HC Deb 26 May 1965 vol 713 cc729-45
Mr. Peter Walker

I beg to move Amendment No. 344, in page 26, line 8, to leave out subsections(1) and (2) and to insert:

  1. (1) In determining the amount of estate duty payable on a death allowance shall be made for any capital gains tax chargeable in consequence of the death and in determining 730 the value of the estate for the purposes of estate duty an allowance shall be made for any capital gains tax owed by the deceased.
  2. (2) In determining the amount of estate duty payable by reference to settled property passing on a death whether it continues to be settled property or not, an allowance shall be made for any capital gains tax chargeable in consequence of the death in respect of the settled property, so far as that tax falls to be paid out of the property so passing or to be borne by any person to whom the property so passes for any beneficial interest in possession.

The Chairman

I have a note that I might suggest to the Committee that with this Amendment we might also take Amendment No. 387, in page 26, line 10, leave out "in consequence of the death" and insert: on chargeable gains accruing on the death in consequence of the provisions of section 23(1)". But I do not press this.

Mr. Walker

The principle involved in the Amendment is an attempt to reduce the adverse effects which have been brought into operation by the previous Clause. I do not want to delay the Committee by repeating the many arguments which have been put forward by both sides of the Committee on the subject of bringing in a form of double taxation at death of both the Capital Gains Tax and death duties. The object of the Amendment is to see that both in the case of the individual and of the settlement the amount of Capital Gains Tax is deducted from the amount of duty to be paid under the Estate Duty provisions rather than out of the size of the estate.

To put on this double form of taxation would particularly adversely affect the individual who had built up his own business. The Committee heard previously this afternoon of the case of the person who, at present, would be responsible for paying £2,400 of duty on a business valued at £20,000 which he had built during his lifetime. As a result of the provisions of the Bill that amount of duty payable on death would be increased to £5,800.

This was considered, quite rightly, by several hon. Members opposite to be an unreasonable position, and both sides of the Committee agreed that death duties are already very high. In the United States there is, rightly, a system under which, during the lifetime of the person, there is a capital gains tax and on death a separate estate duty tax. This Government wish to impose both Capital Gains Tax and Estate Duty at the time of death. This is thoroughly wrong. We failed to have it removed by previous Amendments and we are now endeavouring, by this Amendment, to reduce at least the total impact of both these taxes.

The Chairman

Perhaps the hon. Gentleman would wish to comment on my suggestion that we take the two Amendments together, but if there is any doubt about it we will ignore it.

Sir Eric Fletcher

I can agree with the hon. Member for Worcester (Mr. Peter Walker) on one point—that it is quite unnecessary to repeat all the arguments that we had on this subject on Clause 23. In dealing with the Clause, my hon. and learned Friend the Financial Secretary argued fully why it was quite impossible to accept any of the Amendments proposed by the Opposition for removing or eliminating the charge of Capital Gains Tax on the occasion of death. The hon. Member said that this Amendment would reduce the liability thus arising, but, in fact, it would eliminate it completely. If the Amendment were carried the effect would be to render completely nugatory the charge arising on death of Capital Gains Tax. Therefore, it is quite unacceptable to the Government.

The effect of the Amendment is that the whole amount paid under Capital Gains Tax would be allowed as relief against the claim for Estate Duty, and in a great many cases the result would be to eliminate liability for Capital Gains Tax altogether. In substance, therefore, the Amendment is the same as some of the Amendments proposed to Clause 23 which were decisively rejected by the Committee. I hope that the Committee will repeat on this Amendment the decision to which it came on those.

Sir D. Glover

The Minister without Portfolio said that he could agree with my hon. Friend the Member for Worcester (Mr. Peter Walker) that we need not have tedious repetition of previous arguments, but the Financial Secretary, on the Amendment we have just disposed of, took exactly the opposite view and, after we on this side had repeated our arguments, he accepted them. There seems to be something to be said for hammering home common sense into the Government.

The Chairman

I think that the Chair comes in here. There is a case against tedious repetition of arguments which we have had previously.

Sir D. Glover

Of course, Dr. King, I listen to your Ruling, but I am sure that even your Ruling must be influenced by what you saw happen on the previous Amendment. The arguments had to be put twice before the Government understood them, and they then accepted them. I do riot want to enter upon long and tedious repetition of previous arguments, but I want to feel sure that the Government understand the point which we are making now.

The Minister without Portfolio said that the Amendment was completely unacceptable. In the previous debate, in reply to a very pungent speech from the hon. Member for Manchester, Cheetham (Mr. Harold Lever), the Financial Secretary said that he saw some point in it and he would look at the matter again between now and Report. This is contrary to what the Minister without Portfolio is now saying.

Sir Eric Fletcher indicated dissent.

Sir D. Glover

The Minister shakes his head, and so does the Financial Secretary. Of course he did not say give us carte blanche and accept all our arguments, but he said that we had made a sufficient case, and a sufficient case has been made by his hon. Friend the Member for Cheetham, that he was prepared seriously to look into it. There must be some meeting of minds on this. There is a difficulty, of course, with two different Ministers speaking from the Government Front Bench, but at the moment we really have a bit of a nonsense.

