THE CHAIRMAN OF COMMITTEES (The Earl of MORLEY)My Lords, I beg to ask H.M. Government whether, in assessing the value for estate duty of property sold after the death of a testator, the Treasury is justified in refusing to deduct the costs of the sale from the purchase-money. This question is one of no very large or important nature, and it in no way affects the principle of the Finance Act of 1894. It merely affects in one particular point the method of administration of that Act. As the House is aware, on a succession being created the property of the deceased person is valued, and the value reckoned according to the Act, which says:
The value of any property shall be estimated at the price which, in the opinion of the Commissioners, such property would fetch in the open market if sold at the time of the death of the deceased.The valuation having been made, and, we will assume, the duty having been paid on that valuation, it may happen that the successor may sell some of the property. In a case of that kind the Commissioners of Inland Revenue, if the purchase money of the property is in excess of the valuation, claim to be entitled to receive estate duty on the excess. I assume that, on this principle, if the purchase money was less than the valuation, the successor 959 would be entitled to a reduction on the amount paid. The ways of the Inland Revenue, however, are rather remarkable, and I am afraid an applicant would not have much chance of obtaining a reduction. I think, parenthetically, it is a question whether there should not be some time limit after which further claims should not be made; but my point is that the value of the property sold is clearly the price it fetches, less the costs of the sale. In all transactions of life that principle is, or ought to be, acknowledged, but the Commissioners of Inland Revenue or the Treasury refuse, in estimating the value of the purchase money for the purpose of paying estate duty, to deduct the reasonable costs of sale. This action is, in my opinion, unjust and inequitable. The ease is stronger in regard to works of art and matters of that kind. We will assume that a not very remarkable collection of works of art is lying in a country house. The value of a collection in that particular place would be probably less than the valuation OH which the duty has been paid, but if the works are brought to London and sold they would probably fetch a much larger price. On paying duty on that larger sum it is only fair that the successor should be allowed to deduct from the purchase money the cost of the commission in respect of the sale, which would probably be 10 or 12½ per cent., and also the cost of conveyance to London. It seems to me that this is so obviously a fair and equitable claim that it can hardly be resisted, and I trust that the noble Lord who will answer for the Treasury will give us some hope that the practice which at present prevails will be altered, or, at any rate, that the question may be considered by the Committee, which I understand the Chancellor of the Exchequer said would sit in the autumn, to deal with questions arising in reference to the Finance Act. I think the scope of that Committee might be somewhat enlarged to enable them to consider the point to which I have called the attention of the House to-night, and which deals not with the principle of the Act, but with the mode of administration. In almost all cases the amount of duty claimed under this practice would be so extremely small as not to be worth anyone's while to protest against it. The Inland Revenue Commissioners, as we all know who have dealings with them, have a keen sense of the duty resting upon 960 them to extract every penny they can for the revenue of their country, and the attempt of any individual to protest against the injustice to which I have referred would be absolutely futile, and would never be undertaken. Therefore the only way of bringing a small matter of this kind before the public is to call attention to it in your Lordships' House.
§ * THE LORD PRIVY SEAL (Viscount CROSS)My Lords, it is not for me to say what the law should be, but simply to say what the law actually is, and the answer to my noble friend's question as to whether the Treasury is justified in refusing to deduct the costs of the sale from the purchase money seems to me to be in the affirmative. The estate duty is imposed upon principal value of all property which passes on death (Section 1, Finance Act, 1894), and the "principal value" is to be estimated to be the price which in the opinion of the Commissioners such property would fetch if sold in the open market at the time of the death of the deceased"—Section 7(5). There is a special rule laid down for valuing agricultural property—see the proviso to Section 7 (5)—but that proviso contains no provision for allowing the costs of sale. The analogy of the probate duty was preserved as far as possible in the new estate duty. Under probate duty law the grant and the stamp duty on the grant covered the gross assets of the deceased, and no costs of administration or realisation of any kind were ever allowed against probate duty. The idea seems to be that as the property exists at the moment of death so the estate duty falls upon it with only those deductions which are expressly authorised by the Act. No deduction of costs of sale is expressly authorised by the Finance Act, 1894, except in Section 7 (3), which runs as follows:
Where the Commissioners are satisfied that any additional expense in administering or in realising property has been incurred by reason of the property being situate out of the United Kingdom, they may make an allowance from the value of the property, on account of such expense, not exceeding in any case 5 per cent. on the value of the property.It may therefore be inferred that, except in the particular case referred to in Section 7 (3), no such deduction was intended. Consequently, as no such deductions were made against probate duty, and the 961 Finance Act, 1894, contains no express enactment enabling such deductions to be allowed, they are invariably refused.