HC Deb 18 June 1958 vol 589 cc1258-74
Major W. Hicks Beach (Cheltenham)

I beg to move, in page 14, line 9, at the end to insert or (b) the wife or husband of the settlor has before the expiration of such period released or disclaimed all interest to the whole or any part of the property comprised in the settlement and all interest in the income from the whole or any part of the property so comprised to which he or she may become entitled in the event of the exercise of any such power". The Clause is designed to overcome a difficulty for the Inland Revenue which has arisen from a decision in a case known as the Saunders case, which provided that Where a settlement on a child was with the direction to accumulate until that child—or children—was 21, the capital of the settlement could not be disposed of wholly, as happened in the Countess of Kenmare case, of which we are all aware.

I do not quarrel with the Inland Revenue's decision to overcome this case, but the sole object of the Amendment is to ensure that the concession given to the taxpayers under subsection (4) of the Clause has its full effect. Subsection (4), which, I think, is a very proper concession to the taxpayer, provides that where a settlement, which was formerly exempted from charging the settlor with taxation liability, is caught by the Clause, then, in certain circumstances, the interested parties are given an opportunity within three months to take appropriate steps to bring that settlement, which in a vast number of cases has been entered into quite genuinely, outside the tax. That, I think, puts the matter briefly and fairly.

The important provision so far as this Amendment is concerned is that of paragraphs (a) and (b) of subsection (4). It might be helpful to the Committee if I read them out. I will not read the opening part of subsection (4), which provides that in the following circumstances the income concerned of settlements affected shall not be treated as the income of the settlor for the purposes of tax liability if (a) any power— and I want to stress the word "power"— by reason of which they or it would fall to be so treated has been released or disclaimed at the expiration of three months from the passing of this Act; and (b) neither the settlor nor the wife or husband of the settlor has received or is entitled to any consideration in respect of the release or disclaimer. So far as it goes, that is a perfectly proper provision, but difficulties will arise. I am a practising solicitor and have been concerned in a number of settlements of this nature. From a practical point of view, the difficulty will arise in settlements upon children. It will arise from the word "power," because in many cases, some of which have been excluded some fifteen or twenty years, the power to release capital in certain circumstances, not to the settlor or the settlor's wife, is vested in trustees of the settlement. In fact, in the normal type of settlement that power of making advances would be vested in the trustees.

The difficulty which arises in this very welcome concession by the Government is that a trustee in a fiduciary capacity so far as infants are concerned cannot in any circumstances, either under an English settlement or under a settlement governed by laws abroad, release a power to the detriment of the benficiary under the settlement wherever he or she may be.

It is, of course, true to say, I suppose, that under the new Variation of Trusts Bill, which is now in another place, it might be possible to make some such application. In point of fact, however, the three months' period given under the Clause will not be long enough because, as we know, the Bill will not become law until the end of July and then we have the long Recess.

Therefore, all that my Amendment seeks to do is to try to implement what I believe is the intention of the drafters of the Bill, namely, that where the settlor or any wife of his takes steps to release any possible interest under a settlement of this sort affected by Clause 18, they should receive the benefit of the concession which this Clause provides.

This is a complicated matter. We all know that these irrevocable income settlements for life were first dealt with in 1924 and 1926 and, subsequently, under the 1947 Act. They are now incorporated in the 1952 Act under Chapters II and III of Part XVIII. The object is to give a benefit to a perfectly proper settlement. I hope very much that the Government will give an undertaking to give this matter careful consideration. Unless this provision is made serious cases of hardship will be caused and I am sure that the Government have no intention of bringing them about.

Mr. Charles Fletcher-Cooke (Darwen)

Like my hon. and gallant Friend the Member for Chelmsford (Major Hicks Beach), I am grateful to the Government for giving this opportunity, limited though it is, to persons who, many years ago, may have entered into these settlements in the faith that they would not attract tax. I am grateful that an opportunity for rectification is provided by which they may release a disclaimer from interest for themselves or their wives.