Which story is right? My right hon. and hon. Friends might, with the partial accommodation given by the Financial Secretary, decide not to divide on this Amendment. But, if we are to take the view put by the Minister without Portfolio, that the Amendment is completely unacceptable, we shall, of course, divide the Committee. We return to the fact that, in a case like this, it is right and just—and I do not want to reiterate the arguments—

9.45 p.m.

Mr. MacDermot

I am sure that the hon. Gentleman does not wish to waste time by reiterating the arguments. I want to make it clear that what I undertook to look at was a specific problem in relation to the small businessman. This Amendment is in very wide terms and would apply throughout the whole field. The point my hon. Friend the Minister without Portfolio made was that the effect of the Amendment would, in substance, be the same as the issue we decided following our debate on Clause 24. If, therefore, we are to argue this issue we shall be back on the main argument. This in no way detracts from what I said earlier.

Sir D. Glover

Perhaps I might be complimentary to the hon. and learned Gentleman. In the early hours of the day I did not think that he would see the day through, but he seems to have taken a "purple heart" or something, because he is doing extraordinarily well. He is full of vigour. It shows that a night out of bed seems to suit him down to the ground.

The division between the two sides of the Committee, if the hon. and learned Gentleman seriously meant what he said in our previous debate about going into the problem, concerns whether or not we are talking about a narrow field when we cite the case of a man with £1,000 who has opened a business. I am certain that, if he goes into the problem in depth, he will discover that, far from being an exception, such a case is far more the rule. My hon. Friend the Member for Peterborough (Sir Harmar Nicholls) said that such a case is the norm and not the exception, while the case which the hon. and learned Gentleman looks upon as the norm is actually the exception.

I am certain that, on any reassessment of the problem, the hon. and learned Gentleman will find—if he can stop being ideologically arrogant and thinking that I am trying to make a special case—that this is a far wider range than he believes at the moment. It applies right across commerce, distribution and manufacturing and also to such businesses as solicitors'. Nearly all such firms, if they have been successful in business, will be hit severely by the tax. I hope that, despite our debate on Clause 24, my right hon. and hon. Friends will vote for the Amendment.

Mr. Harold Lever

I shall be neither tedious nor repetitive. All I seek is a little clarity. I should like some sort of assurance that the Treasury is now satisfied that when people die they do not do so in order to avoid Capital Gains Tax. Perhaps, however, I am venturing a rash prediction. The Clause is not yet in force and I am making an assumption that it is unlikely to be.

I ask these questions to clear my mind, in which there is further confusion, or perhaps it is really confusion in the Treasury's mind. As I understand it, the Treasury takes the view that if one is unwise and unkind enough to die without having conferred the inestimable benefit of a donation to the Treasury by realising one's capital gains, something has to be done about this form of avoidance, and that this is equally so if one sets up a trust which keeps the property in question unrealised.

I am a little confused about this, because it seems to me that when a person dies without realising his capital gains, or sets up a trust to ensure that the gains are not realised, what is happening is not that he is avoiding tax but that he is staying outside the intended application of the tax. Since the raison d'etre of the tax is that we wish to bring into account as revenue a tax on the gains which have been realised and no other, it is not an avoidance any more than when I gave up cigarette smoking I did not avoid the tobacco tax.

If the same process of reasoning applied in the Clause were applied by analogy to the moment when I gave up cigarette smoking, one of the following consequences would be likely to follow: either I would be forcibly fed with cigarettes to ensure that there was no depletion of the Revenue, or on death, I should be deemed to have smoked 60 cigarettes a day when I made the decision to abstain until the unfortunate day, which, if it ever happens, which I have been told to assume it will, I perish. I dare say that it would cause relief in some quarters even though my heir would have to bear a ghastly rate of tax. This process of reasoning, if it be the process of reasoning in the Revenue, is fallacious, or I am confused.

I should like an assurance from the Financial Secretary, who is always so courteous, lucid and careful in these matters, that the Treasury does not feel that it is a form of Capital Gains Tax avoidance when a man dies with an unrealised gain.

Secondly, I hope that the reasons advanced for resisting Amendments to this Clause and previous Clauses will bear further examination because we have been told that the hon. Member for Cheetham and others are right in saying that grave hardship will follow if the Clauses are not amended. The answer to this is, "The Government have often inflicted hardship on citizens so that there is not any reason why they should not inflict another." I say—and it may be a prejudiced mind operating—that if the Government inflicted a number of hardships in the past, it is a good idea to suggest their avoidance in the future. If it is recognised that Estate Duty causes hardship in many cases, one may well hesitate before applying Capital Gains Tax at the point of death in addition.

Mr. Grimond

I have totally misunderstood the Government's case, because "MacDermot's law" is that if the Government have inflicted hardship they must inflict greater hardship.

