§ In determining the value of an estate for the purposes of estate duty allowance shall be made for the incidental costs of valuation for the said purpose payable out of the estate, being fees, commission or remuneration paid for the professional services of any surveyor. or auctioneer, or accountant, or agent, or legal adviser.—[Sir C. Mott-Radclyffe.]
§ Brought up, and read the First time.
§ Sir C. Mott-RadclyffeI beg to move, That the Clause be read a Second time.
I can explain this new Clause briefly. I have no wish to detain the Committee 186 for a moment longer than necessary. For a long time it has been thought unfair that all the costs of valuation in respect of estate duty should not be an allowable deduction against the total sum payable in respect of Estate Duty. The Government conceded this point, in my view wisely, last year, within certain limits, in respect of Capital Gains Tax.
This new Clause and the following one, which goes a little wider, but which has not been selected, follows very closely paragraph 4(2) of the Sixth Schedule to the Finance Act, 1965, and I hope to 187 commend it to the Committee on that basis alone. If the argument that the costs of valuation should be a deductible charge against Capital Gains Tax is valid then it is surely doubly valid in relation to Estate Duty, for the simple reason that no liability can be incurred in respect of Capital Gains Tax unless some capital gain has been made, whereas with Estate Duty the incidence of death is entirely fortuitous and capricious and can happen to anyone at any time.
One could give many examples of how unfairly the discrimination between what is a deductible charge against capital gains on the one hand and what is not a deductible charge against Estate Duty on the other may work out.
I propose to give only two examples. They are from the agricultural industry, because I think, with all due modesty, that I understand the economics of the agriculture industry at least as well as the Chancellor appeared to understand them last week. Take the case of the owner-occupier of a 500-acre farm, whose whole capital is virtually locked up in the holding, and he has almost no outside capital. Suppose that when he dies the probate valuation of the farm, at £200 an acre, amounts to a total of £100,000. Taking into account the rebate on agricultural land, if my calculation is correct the duty payable would be slightly short of £25,000.
Therefore, the owner-occupier's executors—perhaps his widow, his son or whoever is left the farm—must sell either the whole farm to realise the Estate Duty and move elsewhere, or, if they can, they must sell part of the farm to pay the Estate Duty and retain the remainder of it. Either way round, there has to be a valuation and there must be a sale.
Let us suppose, for the sake of argument, that they decide to sell 100 acres, if they can, or one-fifth of the acreage. That would realise roughly £20,000. I calculate that by the time the executors have incurred all the costs in relation to the valuation and winding-up the estate and have sold successfully 100 acres of a 500-acre farm to defray the bulk of the cost of the Estate Duty, they would incur, in terms of solicitors' fees, auctioneers' fees, advertising the land for sale, the fees of agents if they were called 188 in, accountants' fees and all the rest, a sum in excess of £1,200, which is not deductible against Estate Duty. That would be a heavy burden.
Let me take an almost converse example of a small family farm of, say, between 100 and 150 acres on which there is already a biggish overdraft. The farmer dies, and by reason of the overdraft being offset and the fact that the farm is small and marginal, no Estate Duty is payable. Nevertheless, the executors still have to incur all the costs of valuing the whole of the holding to prove that they are not liable for Estate Duty.
This is nonsense. It is neither right nor fair. It makes no logic to discriminate in giving the benefit in relation to the Capital Gains Tax and not for Estate Duty. One could multiply these examples many times with all sorts of variations between agricultural and urban property. Whichever way round one does it, the same unfairness results. I am merely asking the Government to be logical and to give in respect of Estate Duty the same concession as they allow in the case of Capital Gains Tax.
§ 11.15 p.m.
§ Mr. J. E. B. Hill(Norfolk, South): I should like to support my hon. Friend the Member for Windsor (Sir C. Mott-Radclyffe). I think that refusal to allow costs of valuation on sale in the case of Estate Duty has long been thought to be unfair. It has now become positively anomalous. I would have thought the case needed no further argument, but lest the Chancellor should be minded to refuse I should like to stress that.
It may be that the words we have chosen may not quite meet the case.