I am particularly anxious that this opportunity for rectification will not be made a mockery of, as in many cases it will be by the Clause being drawn too narrow. My hon. and gallant Friend has referred to cases where only trustees may release, and, of course, they can only release, if at all, with the sanction of the courts. The courts do not sit in August and September, which are two of the three crucial months.

There are also other cases which I think require even more consideration. My hon. and gallant Friend's Amendment seeks to ensure that, provided the husband or wife, or both, as the case may be, themselves declare their interests, the fact that the power, as opposed to the interest, is not disclaimed by the trustees shall not be fatal. That is how I read the Amendment, but even that may not be good enough in many cases. There is the case, certainly of the wife, who is under a disability through being an infant, or of either spouse being under a disability through being of unsound mind, or something of that sort.

Even more important is the case of the future wife, the unknown woman, who has not yet been married and cannot disclaim within three months because she is not yet the wife. That would not be covered by the Amendment, yet it is a very worthy case because it is ridiculous that the whole settlement should be caught in these circumstances, as it would be if this opportunity for rectification were not widened.

One of the limiting factors in this opportunity for rectification is in paragraph (b), which says: neither the settlor nor the wife or husband of the settlor has received or is entitled to any consideration in respect of the release or disclaimer. I suggest that that is too harsh. In the first place, it may very well be, owing to the rather esoteric doctrines of equity, that if one surrenders an interest in futuro without any consideration whatever, that does not operate as a valid surrender, because one cannot give a future gift. Therefore, there ought to be a provision inserted other than an anomalous consideration. More important than that, if the Amendment is accepted, as it should be, and if the possibility of applications to the courts is considered in the case of trustees and settlors or their wives who are infants, for example, or unborn, or future, as they may be, the court may well insist as a term of variation of the settlement that some consideration be given. They may not agree to the release of this power unless there is a quid pro quo.

That has been the sort of term that the courts in the alteration of terms of settlement have insisted on in the past. It would be very unfair if persons who had entered into those settlements many years ago were caught between the cloven rocks of subsection (4) in its present form, which says that there must be no consideration of the requirements, and the courts, which say that there must be a consideration if these interests are to be released.

At this late hour there is no purpose in flogging the point, but if, in many cases, this is to be anything more than a mockery, I suggest that the opportunities must be widened, that the terms must be widened and, above all, that the timing must be widened. In those hopes, I support the Amendment.

Mr. Mitchison

The hon. and learned Member referred to the wife of a settlor and pointed out the difficulty of a wife in futuro. Has he considered the case not so much of a wife in præsenti as a wife in prœsentibus, because another subsection of the Clause provides that it will apply to settlements made anywhere, and I believe that there is a Sultan of Foa who has 100 wives, and one wonders whether they are all required to disclaim their interests in the settlements made in such cases or whether it will be sufficient if one wife or a representative wife disclaims interest. Perhaps the hon. and learned Member could tell us.

Mr. Fletcher-Cooke

I hesitate to be questioned on the law, particularly on that in Mohammedan countries. I suggest that the peculiarities of English equity belong to the monogamous society of this country, and I very much doubt whether the complicated concept of trusts has ever reached the Eastern end of the Mediterranean.

10.45 p.m.

Mr. Mitchison

I am sorry to press the hon. and learned Member a little further, but he will remember that one of the two cases mentioned was the settlement made in Bermuda, and yet, of course, it came into question in matters of English taxation. If Bermuda, why not Foa?

Major Hicks Beach

This is a matter of English law and under English law one is allowed only one wife.

Mr. Mitchison

Are we to take it that the Inland Revenue, for the purposes of this Clause, does not recognise polygamy? If so, how is the representative, true or only wife to be selected?

Major Hicks Beach

One wife at a time.

The Chairman

Is anyone to reply to the debate?

