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Clause 41—(Charge Of Additional Duty)

Volume 440: debated on Wednesday 16 July 1947

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I beg to move, it page 36, line 6, to leave out from "that," to the end of line 10, in page 37, and to insert:

  • "(a) the further duty shall not be charged on any legacy or succession given or created for public or charitable purposes, and
  • (b) in all other cases this section shall take effect in the case of legacy duty only where the testator by whose will the legacy is given or the intestate on whose death the legacy duty is payable dies on or after the sixteenth day of April, nineteen hundred and forty-seven, and, in the case of a succession arising through devolution by law, only where the succession arises on or after that date, and, in the case of a succession arising under a disposition, only if the first succession under the disposition arises on or after that date."
  • As the House will remember, this Clause doubles the existing legacy and succession duties, but in doing so it breaks the precedent which was adopted on previous occasions when there was a change in these particular duties. It is a complicated Clause, and the object of this Amendment, as the House will see, is to remove most of it. The double rate of duty is to apply in a number of cases, all of which are specified in Subsection (3) at the bottom of page 36 of the Bill. Amongst other effects which this Subsection will have, if it remains as in the Bill, is that supposing a particular person died last year, and left a life interest to one person, and the remainder to another, and the first person is still alive, then the second person will, when the remainder falls in, have to pay the double duties. That, I am advised, has never happened before, so this Amendment seeks to insert into this Clause the language of the Act of 1909–10.

    When these duties were increased under that Act, they were not charged at the increased rate in cases where the death had occurred before the time of the Budget. I do not quite understand why the right hon. Gentleman should have changed the plan on this occasion. I hope, therefore, that he will see that this is a right Amendment to make. I cannot think what arguments he will put up against it, because it follows precedent, and on the face of it seems to be eminently fair. After all, if the Government proposal is left as it stands, duty will have already been paid in many cases upon the capital value of the estate as a whole, owing to the time which has elapsed, and now, because the remainder man comes into his due portion, he will have to pay, quite unexpectedly, an enormously increased duty. That cannot be the right way of handling this problem. I suggest that the way we propose, the way in which it has been done in the past, is the right one.

    I am afraid that hon. Gentlemen opposite will think that I am becoming a little obdurate, because I feel that we cannot accept this Amend- ment either. I will endeavour to state the reason why. Clause 41, as it stands at the moment, doubles the existing rate of Legacy and Succession Duty on certain legacies and successions. These really fall into two categories. One is legacies derived from a testator or intestate dying on or after 16th April, 1947, and on successions arising on and after that date. The other is legacies derived from a testator or intestate who died before 16th April, 1947, and successions created before that date, where the legacies or successions become chargeable with duty on deaths or certain other events which are specified in that part of the Clause which it is proposed to leave out. There are set out in the Clause certain events happening after that date which are to give rise to the result that the duty is to be doubled. What the Amendment would do would be to exclude from the scope of further duty all legacies and successions falling within the second category, that is to say, legacies or successions originating from a pre-April, 1947, death, if I may compendiously but perhaps rather disrespectfully so describe it. It would eliminate all those cases from the increased duties.

    The reason why we feel that that proposal is not acceptable is that looking at the justice of the case—and it was really upon that footing that the right hon. and gallant Gentleman moved the Amendment—we think that the crucial fact or event which will determine whether the increased duty is or is not to be charged should be the fact which gives rise to the accretion to the wealth of the individual. That would be, in the second category of case, a post-April, 1947, event in connection with a pre-1947 death, if I may so describe it. We think that should be the crucial fact. To take an ordinary case, why should any particular individual who inherits, or comes into a legacy through succession, of £5,000, pay more or less according to whether his title was a pre-Budget or a post-Budget title? What should determine the rate of duty which he has to pay is the event which immediately gives rise to the fact that he becomes entitled to receive this £5,000. We feel that justice is on the side of the Clause as it stands at present.

    In fact, the proposal would be a not altogether inexpensive one If accepted, it would cost the Exchequer something like £1,500,000 which is not a very large sum but it is far from being a negligible sum. In our view the arrangement at present included in the Clause is the more equitable one. We feel that a case has not been made out for the alteration which the right hon. and gallant Gentleman suggests. Accordingly, I ask the House to reject the Amendment.

    I would like to take up the question of equity which has been raised by the hon. and learned Solicitor-General. He speaks as if all legacies were quite simple gifts direct from the testator or intestate as the case may be. Of course, that is not the position at all. Normally speaking, as the Solicitor-General knows very well, wills make fairly complicated provisions for payment. They usually provide that the legacy shall not be paid by the legator himself but out of the residuary estate. If the will is at all complicated, the incidence of the legacy may fall very heavily one way or the other. For example, we could take the case where a testator leaves the legacy to his wife or sister, or someone else, for the course of her life, and after that probably he would make some special provision. I will not take the case of children, because there the duty is small and it would not cause very much interference, but it might make a provision for a nephew or a niece for whom, for all practical purposes, he may have been a parent. The rate of duty in that case would be quite high. Suppose we get a testator with quite a small estate who has made provision for two or three nephews and nieces to give them a legacy in order to start them off in life, and then given the residue of his estate to some third person. It might be a charity or someone who was urgently in need of the testator's money.

    As a residuary legatee, that charity or person will be liable to pay the entire amount on all the legacies for which the testator has made arrangements, and it may well be that, in some cases, it will virtually swallow up the entire residuary estate. I do not think that that is an equitable provision at all. It is true that, if the testator dies after the provisions of this Bill became known, he could, and no doubt would, take the opinion of his legal advisers and make alterations in his will to provide accordingly, but in the case where the testator died before this Bill ever came forward he could not possibly have known of the circumstances. Although the total amount of £1,500,000 may not be much, it will probably fall, in a large number of cases, on people who were not intended to pay and whom the Government do not intend should pay it. I feel that this arrangement is entirely unfair

    It will also be difficult to administer, and the Solicitor-General knows very well that the law regarding the payment of legacy duties is by no means lacking in complications. The provisions are extremely complicated, as we well know in the case of annuities. I think this alteration will seriously interfere with the administration of a large number of estates, and I think it is entirely contrary to precedent. I hope the Government, even at this late stage, will give some indication that they will look into the matter again.

    I am sorry to remain unconvinced, but I would answer the hon. Member for South Hendon (Sir H. Lucas-Tooth) in this way. Apart from the difficulty of working the tax, his case is that a testator who died before April, 1947, would not know what the future incidence of the tax or the increase of the tax would be. That is the case, but that case would apply in a number of other connections. It would apply to any increase or decrease of the Income Tax or Surtax which would fall to be borne by the present beneficiaries of an estate formed a long time ago—

    That is true, but it would fall equally on all the beneficiaries under the estate. The reason why this is inequitable is that it has been the almost invariable practice to arrange for the payment out of the residuary estate so that it will not fall on one particular beneficiary.

    I said that, in some cases it might fall in that way, and in a way in which the testator, would not desire it, but that equally applies to other obligations of taxes which, equally, could not have been foreseen by the testator, who might have died some time ago. I feel that that particular argument has no more force in connection with this type of tax than it has in connection with any other.

    Amendment negatived.