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New Clause—(Right To Appeal Against Estate Duty Valuation)

Volume 529: debated on Monday 28 June 1954

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Section seven of the Finance Act, 1894, shall be amended by the insertion of a new subsection as follows:

(8A) If the executor of the deceased is dissatisfied with the value placed on the property or any part thereof by the Commissioners under subsection (8) hereof, he may appeal in such a manner as the Commissioners may prescribe to the Board of Referees."—[Mr. Remnant.]

Brought up, and read the First time.

I beg to move, "That the Clause be read a Second time."

My right hon. Friend will have noticed, whatever he might think of this new Clause, that at least it is not asking for any cash concession. In my submission, it seeks to achieve three wholly desirable objectives—to save costs and time, and to arrive quickly at a satisfactory answer to a problem. The method of valuation to use in ordinary cases in these matters was laid down in the Finance Act of 1894, namely, the price that such property would fetch if sold on the open market at the time of the death of the deceased; and that still holds.

It is obvious that there is ample room for supposition, estimation and difference of emphasis. If one goes to the next stage and deals with shares in private companies, which were not existing in 1894, the opportunity of doubt increases enormously. As the only appeal where a stated amount is involved is to the High Court, executors and their advisers and the Estate Duty Office have to take additional pains to endeavour to reach a satisfactory agreement. All that takes time. That necessarily involves the executors having to wait longer before they can take action. I hope no one will think that I am making imputations against that skilful and efficient body the Estate Duty officers, but they have the comprehensive information and statistics available which they can use with advantage over the estates.

11.30 p.m.

I shall not attempt to say what is the cost of going to the High Court because it must vary enormously, but there was one case last autumn which shows how wide original valuations can be. In that case the Estate Duty Office started at 60s. a share and came down finally to 25s., whereas the estate started at 11s. 3d. and rose to 17s. 2d. The executors were still not satisfied and decided to take the matter to the High Court where, after 10 days' hearing, judgment was given of a valuation of 19s. a share. The costs involved must have been enormous, though well worth while to the litigant I imagine.

I suggest to my right hon. Friend that, if he does not think the Board of Referees is the right solution to this undoubted problem, he should seek to find some other alternative means than the High Court which would include a more informal hearing than is possible in a law court, rapidity of decision, and a proportion among its members of those with appropriate business experience. By that means legal costs would be saved, Estate Duty would accrue more quickly to the Inland Revenue, and both parties would be more easily satisfied than they are at present.

There have often been suggestions that there should be a new appellate tribunal for dealing with disputed cases of valuation for Estate Duty, particularly in regard to shares in private companies and, as I understand it, the proposed new Clause is one suggested method of dealing with this problem. My right hon. Friend the Chancellor has considered this problem recently with some care in connection with his general review of the death duties, and there are, no doubt, considerable arguments to be made for introducing a new appellate provision of this kind, the kind of arguments advanced by my hon. Friend in moving his new Clause.

There are, however, arguments on the other side. This matter was considered by the Evershed Committee on Supreme Court Practice and Procedure in July, 1953, and they then reported that, while there was a considerable body of opinion in favour of the new tribunal, there was a considerable divergence of opinion amongst expert witnesses. On the whole, some people felt that a new tribunal of this kind would not be to the advantage of the taxpayer or the Estate Duty Office.

My hon. Friend suggested that by setting up a tribunal of this kind considerable expense might be saved to the taxpayer in arguing the question of the valuation against the Estate Duty Office. I am not convinced that, in practice, the savings would necessarily be as big as he supposes; because, in any case, whatever the tribunal considering the case, expert evidence would have to be called by either side, and it is in the provision of expert evidence that the costs arise in these matters.

I also feel that we have a system working here which, by and large, has not worked unfairly over a number of years, and although from time to time hard things are said about the Estate Duty Office, my own experience, from talking to people with practical experience, is that there is among lawyers and accountants a widespread respect for the Estate Duty Office and the way in which they try to deal with these difficult decisions. Some of them are particularly difficult. Indeed, as the case to which my hon. Friend referred shows, it is difficult for people acting in the greatest good faith to arrive at a fair valuation of company shares in many complicated circumstances.

This proposed new Clause suggests that there should be a reference to the Board of Referees. We do not believe that that would be a really satisfactory body. The Board of Referees is not exactly a body properly constituted to deal with the very technical issue of the valuation of shares in a private company; and if a new body is to be established, then most careful thought would have to be given about the form which it should take.

But I can assure my hon. Friend that the Chancellor's mind is not closed on this subject; he realises that there is a considerable weight of opinion on this subject. A new tribunal, he realises, would be of value, although at the same time, we have to remember that the Evershed Committee reported last July that no case had been made out for the establishment of such a body.

My right hon. Friend would like the opportunity to consider this whole question in the light of what has been said tonight, and between now and next year's Budget he will try to ascertain whether the time has come to set up a new body of the kind suggested and, if so, to consider what its precise form should be. On this undertaking, I hope that my hon. Friend will feel able to withdraw the Motion.

In view of what the Economic Secretary has said, I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

I beg to move, "That the Chairman do report Progress, and ask leave to sit again."

I think it would be for the convenience of the Committee if we could have an indication of the Chancellor's intentions tonight. I think he will agree that we have made good progress, and perhaps we might terminate at this stage.

All I ask the Committee to do is to take the new Clause concerned with real property compulsorily acquired. After that, I suggest that we "call it a day" and start tomorrow with what I might term the "Children's Clause" and then deal with all the allied new Clauses concerned with the "tapering allowances." If we do that, I think we shall have made fairly good progress today, but I must warn the Committee that it is the hope of the Government to get a degree of other business completed after the Finance Bill tomorrow so we shall, I hope, make just extra little progress tonight. I do not think that the next proposed new Clause is controversial, so if hon. Gentlemen have urgent engagements there is no great need for them to stay.

Motion, by leave, withdrawn.