The Solicitor-General (Sir Harry Hylton-Foster)

Fascinated by the studies of these customs, with which the hon. and learned Member for Kettering (Mr. Mitchison) is more familiar than I, and contemplating, at the same time that my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) is a bachelor, I wondered where we were going and what was a quorum in Committee of wives!

May I thank my hon. and learned Friend and my hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach) for raising this point. I say forthwith that in matters of this kind I hope that it is not expressing undue modesty for the Government in office to say that it is the type of technical provision about which any Government, I hope, and certainly my right hon. Friend, would be anxious to gain all the wisdom that the Committee can give and all the representations which one gets after a Finance Bill has been published. That applies to this matter as to any other.

I have only one trifling correction to offer to the Committee on the words uttered by both my hon. Friends. In terms of time it is not quite a question of the crucial three months; it is three months after the Bill becomes law, which is much more like six months. One ought to be thinking of it on that basis, but let me say at once that this is a let-out for the settlement capable—to use post-Iron Curtain phraseology—of being purged. If it can be properly purged in proper cases the object is to make this let-out work. We would desire only, as my hon. and gallant Friend and the whole Committee would, to see it work, and if, on examination, the time at present allotted seems to be too short we should be anxious at once to put it right. But it is necessary to think of it in terms of six months rather than of three.

The next point is about consent. I confess that we should like to look at the kind of cases which my hon. and gallant Friend has in mind. It is not so easy at the moment to think of bona fide cases in which this would be a trouble. Ordinarily, the trustees in a matter of this kind are persons in whom the settlor has confidence, and they are unlikely, if they can, to refrain from releasing or disclaiming if the power is vested in them and he so desires it.

It may be said they cannot do that if they are in a fiduciary position in relation to beneficiaries, but in circumstances like these if the beneficiary gives consent—and I suppose most of them will be able to—they will, in practice, consent and there is no difficulty if they do consent. When the Bill to which my hon. and gallant Friend referred becomes law, as I duly hope it will, at least it will be farther from this six months than it is, because it has passed its Second Reading in another place and I see no reason to anticipate difficulties; and the jurisdiction of the court in this field will be widened immensely beyond where it is at present.

Mr. Mitchison

Retrospectively?

The Solicitor-General

No. Not retrospectively, but it will not matter whether the powers of the court are varied retrospectively because the disclaimer or release here contemplated will not be in terms retrospective under the operation of the Bill, as I now see it, anyhow, in relation to the time when this power becomes available to the court.

I doubt whether I am justified in detaining the Committee further on the point of time in the context or the point of consent in the context, because I am here and now declaring that we should like to look at this point again, and will look at it again before a further stage, because it is the common object to see that this let-out we provide—and which, I hope, has the approval of the Committee—should be applied in appropriate cases and does work.

I ought to explain to my hon. and gallant Friend one at least of the reasons—and, at the same time, cover one of the points raised by my hon. and learned Friend—why my right hon. Friend could not accept the Amendment in the form in which it stands. We attach importance to the provision in subsection (4, b) which I confess I have fallen into the habit of calling the "anti quid pro quo" provision. We must maintain a provision of that kind because, without it, we might leave the let-out widely open to abuse. Obviously, the person releasing or disclaiming could receive back funds from the settlement in the guise of consideration for the release or disclaimer: this effect is, in fact, a part of the mischief against which the Clause as a whole is aimed, and because my hon. and gallant Friend's Amendment does not cover this point my right hon. Friend could not accept it as it stands. But I do declare that we should like to, and will, look again carefully at this point before the next stage and I hope that with that assurance my hon. and gallant Friend will feel justified in withdrawing his Amendment.

Major Hicks Beach

I must make two points. First, my right hon. and learned Friend mentioned that in most cases it would be possible to get the consent of beneficiaries concerned, but most of the people concerned in the settlements I have in mind are infants. Secondly, his argument upon the period and the date of the Bill is not practical, for, even if the Bill becomes law in July, the Long Vacation begins on 1st August, and the courts do not reassemble until October. In view of this, I am sure that he will bear this point in mind. I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Motion made, and Question proposed, That the Clause stand part of the Bill.

