§ Question proposed, That the clause stand part of the Bill.
§ Mr. BlairWe have debated the principle of inheritance tax and the Government's reduction in it before, and I do not wish to rehearse old arguments. Last year the Government abolished inheritance tax on lifetime gifts between individuals. Clause 96 will extend that abolition to lifetime transfers into and out of interest in possession trusts—effectively, any trust that is not discretionary. I should be obliged if the Financial Secretary would tell me how much the abolition will cost, and whether I am right in thinking that it is primarily the better off who will gain.
§ The Financial Secretary to the Treasury (Mr. Norman Lamont)The cost of the new relief is negligible. Although it may be affected by behavioural changes, we do not believe that it would be significant.
§ Mr. BlairAm I right in thinking that when the Treasury says "negligible" it is referring to the same principle as it uses in the Red Book, which is less than £5 million on an annual basis?
§ Mr. LamontI am not sure that that is the same principle as that which is used in the Red Book, but it would fall within the definition of "negligible". If I can add to the definition of "negligible", I shall let the hon. Gentleman know. I do not know whether he wants me to confirm his understanding of the clause. As always, he interpreted it perfectly correctly.
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We are extending to transfers into interest in possession trusts the principle of potentially exempt transfers. That is because we recognise that many businesses and a great deal of the heritage are held in interest in possession trusts. This change was urged on us by various professional bodies. Having looked at it, I came to the conclusion that it was justified. I know that my hon. Friends are very much in favour of it, too. However, it is necessary for the change to be carefully buttressed with anti-avoidance provisions. It is emphatically not our intention to extend the principle of the exempt transfer to other trusts, such as discretionary trusts. We have stopped here. We were subjected to a great deal of pressure to extend exempt transfers into all sorts of trusts, but we have said that there are special features about interest in possession trusts. We have included the anti-avoidance provisions in the schedule so that it stops here.
§ Mr. BlairI suppose that we should be grateful for small mercies. I am happy to have the assurance that the abolition of inheritance tax will stop here. If the Treasury were to exempt transfers into discretionary trusts it would open up a huge loophole for avoidance.
§ Question put and agreed to.
§ Clause 96 ordered to stand part of the Bill.