Mr. Lever

The Leader of the Liberal Party, being brought up to believe that the non-conformist conscience is not dead and therefore that the non-conformist memory is not dead, has reminded me of the words of the ancient biblical king who said that his predecessor had chastised his people with whips and that he intended to chastise them with scorpions. I did not understand the argument in that way—or perhaps I just did not understand the argument. At all events, it is not altogether persuasive—and I should be grateful if the Treasury would look at the argument again—to say in answering a case about hardship that other hardships are caused by other legislation and other circumstances.

Does my hon. Friend the Financial Secretary feel that the rejection of the Amendment and the adoption of the Clause unmutilated will provide another opportunity for the compassionate exercise of the Revenue's discretion. I am not anxious to proliferate Clauses which bring into play the well known extensive compassion of the Inland Revenue to those who owe them large sums of money. I do not want to be critical of the Inland Revenue the members of which carry out what to them must be a distasteful and unrewarding job with a great deal of compassion, intelligence and flexibility. I do not feel that it is right that we should pass legislation imposing unjust taxation, if we think it unjust and liable to cause hardship, and lay the flattering unction to our souls that the tax gatherers will repair their callousness by their overflowing abundance of human Icindnes3. In those circumstances, my right hon. and hon. Friends should be careful in their legislation and should have another look at it from this point of view.

My final point, which does not relate directly to the Amendment but is a general and brief observation, concerns the attitude which I shall adopt in the Division. What I am doing is weeding is the Government's legislative garden. There, there are glorious plants which I revere, respect and cherish, but here and there a weed which I am helping to remove. The idea of returning to the Tory wilderness, however, daunts me, and I shall avoid it at all costs.

Sir Lionel Heald (Chertsey)

If the hon. Member will not vote with us, will he not at least come and sit on this side?

Mr. Peter Walker

While not wanting to add to the cogent arguments of the hon. Member for Manchester, Cheetham (Mr. Harold Lever), I know that the Minister without Portfolio will be preparing his reply to his hon. Friend. I am sorry that the hon. Member decided yet again to give his declaration of voting

Division No. 144.] AYES [9.58 p.m.
Abse, Leo Darling, George Harper, Joseph
Albu, Austen Davies, S. O. (Merthyr) Hart, Mrs. Judith
Allaun, Frank (Salford, E.) Delargy, Hugh Hattersley, Roy
Allen, Scholefield (Crewe) Dempsey, James Hazell, Bert
Armstrong, Ernest Diamond, John Healey, Rt. Hn. Denis
Atkinson, Norman Dodds, Norman Herbison, Rt. Hn. Margaret
Bacon, Miss Alice Doig, Peter Hill, J. (Midlothian)
Barnett, Joel Driberg, Tom Hobden, Dennis (Brighton, K'town.)
Benn, Rt. Hn. Anthony Wedgwood Dunn, James A. Holman, Percy
Bennett, J. (Glasgow, Bridgeton) Dunnett, Jack Houghton, Rt. Hn. Douglas
Binns, John Edwards, Rt. Hn. Ness (Caerphilly) Howell, Denis (Small Heath)
Blackburn, F. English, Michael Howie, W.
Boardman, H. Ensor, David Hoy, James
Boston, T. G. Evans, Albert (Islington, S.W.) Hughes, Emrys (S. Ayrshire)
Bottomley, Rt. Hn. Arthur Fernyhough, E. Hunter, Adam (Dunfermline)
Bowden, Rt. Hn. H. W. (Leics S.W.) Finch, Harold (Bedwelity) Hunter, A. E. (Feltham)
Boyden, James Fletcher, Sir Eric (Islington, E.) Hynd, H. (Accrington)
Braddock, Mrs. E. M. Floud, Bernard Hynd, John (Attercliffe)
Brown, R. W. (Shoreditch & Fbury) Foot, Sir Dingle (Ipswich) Irving, Sydney (Dartford)
Buchanan, Richard Foot, Michael (Ebbw Vale) Jackson, Colin
Butler, Herbert (Hackney, C.) Fraser, Rt. Hn. Tom (Hamilton) Janner, Sir Barnett
Butler, Mrs. Joyce (Wood Green) Jeger,Mrs.Lena(H'b'n&St.P'cras,S.)
Callaghan, Rt. Hn. James Freeson, Reginald Jenkins, Hugh (Putney)
Castle, Rt. Hn. Barbara George, Lady Megan Lloyd Jones, Dan (Burnley)
Coleman, Donald Ginsburg, David Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)
Conlan, Bernard Gourlay, Harry Jones, [...]. Idwal (Wrexham)
Corbet, Mrs. Freda Greenwood, Rt. Hn. Anthony Kelley, Richard
Cronin, John Gregory, Arnold Kenyon, Clifford
Crossman, Rt. Hn. R. H. S. Griffiths, David (Rother Valley) Kerr, Dr. David (W'worth, Central)
Cullen, Mrs. Alice Gunter, Rt. Hn. R. J. Lawson, George
Dalyell, Tam Hamilton, William (West Fife) Leadbitter, Ted

intention. This is, I think, the tenth time today. We said that we would accept it in future to save the time of the Committee and I am sure that the Whips will not be too ruthless and nasty with the hon. Member if he does not repeat it every time.