Mr. Fletcher-Cooke

I do not want to detain the Committee long, but I notice that a learned commentator, writing on this Clause in the Conveyancing and Property Lawyer, says: One can only hope that the whole Clause will receive the severest scrutiny from the Legislature". That being so, I cannot let the Clause pass without one or two words, at least of interrogation.

The Clause, according to the Chancellor of the Exchequer in his Budget speech, was purported to restore the law to what was originally intended. That is what he said. So that if, in fact, any part of the settlement capital or any capital can go to the settlor or his wife, a proportion of part of the income should be treated as the settlor's for tax purposes. That is a worthy motive and I do not think that anyone objects to the reversal by the legislature of a decision in the Saunders case. But what some of us fear is that this very long and difficult Clause goes much further. Why is it not possible simply to amend Section 404 of the original Act, under which the Saunders case was taken, by inserting the words "wholly or partially" in the relevant subsection?

The Committee will recollect that the device used in the Saunders case was to leave, as it were, permanently and irrevocably within the settlement a nominal figure of £100, and, therefore, the settlement was not and could not be wholly revoked because £100 always had to remain. Nothing was more of a device than that, simply because the word "revoked" was held by three of their Lordships, though not by the remaining two, to mean entirely revoked instead of either partially or substantially revoked. Now, if the object is merely to reverse Saunders, can it not be done simply by inserting in the original Clause the words "wholly or partially", and thus obviously defeat the Saunders mischief both as regards capital and income, because I conceive that although Saunders dealt only with capital the Revenue must deal with both capital and income, or a similar device will be produced in the case of income?

Instead of that, we have nearly two pages of words, and we are suspicious of their meaning, because some of them appear to have no very intelligible purpose. May I give an example? In both subsection (1, a) and subsection (2, b), there are alternatives. The first seems, according to instruction of the English language, to be included in the second alternative. The simplest case is to take subsection (2, b), which I will read: In subsection (2) of the said section four hundred and four"— of the Income Tax Act, 1952— the references to a power to revoke or otherwise determine a settlement or any provision thereof shall be deemed to include references to"— Then there is paragraph (a), and— (b) any power to diminish the amount of any payments which are or may be payable under the settlement or any provision thereof or which are or may be so payable to any person other than the settlor and the wife or husband of the settlor. 11.0 p.m.

What can it mean? This, in the first limb of (b), is also included in the second, and the same applies to subsection (1, a). These are only examples. The clock is striking eleven and the Committee will not want me to enter into an elaborate exegesis of this very long Clause, though I should be happy to do so on another occasion. We are frankly suspicious that the Revenue is doing more than simply reversing Saunders; for if its purpose is merely to reverse Saunders, what is wrong with doing it in the short form which I have suggested?

There is another fear. The power to revoke, or to diminish, as it now is, might be held to capture a very common form of settlement which is, in common sense, irrevocable, by which a man agrees in every year when his income reaches a certain point, but not otherwise—that is, I think, the Tennant Case—to settle it year by year on other persons, not his children or wife, but persons who are strangers for this purpose.

It may be held that it is in a man's power to diminish his income by not earning as much as in the previous year. If it is in his power to diminish his income, would such a settlement, which is for all practical purposes irrevocable and from which his family would have no advantage, nevertheless be caught? It would be beyond all common sense if it were. We must remember that judges have said, time and time again, that all they can do is to read the words strictly, however often the result might be ridiculous. Therefore, that might be held to be caught—a result which would not arise if a simpler method of achieving this operation were adopted.

There are many other matters of this kind. Indeed, the scrutiny which the learned author of the article to which I have referred says should be applied to this Clause should be applied to the choice of the date, 16th April, 1958, in subsection (4). That, of course, was the day of the introduction of the Budget. It is only settlements which were entered into before that date that have an opportunity of rectification, small though that is at present.