For my part, if he would accept in principle what we urge I should be quite happy to wait for a Government Amendment at a later stage of the Bill, because this does reach a very long way low down the scale. My hon. Friend has referred to the agricultural situation, but, of course, this affects all estates of real property, and as Estate Duty begins at £4,000 at 1 per cent. it could mean there is a sum of some £40-odd falling upon the quite small estate of real property, which would need to be valued and sold in the case of a house and so on, and the costs of that transaction might well be 189 a quite substantial sum, if they were not allowed against the charge of even a small amount of duty. In these small estates, for the ultimate beneficiaries, a modest amount of £40 or £50 or £100 is still a significant figure.
Therefore, I hope that the ambit of the new Clause will be seen as intended to include small cases as well as some of the substantial and serious cases of the large farms. I hope, therefore, that it will be accepted.
§ Mr. DiamondI am sure that at this late hour of the night the Committee would wish me to answer the debate shortly, while giving the relevant arguments. There are two very powerful arguments, one of principle, the other of practice.
In terms of principle, a duty of this kind is not one against which it is appropriate to allow the valuation and similar costs involved. I can illustrate this most simply by adducing an even stronger argument in support of the case of the hon. Member for Windsor (Sir C. Mott-Radclyffe) than he himself adduced. There was a time when legacy duty was payable. Legacy duty was one of the duties arising as a result of a death. For legacy duty costs of the kind he is talking about were allowable. For Estate Duty they were not allowed. I am drawing attention to this to distinguish between these two kinds of duty. The legacy duty was one which was concerned with the amount the legatee, the successor, received, and he received such amount as was left to him less the costs of ascertaining it. That was what he got. Similarly for Capital Gains Tax. That is a duty which is levied on the gain, on the net gain to the person making it. Therefore, the valuation costs of ascertaining that gain are a proper deduction against the gain. With Estate Duty one is dealing with an entirely different kind of duty, a duty which relates, as it were, to a fixed state of affairs, the date of death of the testator or person concerned. A duty on death.
One takes note of what were the assets at that time in order to arrive at what was their value at that time. One is not concerned with who succeeds, with what happens to the estate afterwards, how it is administered, or anything of that kind. One is merely concerned with ascertaining 190 the value of the assets at that time. That is the principle.
In terms of practice, it would be right to say that practically every estate for which Estate Duty is payable has to incur some kind of probate deduction. It would be a reasonable statement to say that the costs are a limited proportion of the assets of the estate, and therefore that affects the rate of Estate Duty. It would be, therefore, right to say that if one wanted to collect the same amount of Estate Duty and to allow as a deduction from that Estate Duty the costs of valuation and similar costs referred to in the new Clause one would have simply to put up the rate of Estate Duty. So, in theory, one has a principle here which is quite clearly distinguishable; in practice, it would make very little difference. There would be certain cases when it would matter, but in practice it would make very little difference.
I am bound to say that, as has happened on every previous occasion when the proposal has been considered, and as happened on 18th June, 1964, which was the most recent occasion, the Government of the day have said more or less the same as I am saying now.
I am sorry, but I cannot possibly recommend the Committee to accept the Clause.
§ Mr. John HallMy hon. Friend the Member for Windsor (Sir C. Mott-Radclyffe) must be complimented for raising the point, ably supported as he was by my hon. Friend the Member for Norfolk, South (Mr. J. E. B. Hill). This point has been a cri de cocur for many years, as the Chief Secretary well knows. He said that had he been on this side of the Committee he could have made a better case for the point that we are arguing. I would not suggest that he could have done it better than my hon. Friends; I am using the Chief Secretary's own words.
It is a striking fact that, no matter which party is on the benches opposite, the Treasury Ministers seem to have this rigid attitude towards what is, after all, a very modest request. Anyone with an academic interest in the techniques of brain-washing must watch with the greatest interest the way in which the Treasury works on its Front Bench spokesmen. No matter how fiery their 191 orations from this side, once they are on the Treasury Front Bench and open their briefs to see the remark "Resist", resist they do regardless of their innermost convictions. I am sorry that the Chief Secretary did not stand by the viewpoint he professed to hold when on this side and give a more sympathetic reception to the new Clause.
Under the present system, when the executors of an estate have to bear the cost of valuing the estate and the cost of realising assets to pay the duty levied on it, it is rather like being told to dig one's own grave before one is shot. The Treasury says, "Tax will be imposed on that estate if it is seen to be liable for Estate Duty, and you must pay the cost of valuing it to enable us to assess the tax." It is an incredible attitude of mind, even though it has been in operation for a long time.