The hon. Member suggested that the result of the Amendment would be completely to do away with the Capital Gains Tax. That simply is not the case. For example, the illustration has been quoted throughout the day of the heavy penal taxation which is put upon a person with a large goodwill factor in his business. In that example, the death duty amounted to £2,400, but the Capital Gains Tax amounted to £4,200. In that case, therefore, there would still be a heavy imposition of the Capital Gains Tax.

I am also sorry that the hon. Member did not take advantage of the Amendment to answer the point made earlier by my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) about the appalling double taxation Capital Gains Tax that takes place within a settlement.

Question put, That the words proposed to be left out, to the word "in" in line 10, stand part of the Clause:—

The Committee divided: Ayes 179, Noes 172.

Lee, Rt. Hn. Frederick (Newton) O'Malley, Brian Soskice, Rt. Hn. Sir Frank
Lever, Harold (Cheetham) Oram, Albert E. (E. Ham, S) Stones, William
Lewis, Arthur (West Ham, N.) Owen, Will Summerskill, Hn. Dr. Shirley
Lewis, Ron (Carlisle) Padley, Walter Swain, Thomas
Lomas, Kenneth Page, Derek (King's Lynn) Swingler, Stephen
Loughlin, Charles Palmer, Arthur Taverne, Dick
Mabon, Dr. J. Dickson Pargiter, G. A. Thomson, George (Dundee, E.)
McBride, Neil Park, Trevor (Derbyshire, S.E.) Thornton, Ernest
MacColl, James Parker, John Tinn, James
MacDermot, Niall Parkin, B. T. Tuck, Raphael
McKay, Mrs. Margaret Pavitt, Laurence Urwin, T. W.
Mackenzie, Gregor (Rutherglen) Pearson, Arthur (Pontypridd) Varley, Eric G.
Mackie, John (Enfield, E.) Prentice, R. E. Wainwright, Edwin
Mahon, Simon (Bootle) Price, J. T. (Westhoughton) Walden, Brian (All Saints)
Manuel, Archie Pursey, Cmdr. Harry Walker, Harold (Doncaster)
Mapp, Charles Rankin, John Wallace, George
Mason, Roy Redhead, Edward Wells, William (Walsall N.)
Mellish, Robert Rees, Merlyn Whitlock, William
Mikardo, Ian Reynolds, G. W. Wigg, Rt. Hn. George
Molloy, William Robertson, John (Paisley) Wilkins, W. A.
Monslow, Walter Robinson, Rt. Hn.K.(St. Pancras, N.) Williams, Albert (Abertillery)
Morris, Charles (Openshaw) Ross, Rt. Hn. William Williams, Mrs. Shirley (Hitchin)
Mulley,Rt.Hn.Frederick(SheffieldPk) Rowland, Christopher Wilson, Rt. Hn. Harold (Huyton)
Murray, Albert Shore, Peter (Stepney) Wilson, William (Coventry, S.)
Neal, Harold Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.) Woodburn, Rt. Hn. A.
Newens, Stan Silkin, John (Deptford) Wyatt, Woodrow
Noel-Baker, Francis (Swindon) Silkin, S. C. (Camberwell, Dulwich) Yates, Victor (Ladywood)
Noel-Baker,Rt.Hn.Philip(Derby,S.) Slater, Mrs. Harriet (Stoke, N.)
Oakes, Gordon Slater, Joseph (Sedgefield) TELLERS FOR THE AYES:
Ogden, Eric Solomons, Henry Mr. George Rogers and
Mr. Ifor Davies.
Alison, Michael (Barkston Ash) Foster, Sir John Litchfield, Capt. John
Allan, Robert (Paddington, S.) Fraser,Rt.Hn.Hugh(St'fford & Stone) Lloyd,Rt.Hn. Geoffrey (Sut'nC'dfield)
Amery, Rt. Hn. Julian Fraser, Ian (Plymouth, Sutton) Lloyd, Ian (P'tsm'th, Langstone)
Anstruther-Gray, Rt. Hn. Sir W. Galbraith, Hn. T. G. D. Lloyd, Rt. Hn. Selwyn (Wirral)
Astor, John Gammans, Lady Longden, Gilbert
Atkins, Humphrey Gilmour, Sir John (East Fife) Loveys, Walter H.
Awdry, Daniel Glover, Sir Douglas Lubbock, Eric