I plead most sincerely with my right hon. and learned Friend to advance that date to the date of the introduction of the Finance Bill, at least, when the full terms of the veto could be seen, as it was not on reading the Chancellor's statement on the Budget when, very shortly as must inevitably have been the case, he said that his intention was to reverse Saunders and no more. Since then, and before the publication of the Finance Bill, rightly or wrongly, a number of settlements have been entered into which would not have attracted tax under Section 404 of the 1952 Act even if the Saunders case had gone the other way.

In other words, they do not depend for their validity on the Saunders decision. Therefore, it seems to me that they should be given an opportunity to rectify their settlements when they have seen the full terms of the Government's proposals, as has been given to those whose settlements were created before 16th April.

We cannot give this Clause the scrutiny which we should like. Its verbiage is enormous, as is its length. I hope that the Solicitor-General will, if he can, explain in his inimitable way, which always convinces us, why it is necessary to put this in such an extraordinarily artificial form instead of doing it in the simple and concise way which my Amendments, which were not called, suggested.

Mr. Diamond

I would not wish to delay the Committee more than a few minutes to deal with this question, and to draw a conclusion, if I can, from the way consideration is given under this Clause to those who have attempted to dodge Surtax, compared with the consideration given earlier to the suggestions coming from this side of the Committee to help the Government in not giving the benefit to the avoider of Income Tax.

I am not a lawyer, and it is with trepidation that I offer any comment on a matter so clearly the province of lawyers. But we are all Members and we all have the responsibility of trying to understand the legislation which we are drafting. The best way of making sure I understand it is to say what I believe it to mean, and, no doubt, the Solicitor General, or whoever is to reply, will correct me if I am wrong.

I understand this Clause, in effect, to counteract avoidance of Surtax. I dare say that I am right in that, because those are the words used by the Financial Secretary on the Second Reading of the Finance Bill. He said: Clause 18 counteracts avoidance of Surtax by remedying a defect in the law relating to revocable settlements which has been revealed by a recent decision of the courts."—[OFFICIAL REPORT, 12th May, 1958; Vol. 588, c. 43.] That is the purpose of the Clause, until we get to subsection (4), which is a let-out for everybody who tried to avoid Surtax but who, as a result of this, is now to be shown to have failed as a result of this Clause. In short, where one has the Surtax dodger, the man who has entered into a settlement to avoid Surtax, it is not sufficient that one puts the matter right, as in the two previous Clauses on dividend stripping. One must apparently give a man three months' notice of what one intends to do, and enable him to alter the settlement so that he shall not be prejudiced by having entered into it.

The reply given a short time ago to the Amendment moved by the hon. and gallant Member for Cheltenham (Major Hicks Beach) indicated that if six months was shown not to be sufficient the Solicitor-General was prepared to consider increasing it still further. My point is that whereas, on the two previous Clauses, the Committee has refused to give any help to the Amendments put forward from this side, designed to deal with tax avoidance, on this occasion, when we are dealing with Surtax avoidance through settlements, the Government are not only giving ample warning to the dodger to alter the settlements but dealing sympathetically with other Amendments to extend the time further. That is the way the Government apparently are seeking to discharge their duty of protecting the taxpayer and the Revenue.

The Solicitor-General

This is a turgid subject at any time, and a perfectly frightful topic at this hour of the night. I hope hon. Members will forgive me if I detain the Committee for a moment to deal with the matters which have been raised and have been put upon my plate, as it were, by the speech of my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke).

