TRANSFER ON DEATH (Hansard, 6 March 1975)

§ Mr. Joel Barnett
I beg to move Amendment No. 46, in page 17, line 13, at end insert: '(2A) Where the deceased was entitled to an interest in possession in settled property and on his death the settlor's spouse became beneficially entitled to that property, then if—

(a) the settlor's spouse was at the time of the death domiciled in the United Kingdom and resident (within the meaning of the Income Tax Act) in the United Kingdom in the year of assessment in which the death occurred; and

(b) neither the settlor nor the settlor's spouse had acquired a reversionary interest in the property for a consideration in money or money's worth;

the value of the settled property shall be left out of account in determining for the purposes of this Part of this Act the value of the deceased's estate immediately before his death'. The amendment provides exemption from the tax charged on the coming to an end of an interest in possession on death, where the property then reverts to the settlor's spouse. The amendment and its counterpart in paragraph 4 of Schedule 5—Amendment No. 172—arises from our consideration of the argument in Committee for the provision of exemption from the capital distribution charge where property reverts to the settlor from a discretionary trust.

§ Mr. David Howell
The amendment meets points made in the Standing Committee. We believe that it is a great improvement in the Bill. I assume that from now on the Chief Secretary will never refer to any such arrangements as 1787 a loophole for tax avoidance and something to be legislated out of existence in future legislation.

§ Mr. Joel Barnett
I beg to move Amendment No. 51, in page 18, line 7, at end insert: '(5A) Where any part of the property which would have been included as mentioned in subsection (4) above would, by virtue of section 40(2)(c) of the Finance Act 1969, have formed an estate by itelf, the tax chargeable under this section shall be the aggregate of—

(a) the tax that would have been so chargeable if that part had not been so included; and

(b) the tax (if any) that would have been so chargeable if that part only had formed the estate of the deceased and the deceased had made no previous chargeable transfers;

but in a case where (by reason of an excess over £25,000) the part referred to in paragraph (b) above would have been a fraction only of any property, the tax that would have been chargeable as mentioned in that paragraph shall be taken to be the like fraction of the tax that would have been so chargeable if the remainder of that property had also been included in the estate of the deceased'. It may be convenient to discuss at the same time Government Amendment No. 52, which is on the same points.
The amendments honour an undertaking I gave in Committee to meet the point of amendments moved by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). They relate to the transitional relief from aggregation under the old estate duty law for gifts of policies of insurance effected before 20th March 1968. That relief exempts the first £25,000 of policy proceeds from aggregation with the other property chargeable on the death. There is a similar relief for Northern Ireland.