§ (1) The Commissioners of Inland Revenue shall on a request in writing made by any person or body give a decision in writing on the question whether any gift either which it is proposed shall be made inter vivos or which has in fact been made inter vivos will, it effected, be made or (as the case may be) has been made for public or charitable purposes within the meaning of the proviso to subsection (1) of section fifty-nine of the Finance (1909–10) Act, 1910.
§ (2) The Commissioners of Inland Revenue may before giving a decision under this section require the person or body making the request to give to them such information and to produce to them such documents in his or its possession or power as the Commissioners may reasonably consider necessary for the purpose of ascertaining all the facts relating to the proposed gift.
§ (3) Any decision of the Commissioners of Inland Revenue made under this section shall bind the Crown and all parties to the gift inter vivos (whether or not affected) and any persons claiming through under or in trust for such parties.
§ (4) Any person aggrieved by a decision of the Commissioners of Inland Revenue given under this section may without paying or giving security for any duty appeal to the High Court in accordance with the provisions of section ten of the Finance Act, 1894 and the rules 1533 made thereunder and the provisions of the said section ten, except subsection (2) thereof, shall apply to any appeal brought under this section. The Commissioners of Inland Revenue shall be respondents to any such appeal.
§ (5) A decision of the High Court made on appeal, or of any court on appeal therefrom, shall have the same force and effect as if it were a decision of the Commissioners of Inland Revenue given under this section, and it is hereby expressly declared that the High Court and any court hearing an appeal therefrom, may decide any question arising under this section, although the matter or matters raised are wholly or partly hypothetical.—[Mr. MacDermot.]
§ Brought up, and read the First time.
§ Mr. MacDermot
I beg to move, That the Clause be read a Second time.
The object of the Clause is to clear away an anomaly in the administration of our tax laws which is causing a considerable amount of annoyance and difficulty. The point arises in this way. If a trust or other body which is being formed for charitable purposes is in receipt of income under a seven-year covenant and it wishes to reclaim tax which is being paid on that income it can go to the chief inspector and obtain from him a ruling. He will examine the trust deed or constitution of the body and say whether or not he is prepared to accept it as a charity. That has been a matter of practice, not covered by legislation. The practice is very convenient. It enables the charity in question to go to its prospective benefactors and tell them that it has been accepted as a charity. That is an added inducement to those benefactors to make covenants.
If a similar body receives a lump sum gift and then approaches the Estate Duty Office of the Inland Revenue to find out whether the body would be accepted for Estate Duty purposes as being one which has received a gift for charitable or public purposes, the Estate Duty Office show themselves unable to express an opinion on the matter. As the Committee will be aware, if gifts are made inter vivos for charitable or other public purposes, they are exempt from Estate Duty if a period of a year or more elapses between the making of the gift and the death of the donor.
The reason which the Estate Duty Office give for refusal to co-operate on the matter and give an opinion is the decision of the Court of Appeal re Barnato 1534 deceased, in which the Court held that it could not entertain proceedings to decide a matter of this character as it raised a purely hypothetical question that might never arise. I should have thought that was an insufficient reason to debar the Estate Duty offices from co-operating in the same way as does the chief inspector.
The present practice, or lack of practice, in this respect hits charitable bodies in two ways. They are, first, unable to give that added encouragement to prospective benefactors of telling them that they have been accepted by the Estate Duty Office and, secondly, if they receive substantial donations and cannot get any co-operation in this form, a very large part of the money has to remain frozen for the full five-year period before they are able to use it.
The new Clause proposes that the Inland Revenue Commissioners should be under a duty to give a decision in writing on request that there should be a right of appeal against their decision at the High Court and, subject to that right of appeal, the decision should be binding on all parties concerned. It also gives power to the Inland Revenue Commissioners to call for documents and information they require before giving a decision.
It may be that the Government may feel this is a matter which can be dealt with administratively without legislation. If that is so, I should be very glad to hear it and I would be happy to ask leave to withdraw the new Clause on such an assurance. I would only point out that the advantage which would result from dealing with the matter legislatively would be that it would be possible to bring an element of finality into it by virtue of the appeal to the courts. I can foresee that there may be difficulties, and there may be difficulties about drafting.
I conclude by saying that this matter, which has received very widespread support not only from both sides of the Committee, has, I understand, been considered and supported officially by the Law Society. I very much hope that the Government will be able to give the new Clause favourable consideration.
§ Mr. E. Fletcher
I wish to support briefly what my hon. Friend the Member for Lewisham, North (Mr. MacDermot) has said. I very much hope the Financial Secretary will be able to accept this 1535 new Clause and give us an assurance that the present anomaly, either in the law or the administration of the law, will be removed. The present position is quite anomalous. Whereas inspectors of taxes in the Income Tax Department are quite ready to express an opinion about hypothetical cases, the reverse is not the case with the Estate Duty Office.
I will give an illustration of a resultant absurdity which has arisen in a specific case quite recently. A certain gentleman, whose name I will not mention, desired to give a sum of £30,000 for research into human fertility. A trust deed of the trust was executed and the chief inspector of taxes passed the deed as constituting a good charitable trust, but, th donor being an elderly person, the question of estate duty became of importance.
If Estate Duty were to be chargeable upon this gift of £30,000 for research into human fertility he would withdraw, with the result that the trustees were hampered in dealing with the trust funds. The chief inspector of taxes having given his blessing to the donation, the Estate Duty Office was approached and asked if it also would take the view that this was a valid gift for charitable purposes which would be exempt from Estate Duty, provided the donor survived the period of one year after the date of the gift. Surprising though it may seem, the Estate Duty Office felt prohibited by reason of the decision in the case of Barnato deceased, to which my hon. Friend referred, from giving the information.
It seems ridiculous that one department of the Revenue should be prepared to pronounce very sensibly on a hypothetical question, but another department should feel inhibited from doing so. Therefore, I was glad to find that my hon. Friend and Members on both sides had put down this new Clause, and I hope that the Financial Secretary will either be prepared to accept it, or will be able to assure us categorically that all the necessary administrative arrangements will be made to enable the same result to take place as if the new Clause were embodied in our legislation.
§ 1.45 a.m.
§ Mr. Simon
The purpose behind this Clause has obviously gained the adherence of experienced hon. Members on both sides of the Committee, and I thought that a convincing case was made out for action. I cannot accept the Clause as it is, because the question whether a gift is given for a public and charitable purpose is not peculiarly an Estate Duty matter. It is a question of general law, and a pronouncement on it will affect the rights of citizens generally. Therefore, if only for that reason, the Commissioners of Inland Revenue are not proper persons to pronounce on such matters.
However, I think that a conclusive case was made out for taking administrative action to do what the hon. Gentleman and my hon. Friend wish to see. So far as I know, the refusal of the Estate Duty Office to give a ruling in the case which the hon. Member for Islington, East (Mr. E. Fletcher) mentioned, was an isolated case. I am prepared to regard it as an error and to give a categorical undertaking that the practice of the Estate Duty Office will be the same as the practice of the inspector of taxes and that an opinion will be given to the best of the ability of the Estate Duty Office in the sort of case he has in mind.
§ Mr. MacDermot
I thank the Financial Secretary for that categorical undertaking, and I beg to ask leave to withdraw the Motion.
§ Motion and Clause, by leave, withdrawn.