The Government went some part of the way towards recognising the justice of this in the Capital Gains Tax, although the Chief Secretary has tried to make a difference between what he describes as a tax on a gain and a tax on an estate, which we call Estate Duty. I fail to see the exact difference, because, as I tried to argue at some length during the debates on Amendments to the Capital Gains Tax Clauses, Capital Gains Tax is a tax on capital, which is what Estate Duty is, in effect. I cannot see why the allowances which are made in Schedule 6, paragraph 4(1) and (2), which enable certain expenses, including expenses of valuation, to be offset against the gain, should not apply in the present case.
The point has given rise to astonishment. Many people find, when they come to settle the affairs of an estate, that they are not able to offset the costs of valuation against the estate. It seems such an elementary fact of justice that it surprises many people. We know that ignorance of the law is no excuse, but it is interesting to note that ever some learned judges appear ignorant of the law in this respect. In the recent Chatsworth case Lord Justice Danckwerts said:
| Division No. 93.] | AYES | [11.27 p.m. |
| Alison, Michael (Barkston Ash) | Balniel, Lord | Biggs-Davison, John |
| Allason, James (Hemel Hempstead) | Batsford, Brian | Black, Sir Cyril |
| Astor, John | Beamish, Col. Sir Tufton | Body, Richard |
| Atkins, Humphrey (M't'n & M'd'n) | Bell, Ronald | Boyle, Rt. Hn. Sir Edward |
| Awdry, Daniel | Bennett, Dr. Reginald (Gos. & Fhm) | Braine, Bernard |
§ "There is one other subject on which I should like to add a word or two. It is rather startling that no deduction is possible apparently under the statute (and that seems to be the case) for the necessary expenses which any sale of land particularly must involve. That seems to me to be a hardship on estates…."
§ It seems curious that a learned judge should be ignorant of this fact, but it is not curious that he should regard it as a hardship on the estate.
§ I think that the Committee will agree that the Chief Secretary's reply is typical of the replies that we have had throughout the whole of these long debates on the Committee stage of this Bill. The right hon. Gentleman has the ability to put a case with force and aggressiveness, and even when he gives way he does so more aggressively than anybody else in the Committee. I think it is time that the Chief Secretary—and indeed every Member of the Treasury Bench—used his own initiative and his own intelligence in looking at this problem and did not always take the view of the Treasury officials and the brief given to him.
§ The right hon. Gentleman knows as well as I do that there is a good deal of force and justice in this Clause. He knows as well as I do that if he were on this side of the Committee he would be urging this with all the eloquence at his command on whoever was on the Treasury Bench. The right hon. Gentleman knows, too, that in resisting this he is carrying out the duty laid on him by his brief. This is not good enough. Time and again we have faced this obstructionism from the benches opposite. Unanswerable arguments from this side of the Committee have been met by these stonewalling tactics. This is wasting the time of the Committee. This is wasting the time of the House. It is making a mockery of attempts to put forward logical and reasoned arguments, and therefore I suggest to my right hon. and hon. Friends that we should divide on this Clause.
§ Question put, That the Clause be read a Second time:—
§ The Committee divided: Ayes 106. Noes 177.
