HC Deb 05 July 1960 vol 626 cc374-7

(1) Where, in the case of a person dying after the fourth day of April, nineteen hundred and sixty, such a surrender as is mentioned in subsection (1) of section forty-eight of the Finance Act, 1940 (under which a surrender of title to benefits from a company will not defeat a charge to estate duty under section forty-six of that Act), is made bona fide at a time before the beginning of the two years ending with the death, the amount of any benefits treated as accruing to the deceased from the company which are so treated by virtue only of the operation of the said section forty-eight in relation to that surrender shall be reduced—

  1. (a) by fifteen per cent. thereof if the said time fell during the first of the three years ending with the death,
  2. (b) by thirty per cent. thereof if it fell during the first of the four years ending with the death, or
  3. (c) by sixty per cent. thereof if it fell earlier.

(2) Where subsection (2) of section fifty-one of the Finance Act, 1940 (under which where estate duty is payable in respect of shares or debentures by virtue of which benefits accrued to the deceased, relief from duty under section forty-six of the Act is given by reference to the value of the shares or debentures), has effect as respects any shares or debentures by reason of any benefits being treated as accruing to the deceased, being benefits of which under the foregoing subsection the amount is reduced by any perentage, paragraphs (a) and (b) of the said subsection (2) shall so have effect as if for references to the value of the shares of debentures there were substituted references to their value reduced in the proportion which that percentage of the amount of the said benefits bears to the amount of all benefits accruing or treated as accruing to the deceased from the company by virtue of any interest that he at any time had in the shares or debentures or by virtue of a power's having at any time been exercisable by him or with his consent in relation thereto, and other references in the said section fifty-one shall be construed accordingly.—[Sir E. Boyle.]

Brought up, and read the First time.

Sir E. Boyle

I beg to move, That the Clause be read a Second time.

This new Clause extends the graduated relief provided by Clause 61 of this year's Finance Bill to cases where the deceased person, more than two years before his death, gave up his title to benefits from companies which attract duty under Section 46 of the well-known Finance Act of 1940.

Under Section 46 and subsequent related provisions of the Finance Act, 1940, duty is charged in certain circumstances where a deceased person had at some time transferred property to a one-man company and, within the last five years, had received or could have received benefit from it. If the deceased had surrendered his title to benefits within five years before his death, Section 48 of the Finance Act, 1940, provides that a charge may yet be made as if he had not done so.

In Committee, when we were debating what was Clause 59, my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) raised the point that in his view graduation ought to be allowed where the title to benefit had been surrendered in cases of this kind. My right hon. Friend examined this proposal. In his view, as I indicated in Committee, my hon. Friend had made a very reasonable point. For that reason we put down a new Ways and Means Resolution. The new Clause adopts the proposal which my hon. Friend moved in Committee though not, as he will recognise, in quite the form in which he proposed it.

In my view this in no way adds a new principle or any substantive controversial point to our discussions in Committee on what was Clause 59, which we debated at some length. The new Clause merely extends the graduation which ought to be allowed in this case. Whatever may be hon. Members' views on the principle of the Clause, I think that this tidying up provision is a reasonable addition to the Bill.

Mr. Mitchison

We do not particularly like the occasion of this Clause. These arrangements with and about companies were and are open to a good deal of criticism. More particularly we do not like, and we divided against, the proposal to reduce by graduation the rates of Estate Duty during the five years after a gift inter vivos.

On the other hand, if we are to have such a graduation it seems very difficult to distinguish this case from the simpler cases provided for in the Bill. We therefore reserve all our objections to the graduation in principle, as we intended to reserve them when the amended Clause was passed a few moments ago. While doing so, we shall not divide against the new Clause.

Sir H. d'Avigdor-Goldsmid

Notwithstanding his well-known dislike of monkeying about with companies, when his party were in power the hon. and learned Member for Kettering (Mr. Mitchison) supported the extension from three to five years of what I will briefly call the death duty rule. I therefore expect that he will regard it as logical for him to accept the graduation.

Mr. Mitchison

Will the hon. Member explain the logic of what appears to me to be a remarkable proposition?

Sir H. d'Avigdor-Goldsmid

I do not want to detain the Committee. I thought that I had made a quite unremarkable statement. When the hon. and learned Member's party were in power they extended the mischief of the death duty exemption up to five years and took specific action to catch transactions of the class covered by the Clause. It therefore appears to be entirely logical, now that the mischief of the five years has been somewhat mitigated, that it should apply equally to those transactions caught by the Clause. I hope that this logic will now appeal to the hon. and learned Gentleman.

Having just had a dusty answer from him, may I thank my hon. Friend the Financial Secretary for giving me a good answer on this occasion?

Mr. J. T. Price

Since the hon. Member for Walsall, South (Sir H. d'AvigdorGoldsmid) is making an appeal based in his own submission on logic, I must for a moment follow up his logic. If he believes that a former Labour Government created some form of mischief in extending the period from three years to five years, is he suggesting that in next year's Finance Bill—it is too late this year—he will seek to bring forward an Amendment to reduce the period from three years to five years?

As we are dealing with a property interest, and the effect in many respects of Estate Duty being mitigated, has any computation been made by the Treasury of the impact on Estate Duty yield? I do not remember ever being told the financial impact on the yield, and I think that, with very great respect, I am entitled to ask for some kind of estimate of what is involved in terms of hard cash.

Sir E. Boyle

I can answer the hon. Gentleman in one sentence. My right hon. Friend said, and I repeat it, that the total cost of accepting Clause 61, the principle of which we are not now discussing, would, in a full year, be rather more than £2 million. As far as I can tell the Committee, the cost of accepting the new Clause, arising out of what was put forward in Committee by my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor Goldsmid) will be negligible in relation to the total amount, and I was glad to hear what I thought was the very fair speech of the hon. and learned Member for Kettering (Mr. Mitchison).

Question put and agreed to.

Clause read a Second time, and added to the Bill.