I should like, as anybody would, to deal wth the problem as concisely and with as few words as possible. I must not discuss a new Clause but, as an illustration of the argument of my hon. and learned Friend, we might conveniently look at the terms suggested by my hon. and learned Friend in his proposed Clause, "Amendment of s. 404 of Income Tax Act, 1952." It is very graceful, very brief and by no means verbose, but I am sure he will forgive me if I point out that the trouble with it is that it does not do what the Clause has to do. Perhaps in a moment I might indicate to him why. I am not mocking at all, because I myself would not know, but those who advise me on these matters have pointed out why it does not. A form of words such as my hon. and learned Friend suggests by the insertion of the words "wholly or partially" in Section 404 of the Income Tax Act, 1952—

Mr. Mitchison

On a point of order, Sir Gordon. Are we discussing Clause 18 or a new Clause on the Order Paper which was referred to at the end of the speech of the hon. and learned Member for Darwen (Mr. Fletcher-Cooke) and which has not been called but appears to be the subject of discussion by the right hon. and learned Gentleman?

The Deputy-Chairman

We are discussing Clause 18, but I understand that the Solicitor-General referred to the new Clause by way of illustration.

The Solicitor-General

I should hate to take up more time than need be by going out of order. I was endeavouring to answer my hon. and learned Friend's question. It was, in terms, "Why not do what you have to do by inserting 'wholly or partially' in Section 404 of the 1952 Act?" I was looking at the words of his Clause as a convenient illustration in order to see what happened if one inserted those words.

The reason why it does not do what one has to do in this context is that it leaves open in the case of the annual payments settlement—the usual kind of seven-year deed is an example—the contention that the settlement contains no power wholly or partially to revoke or otherwise determine the settlement. It leaves open the contention that the mere fact that the amount of the annual payments may be cut down does not amount to a power of partial revocation in this context. It does not deal with the question of the penalty settlement that one has to deal with, which is dealt with in part of Section 404 (1) of the 1952 Act. It leaves open something absolutely essential in this context to deal with the capital settlement, the Saunders type of case—the lawyers will know what I mean. There there was some discussion in the court of appeal at length as to whether in the words of Section 404: …to revoke or otherwise determine the settlement or any provision thereof… "provision" meant some benefit conferred by the settlement or a clause in the settlement.

11.15 p.m.

The majority of their Lordships—that is, two of them, Lord Simonds and Lord Reid—thought that the point need not be further pursued, but Lord Cohen came down on the side of a clause in the settlement—and other courts might take that view. If that is so, the form of words which my hon. Friend has in mind leaves the whole problem unsettled. One cannot plunge into what we might call the clean form of words which he has in mind.

My hon. and learned Friend asked me about other alternatives.

In Clause 18 (1) (a), if one leaves out the first part of the alternative so that it read, the references to a power to revoke or otherwise determine a settlement or any provision thereof shall be deemed to include references to any power to diminish the amount of any annual payments which the settlor or the wife or husband of the settlor may be liable to make… and so on, one would deal with the annual payment settlement where the settlor covenanted directly with the beneficiary. But one does not deal with the case where a trustee is interposed. One does not deal with the case, for instance, where there is a power to direct that the beneficiary is only to receive a reduced amount and the consequence of that is that the settlor has not to pay the same amount. For example, a covenant whereby a settlor undertakes to pay to trustees an annuity sufficient to enable them to pay £500 a year to "A" and "B", but where there is a discretionary power to the trustees to reduce the amount payable to "A" and "B" to £5. The result would be to diminish the amount due from the settlor.

It is for this reason that the words are as they are in paragraph (a), and I know that my hon. Friend will realise the importance of paragraph (a) of subsection (2) in relation to the Saunders case—where there is a power to hand out property comprised in a settlement. But paragraph (b) is required also to deal with a case where there is power to divert some of the income from the beneficiary to the settlor. That is a sample. The Clause may not be perfect enough to stop up all the holes, but the kind of case which might be given to illustrate why paragraph (a) is wanted is of a settlement which specifically forbids any passing of the capital involved to the settlor, or the settlor's husband or wife as the case may be. It is not, therefore, covered by subsection (2) of Section 404 of the Income Tax Act, 1952; it is quite outside paragraph (a) of subsection (2) of the Clause. Suppose it is that kind of settlement and includes a provision that the income of the settlement should be paid to "A" and if the trustees so decide that only £100 should be paid to "A" and the rest to the settlor's wife, we should want some words to catch that one

I was asked by my hon. and learned Friend about the effect of a quite common form of settlement. His suggestion was a settlement whereby the settlor bound himself in every year when his income reached £X to pay so-and-so. Not having thought about it until he spoke, that, I apprehend, is not caught by this provision, but I will reconsider that matter, for much may depend upon the precise form of words used.