193| Brewis, John | Hawkins, Paul | Murton, Oscar |
| Brown, Sir Edward (Bath) | Heald, Rt. Hn. Sir Lionel | Nicholls, Sir Harmer |
| Bruce-Gardyne, J. | Heseltine, Michael | Nott, John |
| Bullus, Sir Eric | Higgins, Terence L. | Osborn, John (Hallam) |
| Carlisle, Mark | Hirst, Geoffrey | Page, Graham (Crosby) |
| Clark, Henry | Hobson, Rt. Hn. Sir John | Percival, Ian |
| Clegg, Walter | Holland, Philip | Pike, Mies Mervyn |
| Cooke, Robert | Hordern, Peter | Prior, J. M. L. |
| Crawley, Aidan | Hornby, Richard | Ramsden, Rt. Hn. James |
| Dalkeith, Earl of | Howell, David (Guildford) | Renton, Rt. Hn. Sir David |
| Dance, James | Hunt, John | Ridley, Hn. Nicholas |
| Dean, Paul (Somerset, N.) | Hutchison, Michael Clark | Rossi, Hugh (Hornsey) |
| Deedes, Rt. Hn. W. F. (Ashford) | Kaberry, Sir Donald | Sharples, Richard |
| Digby, Simon Wingfield | Kimball, Marcus | Smith, John |
| Dodds-Parker, Douglas | Kirk, Peter | Taylor, Sir Charles (Eastbourne) |
| Eden, Sir John | Kitson, Timothy | Taylor, Frank (Moss Side) |
| Fletcher-Cooke, Charles | Knight, Mrs. Jill | Thatcher, Mrs. Margaret |
| Foster, Sir John | Lambton, Viscount | Turton, Rt. Hn. R. H. |
| Fraser, Rt. Hn. Hugh (St'fford & Stone) | Langford-Holt, Sir John | Walker, Peter (Worcester) |
| Glover, Sir Douglas | Lewis, Kenneth (Rutland) | Walker-Smith, Rt. Hn. Sir Derek |
| Gower, Raymond | Loveys, W. H. | Ward, Dame Irene |
| Grant, Anthony | McAdden, Sir Stephen | Weatherill, Bernard |
| Gresham Cooke, R. | Maclean, Sir Fitzroy | Whitelaw, William |
| Griffiths, Eldon (Bury St. Edmunds) | Macleod, Rt. Hn. Iain | Wilson, Geoffrey (Truro) |
| Gurden, Harold | Maddan, Martin | Worsley, Marcus |
| Hall, John (Wycombe) | Mawby, Ray | Wylie, N. R. |
| Hall-Davis, A. G. F. | Maxwell-Hyslop, R. J. | Younger, Hn. George |
| Harris, Frederick (Croydon, N.W.) | Mills, Peter (Torrington) | |
| Harrison, Brian (Maldon) | Miscampbell, Norman | TELLERS FOR THE AYES: |
| Harrison, Col. Sir Harwood (Eye) | Mitchell, David (Basingstoke) | Mr. Francis Pym and |
| Harvey, Sir Arthur Vere | Morrison, Charles (Devizes) | Mr. Jasper More. |
| Harvie Anderson, Miss | Mott-Radclyffe, Sir Charles |
| NOES | ||
| Andersen, Donald | Fletcher, Raymond (Ilkeston) | Macdonald, A. H. |
| Archer, Peter | Fletcher, Ted (Darlington) | McKay, Mrs. Margaret |
| Armstrong, Ernest | Floud, Bernard | Mackenzie, Gregor (Rutherglen) |
| Atkinson, Norman (Tottenham) | Foley, Maurice | Mackie, John |
| Bagier, Gordon A. T. | Ford, Ben | Mackintosh, John P. |
| Baxter, William | Forrester, John | Maclennan, Robert |
| Bence, Cyril | Fowler, Gerry | McMillan, Tom (Glasgow, C.) |
| Bennett, James (G'gow, Bridgeton) | Fraser, John (Norwood) | McNamara, J. Kevin |
| Bessell, Peter | Fraser, Rt. Hn. Tom (Hamilton) | Manuel, Archie |
| Bidwell, Sydney | Gardner, A. J. | Mayhew, Christopher |
| Binns, John | Garrett, W. E. | Mikardo, Ian |
| Bishop, E. S. | Garrow, Alex | Milian, Bruce |
| Blackburn, F. | Ginsburg, David | Mitchell, R. C. (S'th'pton, Test) |
| Boardman, H. | Gourlay, Harry | Molloy, William |
| Booth, Albert | Gray, Dr. Hugh (Yarmouth) | Morgan, Elystan (Cardiganshire) |
| Boston, Terence | Gregory, Arnold | Morris, Alfred (Wythenshawe) |