Baker, W. H. K. Godber, Rt. Hn. J. B. MacArthur, Ian
Barlow, Sir John Goodhew, Victor Mackenzie, Alasdair (Ross&Crom'ty)
Batsford, Brian Gower, Raymond Mackie, George Y. (C'ness & S'land)
Beamish, Col. Sir Tufton McLaren, Martin
Bennett, Sir Frederic (Torquay) Grant, Anthony McMaster, Stanley
Berry, Hn. Anthony Gresham Cooke, R. McNair-Wilson, Patrick
Bessell, Peter Griffiths, Peter (Smethwick) Maginnis, John E.
Birch, Rt. Hn. Nigel Grimond, Rt. Hn. J. Mathew, Robert
Black, Sir Cyril Hall, John (Wycombe) Maude, Angus
Blaker, Peter Harrison, Brian (Maldon) Maxwell-Hyslop, R. J.
Box, Donald Harvey, Sir Arthur Vere (Macclesf'd) Maydon, Lt.-Cmdr. S. L. C.
Boyd-Carpenter, Rt. Hn. J. Harvey, John (Walthamstow, E.) Meyer, Sir Anthony
Boyle, Rt. Hn. Sir Edward Harvie Anderson, Miss Mills, Peter (Torrington)
Brewis, John Hawkins, Paul Mills, Stratton (Belfast, N.)
Brinton, Sir Tatton Heald, Rt. Hn. Sir Lionel Miscampbell, Norman
Bromley-Davenport.Lt.-Col.SirWalter Heath, Rt. Hn. Edward Mitchell, David
Brooke, Rt. Hn. Henry Hendry, Forbes Morrison, Charles (Devizes)
Bryan, Paul Higgins, Terence L. Mott-Radclyffe, Sir Charles
Buchanan-Smith, Alick Hill, J. E. B. (S. Norfolk) Munro-Lucas-Tooth, Sir Hugh
Buck, Antony Hirst, Geoffrey Murton, Oscar
Buxton, Ronald Hobson, Rt. Hn. Sir John Neave, Airey
Chichester-Clark, R. Hogg, Rt. Hn. Quintin Nicholls, Sir Harmar
Clark, William (Nottingham, S.) Hooson, H. E. Nugent, Rt. Hn. Sir Richard
Cole, Norman Hopkins, Alan Orr, Capt. L. P. S.
Cooper, A. E. Hordern, Peter Osborn, John (Hallam)
Costain, A. P. Hornsby-Smith, Rt. Hn. Dame P. Page, John (Harrow, W.)
Craddock, Sir Beresford (Spelthorne) Howe, Geoffrey (Bebington) Page, R. Graham (Crosby)
Crowder, F. P. Hunt, John (Bromley) Pearson, Sir Frank (Clitheroe)
Curran, Charles Iremonger, T. L. Peyton, John
Currie, G. B. H. Irvine, Bryant Godman (Rye) Pickthorn, Rt. Hn. Sir Kenneth
Dalkeith, Earl of Johnston, Russell (Inverness) Pitt, Dame Edith
Davies, Dr. Wyndham (Perry Barr) Jopling, Michael Price, David (Eastleig[...])
d'Avigdor-Goldsmid, Sir Henry Kaberry, Sir Donald Prior, J. M. L.
Deedes, Rt. Hn. W. F. Kerby, Capt. Henry Pym, Francis
Dodds-Parker, Douglas Kilfedder, James A. Ramsden, Rt. Hn. James
Doughty, Charles Kimball, Marcus Redmayne, Rt. Hn. Sir Martin
Errington, Sir Eric King, Evelyn (Dorset, S.) Rees-Dav'es, W. R.
Eyre, Reginald Kitson, Timothy Russell, Sir Ronald
Fell, Anthony Langford-Holt, Sir John Sharples, Richard
Fletcher-Cooke, Charles (Darwen) Legge-Bourke, Sir Harry Shepherd, William
Flet[...]her-Cooke, Sir John (S'pton) Lewis, Kenneth (Rutland) Sinclair St. George
Smith, Dudley (Br'ntf'd & Chiswick) Thatcher, Mrs. Margaret Whitelaw, William
Spearman, Sir Alexander Thompson, Sir Richard (Croydon,S.) Wills, Sir Gerald (Bridgwater)
Stanley, Hn. Richard Tiley, Arthur (Bradford, W.) Wilson, Geoffrey (Truro)
Stoddart-Scott, Col. Sir Malcolm Tweedsmuir, Lady Wolrige-Gordon, Patrick
Studholme, Sir Henry van Straubenzee, W. R. Woodnutt, Mark
Tal[...]bot, John E. Walder, David (High Peak) Yates, William (The Wrekin)
Taylor, Sir Charles (Eastbourne) Walker, Peter (Worcester) Younger, Hn. George
Taylor, Edward M. (G'gow.Cathcart) Walters, Dennis
Taylor, Frank (Moss Side) Ward, Dame Irene TELLERS FOR THE NOES:
Teeling, Sir William Weatherill, Bernard Mr. Jasper More and
Temple, John M. Webster, David Mr. Geoffrey Johnson Smith.

