause. There are two different kinds of widows dealt with under the Clause. There are widows provided for under a contract with an insurance company or some other insurer, and those who get their benefit under the trust referred to in subsection (4). Now, in so far as a widow gets an annuity under a contract, that annuity shall be aggregated only with another annuity, if she can have a second or 1188 third one, or another contract of insurance in her favour in respect of which the insurer had no benefit. What happens now to an annuity under a trust under subsection (4) I do not know.
I believe that in quite a number of trust schemes widows get their annuities free of any aggregation or Estate Duty. Therefore, the proposed new Clause is creating another section of widows' annuities which are treated differently from a great many others. If this provision were not made, the widows' annuities under contract would be aggregated with the whole of the estate and they would be worse off than they will be under the Clause.
We are dealing with this matter in almost a piecemeal way this year. I hope that the Chancellor will have a full investigation made next year, for the purposes of Estate Duty, into the position of all those widows who enjoy annuities, and see whether we can find, instead of pure luck, a principle to determine whether a widow has an annuity not liable to Estate Duty or an annuity liable to be treated as an estate in itself or one which has to be aggregated. What happens now seems to be a matter of complete chance. While we are thankful for this partial concession I hope that next year something will be done.
§ Clause read a Second time and added to the Bill.
§ To report Progress and ask leave to sit again.—[Mr. H. Macmillan.]
§ Committee report Progress; to sit again Tomorrow.