| Bradley, Tom | Grey, Charles (Durham) | Moyle, Roland |
| Brooks, Edwin | Hamilton, James (Bothwell) | Mulley, Rt. Hn. Frederick |
| Brown, Hugh D. (G'gow, Provan) | Hamilton, William (Fife, W.) | Murray, Albert |
| Brown, Bob (N'c'tle-upon-Tyne, W) | Hamling, William | Norwood, Christopher |
| Brown, R. W. (Shoreditch & F'bury) | Hannan, William | Oakes, Gordon |
| Buchan, Norman | Harper, Joseph | Ogden, Eric |
| Butler, Herbert (Hackney, C.) | Harrison, Walter (Wakefield) | O'Malley, Brian |
| Butler, Mrs. Joyce (Wood Green) | Hazell, Bert | Orbach, Maurice |
| Callaghan, Rt. Hn. James | Heffer, Eric S. | Orme, Stanley |
| Carmichael, Neil | Herbison, Rt. Hn. Margaret | Oswald, Thomas |
| Coe, Denis | Hooley, Frank | Page, Derek (King's Lynn) |
| Coleman, Donald | Hooson, Emlyn | Paget, R. T. |
| Cullen, Mrs. Alice | Houghton, Rt. Hn. Douglas | Palmer, Arthur |
| Dalyell, Tam | Howie, W. | Pardoe, John |
| Davidson, James (Aberdeenshire, W.) | Hunter, Adam | Park, Trevor |
| Davies, Dr. Ernest (Stretford) | Hynd, John | Parker, John (Dagenham) |
| Davies, Harold (Leek) | Jackson, Colin (B'h'se & Spenb'gh) | Parkyn, Brian (Bedford) |
| Davies, Robert (Cambridge) | Jay, Rt. Hn. Douglas | Perry, Ernest G. (Battersea, S.) |
| Delargy, Hugh | Jeger, Mrs. Lena (H'b'n & St. P'cras, S.) | Perry, George H. (Nottingham, S.) |
| Dempsey, James | Jenkins, Hugh (Putney) | Price, Christopher (Perry Barr) |
| Dewar, Donald | Johnson, James (K'ston-on-Hull, W.) | Price, William (Rugby) |
| Diamond, Rt. Hn. John | Johnston, Russell (Inverness) | Rhodes, Geoffrey |
| Dickens, James | Kenyon, Clifford | Richard, Ivor |
| Doig, Peter | Kerr, Dr. David (W'worth, Central) | Roberts, Albert (Normanton) |
| Dunn, James A. | Leadbitter, Ted | Robertson, John (Paisley) |
| Dunnett, Jack | Lee, John (Reading) | Robinson, W. O. J. (Walth'stow, E.) |
| Dunwoody, Mrs. Gwyneth (Exeter) | Lestor, Miss Joan | Roebuck, Roy |
| Dunwoody, Dr. John (F'hm & C'b'e) | Lomas, Kenneth | Rose, Paul |
| Edwards, William (Merioneth) | Lyon, Alexander W. (York) | Ross, Rt. Hn. William |
| Ellis, John | Lyons, Edward (Bradford, E.) | Rowland, Christopher (Meriden) |
| English, Michael | McBride, Neil | Ryan, John |
| Ensor, David | McCann, John | Shaw, Arnold (Ilford, S.) |
| Evans, Ioan (Birm'h'm, Yardley) | MacDermot, Niall | Short, Mrs. Renée (W'hampton, N.E.) |
| Silkin, John (Deptford) | Wainwright, Edwin (Dearne Valley) | Williams, Alan Lee (Hornchurch) |
| Silkin, S. C. (Dulwich) | Wainwright, Richard (Colne Valley) | Williams, Clifford (Abertillery) |
| Silverman, Julius (Aston) | Walden, Brian (All Saints) | Williams, Mrs. Shirley (Hitchin) |
| Small, William | Walker, Harold (Doncaster) | Williams, W. T. (Warrington) |
| Steel, David (Roxburgh) | Wallace, George | Winnick, David |
| Steele, Thomas (Dunbartonshire, W.) | Watkins, David (Consett) | Winstanley, Dr. M. P. |
| Summerskill, Hn. Dr. Shirley | Weitzman, David | Woodburn, Rt. Hn. A. |
| Swingler, Stephen | Wellbeloved, James | Yates, Victor |
| Tinn, James | Wells, William (Walsall, N.) | |
| Urwin, T. W. | Whitaker, Ben | TELLERS FOR THE NOES: |
| Varley, Eric G. | Whitlock, William | Mr. Alan Fitch and |
| Mr. Charles R. Morris. |