Amendment made: In page 26, line 10, leave out in consequence of the death" and insert "on chargeable gains accruing on the death in consequence of the provisions of section 23(1)".— [Sir Eric Fletcher.]

Mr. Peter Walker

I beg to move, Amendment No. 290, in page 26, line 11, at the end to insert: and as well as for any amount of capital gains tax chargeable on the whole or such proportion of a gift inter vivos by the deceased as fell to be included in the deceased's estate for the calculation of estate duty.

The Chairman

With this Amendment we can discuss Amendment No. 408, in Clause 23, page 22, line 4, at end insert: but the total amount of capital gains tax and estate duty paid on the assets shall not exceed he amount of the estate duty which would have been paid off if the provisions of this Act did not apply".

Mr. Walker

This Amendment is designed to put right what seems to be an unwarranted discrepancy in the position of somebody giving a gift. At present, as the Committee will be aware, the amount of a Capital Gains Tax is deducted from the estate prior to the imposition of the death duties. Under this Amendment we endeavour to cater for the position where somebody is giving a gift and has paid a Capital Gains Tax at the time of giving that gift and then the gift, as a result of it perhaps only just being recently given and not given within the five-year period, is added to the estate for the purpose of death duty but the Capital Gains Tax already paid is not deducted.

I think that this is a reasonable and logical point and I hope that it will be accepted by the other side of the Committee.

Mr. MacDermot

Owing to the wording of the Amendment, we were a little mystified about the point which the hon. Gentleman had in mind by putting it down. I have listened to what he has said. I do not wish to try to answer this "off the cuff". I should like time to consider it, if he will permit me to do so, because we had not grasped the point by looking at the Amendment. The hon. Gentleman obviously has a point. I undertake to consider it before the Report stage.

Mr. Peter Walker

I am grateful to the hon. and learned Gentleman. I am sure that this is a point which the Government will want to take into consideration, as it is a just one. In view of the hon. and learned Gentleman's undertaking, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Amendments made: In page 27, line 26, leave out "and" and insert "or".

In page 27, leave out lines 28 and 29 and insert: deemed to be effected in accordance with section 24(3) of this Act". In line 37, leave out "and" and insert "or".

In line14, leave out "(1)" and insert "(2)".—[Sir Eric Fletcher.]

Question proposed, That the Clause, as amended, stand part of the Bill.

Mr. Maxwell-Hyslop

I think that we need to make a few more inquiries about what the Clause means before we decide whether or not to assent to it being part of the Bill. I am sorry to have to do this when the Financial Secretary is so sleepy, but it is perhaps better that he should yawn than that the taxpayer should groan.

In line 23 we see the expression if sold in the open market", and it is that on which I seek advice. One would think that we knew what was meant by the open market, but during the course of the last year it has become clear—and a number of hon. Members have raised the point in the House—that auction sales which may appear to constitute an open market sale have been something rather less than open. I should like the Financial Secretary, or the Minister without Portfolio, to give us an explanation of what does or does not constitute valuation for sale in the open market.

Incidentally, is the value of something when sold in the open market inclusive or exclusive of the auctioneer's commission and stamp duty? This is relevant because it increases by a significant percentage, or alternatively decreases by a significant percentage, the actual valuation on which any Capital Gains Tax will hypothetically have to be paid. Because of the imperfections of the market, I think that we ought to have clearly defined what is meant by the words, if sold in the open market".

