§ Amendment made: Clause 70, in page 144, line 21, leave out "a".—[Mr. Diamond.]
§ Mr. Geoffrey Lloyd
I beg to move Amendment No. 316, Clause 70, in page 144, line 33, at the end to insert:(8) This section shall not apply to any loan or advance made by a close company to any person accountable by law for the payment of any estate duty due by reason of the death of a deceased participator in the said company in respect of any shares or other interest in the said company beneficially held or enjoyed by such participator at, or at any time within five years immediately prior to, his death:Provided that this subsection shall not apply unless the inspector is satisfied—I raised this point first in Committee and the Chief Secretary said that he 147 would look into it, but he has not put down an Amendment to meet the point and, therefore, we have done so ourselves.
and it is hereby declared that hardship within the meaning of this subsection shall be deemed to include the loss of control of the said company enjoyed whether by the said individual alone or with other participators by reason of the disposal of any shares or other interest in the said company in favour of any person or persons other than the said individual or such other participators.
- (a) that the said loan or advance is made bona fide and for a full consideration for the purpose of paying such estate duty as aforesaid, and is duly applied in or towards the payment of such estate duty as aforesaid; and
- (b) that the said loan or advance is reasonably necessary in order to ensure the payment of such estate duty as aforesaid without imposing hardship on any individual beneficially entitled to any interest in the said company or in the estate of the said deceased participator;
Briefly, I will give an example of the sort of case that we have in mind. This is where a merchanting company with annual profits of the order of £20,000 before tax was held in equal shares by two cousins, one of whom died. By the time that all the outside assets of the dead cousin had been disposed of, there was a deficiency of £20,000 in the amount of cash available to pay Estate Duty. The surviving cousin, anxious to acquire the shares of the deceased, had no assets other than his own shares in the business and was, therefore, in practice unable to do so.
The problem in this case was solved by the company making a loan to the executors of the deceased shareholder, which enabled them to pay the duty. Subsequently, as a result of the merger with another company, cash was made available to the shareholders which enabled the executors to repay the loan. I fear that under the Bill as it stands, a practice of this kind which seems to be reasonable would not be legal, and the purpose of the Amendment is to meet a case of that kind.
§ Mr. Diamond
I could engage in a long series of arguments which would convince nobody—certainly not the right hon. Gentleman—that what he is proposing has no basis and that what the Government are doing is, as usual, perfect. I do not propose to repeat the obvious.
I think it far better to say to the right hon. Gentleman that I am grateful to him for bringing forward this Amendment, as he did on a previous occasion. There is a measure of hardship involved which his Amendment goes too far to meet, which we ourselves have tried to meet and have not found a successful way of meeting yet.
It is a difficult matter. I assure the right hon. Gentleman that the Government have considered with sympathy the point which he has put forward. I hope that he will allow us to give it further consideration during the ensuing year to see whether we can possibly find a workable scheme. The present scheme goes 148 far too wide and has certain deficiencies and there is considerable point in the essential argument which has been brought forward.
§ Mr. William Clark
I am most grateful to the right hon. Gentleman for being a little more reasonable on this occasion. If he is to look at this matter between now and next April there might be some companies involved in the current year, as has been suggested. Obviously, the right hon. Gentleman cannot categorically commit himself now, but if a company has to make a loan to a participator for Estate Duty in the circumstances envisaged by my right hon. Friend the Member for Sutton Coldfield (Mr. Geoffrey Lloyd), and if, in the next Finance Bill, this matter is to be put right, could we have an assurance that any company which, in the interim, is caught because of this distribution will receive retrospective relief?
§ Mr. Diamond
I am grateful to the hon. Gentleman for raising that point, because it enables me to say that I would not have suggested to the House, and particularly to the right hon. Member for Sutton Coldfield, this method of applying oneself to the problem if I thought that there was any possibility of any company being affected in practice between now and next April. I do not think that there is and in the sense that there is not I could give the undertaking. I am advised that there is not and I do not see how there could be. If the hon. Gentleman would care to write to me afterwards and give me a case which he could conceive of I should be glad to deal with it. The amount of retrospection which might be involved to Budget day when it is not exactly 5th April is something which I am sure the House would overlook when we got that far.
§ Amendment, by leave, withdrawn.