There is one other matter with which I must deal, the question of the choice of date in relation to a settlement in respect of which the let-out under subsection (4) is to apply. The hon. Member for Gloucester (Mr. Diamond) invokes splendid interest in what seems to him to be the indulgence of the wicked Tories for the tax avoider in this instance. They are not exactly such, for there are people who, for perfectly innocent reasons of which the hon. Member would approve, create revocable settlements. No doubt the bulk of them have a tax avoidance tinge about them, but the point about this kind of let-out is that a person who has brought about a kind of tax avoidance can purge himself of that altogether, and it seems reasonable to allow him to do that.

We follow precise precedents in this matter—such as they are. If the hon. Member looks at the appropriate Schedule of the Finance Act, 1938, he will find an exactly parallel let-out based in the same way and no doubt on the same principle. He was concerned about the date which might be applicable in the case of what I might call the pre-Budget settlement and not the post-Budget settlement and we followed precedent in that way.

I ask my hon. and learned Friend the Member for Darwen to think why it is that we follow the previous general line in relation to tax avoidance in limiting the let-out to pre-Budget statement and why in the past that has been the general line adopted. I think that on reflection he will agree that it would be preposterous to confine oneself in the context to what was stated in the Chancellor's Budget statement. It is only for humble mortals like myself to listen to such things as Budget statements by Chancellors, but it would be the abomination of desolation to impose upon the Chancellor of the Exchequer the obligation to recite in his Budget statement every form of device of which he could think and which he intended to stop.

Nor does that happen, because any competent adviser advising somebody making a settlement after the Budget statement would at least in common decency take the trouble to look at the Financial Resolution on which it was based, and the Financial Resolution on which this matter is based in Number 12. I do not want to read it to the Committee at this hour, but if at his leisure my hon. and learned Friend will look at column 80 of HANSARD for 5th April, the date of the Budget statement, he will see that there is a specific reference to Section 404, and, of course, the Clause does nothing which is not authorised by the Financial Resolution.

Nor does the Financial Resolution confine itself to reversing the case of Saunders, because it would be a silly way to block up a hole like Saunders by leaving all kinds of escape vents in other directions which persons as ingenious as my hon. and learned Friend could easily find. Anybody considering what the Chancellor was proposing to do would sensibly look at what the Financial Resolution said, and, of course, the Clause is covered by what is in the Financial Resolution.

It is for that reason that it seems right in this context for us to follow what has always been the general line in this matter and to make the let-out apply to pre-Budget settlements and not to post-Budget settlements. After all, it may be a little unkind to the fellow taxpayer of the settlor to give the settlor and his advisers a free run while the anti-avoidance enactments were being incorporated into law. I hope that on reflection my hon. and learned Friend will think that a satisfactory reason for the course which we have taken.

Mr. Diamond

The right hon. and learned Gentleman referred to the Budget proposals reported in column 80 of HANSARD for Budget day. Do I gather that to mean that one is entitled to have regard to the Budget proposals and to the Motions carried by the Committee?

The Solicitor-General

It is possible that I was misheard. I was referring to the Financial Resolution Number 12, and I was expressing the view that any lawyer seeking to advise somebody about whether to make a settlement in a certain form at some date between the Budget statement and the publication of the Finance Bill, say, three weeks later, would be slightly unwise not to look at the terms of the Budget Resolution on which that passage of the Chancellor's statement was founded.

Mr. Mitchison

The right hon. and learned Gentleman has answered the debate so fully that it would be almost blasphemous to add any more.

Question put and agreed to.

Clause ordered to stand part of the Bill.