Division No. 145.] AYES [10.15 p.m.
Abse, Leo George, Lady Megan Lloyd Molloy, William
Albu, Austen Ginsburg, David Monslow, Walter
Allaun, Frank (Salford, E.) Gourlay, Harry Morris, Charles (Openshaw)
Allen, Scholefield (Crewe) Greenwood, Rt. Hn. Anthony Mulley, Rt. Hn. Frederick(SheffieldPk)
Armstrong, Ernest Gregory, Arnold Murray, Albert
Atkinson, Norman Griffiths, David (Rother Valley) Neal, Harold
Bacon, Miss Alice Hamilton, William (West Fife) Newens, Stan
Baxter, William Hannan, William Noel-Baker, Francis (Swindon)
Benn, Rt. Hn. Anthony Wedgwood Harper, Joseph Noel-Baker,Rt.Hn.Philip(Derby,S.)
Bennett, J. (Glasgow, Bridgeton) Hart, Mrs. Judith Oakes, Gordon
Binns, John Hattersley, Roy Ogden, Eric
Blackburn, F. Hazell, Bert O'Malley, Brian
Boston, T. G. Healey, Rt. Hn. Denis Oram, Albert E. (E. Ham, S.)
Bottomley, Rt. Hn. Arthur Herbison, Rt. Hn. Margaret Owen, Will
Braddock, Mrs. E. M. Hill, J. (Midlothian) Padley, Walter
Brown, R. W. (Shoreditch & Fbury) Hobden, Dennis (Brighton, K'town.) Page, Derek (King's Lynn)
Buchanan, Richard Holman, Percy Palmer, Arthur
Butler, Herbert (Hackney, C.) Houghton, Rt. Hn. Douglas Pargiter, G. A.
Butler, Mrs. Joyce (Wood Green) Howell, Denis (Small Heath) Park, Trevor (Derbyshire, S.E.)
Callaghan, Rt. Hn. James Hoy, James Parker, John
Cattle, Rt. Hn. Barbara Hughes, Emrys (S. Ayrshire) Parkin, B. T.
Coleman, Donald Hunter, Adam (Dunfermline) Pavitt, Laurence
Conlan, Bernard Hynd, H. (Accrington) Pearson, Arthur (Pontypridd)
Corbet, Mrs. Freda Irving, Sydney (Dartford) Prentice, R. E.
Cronin, John Jackson, Colin Pursey, Cmdr. Harry
Crossman, Rt. Hn. R. H. S. Janner, Sir Barnett Rankin, John
Cullen, Mrs. Alice Jeger,Mrs.Lena(H'b'n&St.P'cras,S.) Redhead, Edward
Dalyell, Tam Jenkins, Hugh (Putney) Rees, Merlyn
Darling, George Jones.Rt.Hn.Sir Elwyn(W.Ham,S.) Reynolds, G. W.
Davies, Ifor (Gower) Kelley, Richard Robertson, John (Paisley)
Davies, S. O. (Merthyr) Kenyon, Clifford Robinson, Rt. Hn.K.(St. Pancras, N.)
Delargy, Hugh Kerr, Dr. David (W'worth, Central) Rose, Paul B.
Diamond, John Lawson, George Ross, Rt. Hn. William
Dodds, Norman Leadb[...]ltter, Ted Rowland, Christopher
Doig, Peter Lever, Harold (Cheetham) Shore, Peter (Stepney)
Driberg, Tom Lewis, Ron (Carlisle) Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)
Dunn, James A. Loughlin, Charles Silkin, John (Deptford)
Dunnett, Jack Mabon, Dr. J. Dickson Silkin, S. C. (Camberwell, Dulwich)
Edwards, Rt. Hn. Ness (Caerphilly) McBride, Neil Silverman, Julius (Aston)
English, Michael MacColl, James Slater, Mrs. Harriet (Stoke, N.)
Ensor, David MacDermot, Niall Slater, Joseph (Sedgefield)
Evans, Albert (Islington, S.W.) McKay, Mrs. Margaret Solomons, Henry
Fernyhough, E. Mackenzie, Gregor (Ruthergien) Soskice, Rt. Hn. Sir Frank
Finch, Harold (Bedwellty) Mackie, John (Enfield, E.) Stones, William
Fletcher, Sir Eric (Islington, E.) Mahon, Simon (Bootle) Strauss, Rt. Hn. G. R. (Vauxhall)
Floud, Bernard Manuel, Archie Summerskill, Hn. Dr. Shirley
Foot, Sir Dingle (Ipswich) Mapp, Charles Swain, Thomas
Foot, Michael (Ebbw Vale) Mason, Roy Swingler, Stephen
Fraser, Rt. Hn. Tom (Hamilton) Mellish, Robert Taverne, Dick
Freeson, Reginald Mikardo, Ian Thomson, George (Dundee, E.)
Mr. MacDermot

The reference to the open market is a well understood term among valuers. It appears in a great body of legislation in one form and another. The test is that of a sale between a willing buyer and a willing seller, and is not influenced by considerations of commission.

Mr. Maxwell-Hyslop

But is it inclusive or exclusive of selling costs?

10.15 p.m.

Mr. MacDermot

Perhaps the hon. Gentleman did not hear my closing words. It is not influenced by considerations of commission.

Question put, That the Clause, as amended, stand part of the Bill:

The Committee divided: Ayes 167, Noes 160.

