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Estate Duty

Volume 526: debated on Tuesday 6 April 1954

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I undertook last year to review anomalies in the Estate Duty, particularly anomalies arising in connection with what is known as the "assets basis" of valuation for controlling interests in private companies. Proposals for dealing with a number of these will appear in the Finance Bill. The Bill will also make provision for cases where part of a controlling shareholding, which has been valued on the assets basis, is sold to an independent purchaser; my proposal here, in broad terms, is that the Estate Duty valuation of the shares actually sold shall be brought into line with the sale price. The general principle of the assets basis, however, must, in my view, be maintained.

Nevertheless, I think that business assets are a type of property on which the Estate Duty can bear with special severity, particularly in the case of family businesses, whose traditional activities mean so much for the stability of our social and industrial life. Accordingly, where industrial premises or plant and machinery are used for the purposes of a trade carried on by the deceased—or, where the assets basis applies, by the deceased's company —the Estate Duty on these assets will be reduced by 45 per cent. This is the rate of relief which is already given in respect of agricultural land. This is a reform which hon. Members have often pressed on me in Finance Bill debates. I estimate the cost of the relief at £½million this year and £1½ million in a full year.

I have also examined a considerable number of anomalies, and alleged anomalies, in other parts of the Estate Duty field, though I have not been able to cover the whole subject this year. For example, the principle of aggregation of free and settled property has come in for a good deal of criticism on the ground of the hardship which it can cause to the deceased's family in certain circumstances. There is already a provision under which, broadly speaking, the deceased's own property is not aggregated with settled property if it is under £2,000. I propose to raise this figure to £10,000. I believe that with this amendment the great bulk of the hardship cases will be eliminated. This concession will cost £125,000 this year and £250,000 in a full year.

Lastly, I propose to deal with the doubts and anomalies which have arisen in regard to the treatment of policies of assurance which do not form part of the deceased's own estate.