Thornton, Ernest Wells, William (Walsall N.) Wilson, William (Coventry, S.)
Tuck, Raphael Whitlock, William Wyatt, Woodrow
Urwin, T. W. Wigg, Rt. Hn. George Yates, Victor (Ladywood)
Varley, Eric G. Wilkins, W. A.
Walden, Brian (All Saints) Williams, Albert (Abertillery) TELLERS FOR THE AYES:
Walker, Harold (Doncaster) Williams, Mrs. Shirley (Hitchin) Mr. George Rogers and
Wallace, George Wilson, Rt. Hn. Harold (Huyton) Mr. William Howie
Alison, Michael (Barkston Ash) Grimond, Rt. Hn. J. Mott-Radclyffe, Sir Charles
Allan, Robert (Paddington, S.) Hall, John (Wycombe) Munro-Lucas-Tooth, Sir Hugh
Amery, Rt. Hn. Julian Harris, Reader (Heston) Murton, Oscar
Anstruther-Gray, Rt. Hn. Sir W. Harrison, Brian (Maldon) Nicholls, Sir Harmar
Atkins, Humphrey Harvey, John (Walthamstow, E.) Nugent, Rt. Hn. Sir Richard
Awdry, Daniel Harvie Anderson, Miss Orr, Capt. L. P. S.
Baker, W. H. K. Hawkins, Paul Osborn, John (Hallam)
Barlow, Sir John Heald, Rt. Hn. Sir Lionel Page, R. Graham (Crosby)
Batsford, Brian Heath, Rt. Hn. Edward Pearson, Sir Frank (Clitheroe)
Beamish, Col. Sir Tufton Hendry, Forbes Peyton, John
Bennett, Sir Frederic (Torquay) Higgins, Terence L. Pickthorn, Rt. Hn. Sir Kenneth
Berry, Hn. Anthony Hill, J. E. B. (S. Norfolk) Pitt, Dame Edith
Bessell, Peter Hirst, Geoffrey Price, David (Eastleigh)
Birch, Rt. Hn. Nigel Hobson, Rt. Hn. Sir John Prior, J. M. L.
Black, Sir Cyril Hogg, Rt. Hn. Quintin Pym, Francis
Blaker, Peter Hooson, H. E. Ramsden, Rt. Hn. James
Box, Donald Hordern, Peter Redmayne, Rt. Hn. Sir Martin
Boyd-Carpenter, Rt. Hn. J. Hornsby-Smith, Rt. Hn. Dame P. Rees-Davies, W. R.
Boyle, Rt. Hn. Sir Edward Howe, Geoffrey (Bebington) Russell, Sir Ronald
B[...]rewis, John Iremonger, T. L. Sharples, Richard
Brinton, Sir Tatton Irvine, Bryant Godman (Rye) Shepherd, William
Brooke, Rt. Hn. Henry Jenkin, Patrick (Woodford) Sinclair, Sir George
Bryan, Paul Johnston, Russell (Inverness) Smith, Dudley (Br'ntf'd & Chiswick)
Buchanan-Smith, Alick Kaberry, Sir Donald Spearman, Sir Alexander
Buck, Antony Kerby, Capt. Henry Stanley, Hn. Richard
Buxton, Ronald Kilfedder, James A. Stoddart-Scott, Col. Sir Malcolm
Carlisle, Mark Kimball, Marcus Studho[...]lme, Sir Henry
Clark, William (Nottingham, S.) King, Evelyn (Dorset, S.) Talbot, John E.
Cooper, A. E. Kitson, Timothy Taylor, Sir Charles (Eastbourne)
Costain, A. P. Langford-Holt, Sir John Taylor, Edward M. (G'gow,Cathcart)
Crowder, F. P. Legge-Bourke, Sir Harry Taylor, Frank (Moss Side)
Curran, Charles Lewis, Kenneth (Rutland) Teeling, Sir William
Currie, G. B. H. Lloyd,Rt.Hn.Geoffrey(But'nC'dfield) Temple, John M.
Dalkeith, Earl of Lloyd, lan (P'tsm'th, Langstone) Thatcher, Mrs. Margaret
Davies, Dr. Wyndham (Perry Barr) Longden, Gilbert Thompson, Sir Richard (Croydon,S.)
d'Avigdor-Goldsmid, Sir Henry Loveys, Walter H. Tiley, Arthur (Bradford, W.)
Deedes, Rt. Hn. W. F. Lubbock, Eric Tweedsmuir, Lady
Dodds-Parker, Douglas Mackenzie, Alasdair (Ross&Crom'ty) van Straubenzee, W. R.
Doughty, Charles Mackie, George Y. (C'ness & S'land) Walder, David (High Peak)
Errington, Sir Eric McLaren, Martin Walker, Peter (Worcester)
Eyre, Reginald McMaster, Stanley Walters, Dennis
Fell, Anthony McNair-Wilson, Patrick Ward, Dame Irene
Fletcher-Cooke, Charles (Darwen) Maginnis, John E. Weatherill, Bernard
Fletcher-Cooke, Sir John (S'pton) Marp[...]es, Rt. Hn. Ernest Webster, David
Foster, Sir John Mathew, Robert Whitelaw, William
Fraser,Rt.Hn.Hugh(St'fford & Stone) Maude, Angus Wills, Sir Gerald (Bridgwater)
Fraser, lan (Plymouth, Sutton) Maxwell-Hyslop, R. J. Wilson, Geoffrey (Truro)
Gammans, Lady Maydon, Lt.-Cmdr. S. L. C. Woodnutt, Mark
Gilmour, Sir John (East Fife) Meyer, Sir Anthony Yates, William (The Wrekin)
Glover, Sir Douglas Mills, Peter (Torrington) Younger, Hn. George
Godber, Rt. Hn. J. B. Mills, Stratton (Belfast, N.)
Goodhew, Victor Miscampbell, Norman TELLERS FOR THE NOES:
Gower, Raymond Mitchell, David Mr. Ian MacArthur and
Gresham Cooke, R. More, Jasper Mr. Geoffrey Johnson Smith
Griffiths, Peter (Smethwick) Morrison, Charles (Devizes)