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Liability For Tax

Volume 887: debated on Thursday 6 March 1975

The text on this page has been created from Hansard archive content, it may contain typographical errors.

I beg to move Amendment No. 55, in page 19, line 18, leave out from provisions' to end of line 21.

With this we may discuss the following amendments:

No. 56, in line 25, after 'transferee', insert:
'Provided always that the transferor and the transferee or, when appropriate, the personal representatives of either of them, may within two years of the date of a chargeable transfer, Jointly state by notice in writing to the Board that one or the other shall be primarily liable, in which event the other shall be discharged from all liability unless and until the one made primarily liable shall fail to pay the tax assessed on him;'.
No. 153, in Schedule 4, page 62, line 6, at end insert:
'(2) In the case where the instalments of tax mentioned in sub-paragraph (1) above are paid by the transferor, they shall not be regarded as chargeable transfers, and no tax shall be payable upon them.'

This is a paving amendment to Amendment No. 56. I hope that this will be a briefer debate than the last one. Now that the Chancellor has left the Chamber it will be a much more courteous debate. What is at issue is a problem that we came up against in Standing Committee. Unfortunately it was not satisfactorily resolved on that occasion. I do not think that there is any fundamental difference between the two sides of the House on this issue. What is wrong with the Bill as it stands and what the amendments seek to put right is that the Bill is not precisely as the Government intend it to be. If we can we intend to persuade the Government to accept these amendments and so to put the Bill right.

The question is whether the liability for paying tax rests with the donor or with the donee or whether it is the Government's intention—and we believe this is necessary—that the two parties to a transfer shall have the right to elect which one will bear the tax. At first sight it may seem relatively unimportant whether the tax is paid by the donor or by the donee. In terms of a single transfer the same amount of tax will be payable either way. In fact, it is very important whether the donor or the donee pays the tax. Under Schedule 4 the donee can pay by either eight annual or 16 half-yearly instalments with no interest payments if he pays on the due date, whereas the donor has no right to spread his payment of the tax over eight years. That makes a big difference.

The difference between whether the donor or the donee pays the tax is further increased because of the £1,000 exemption. If the donor pays, and he has to pay in one year, he receives only the £1,000 exemption, whereas if the donee pays he can spread the payments over eight years and he will have an £8,000 exemption. It is a matter of considerable importance whether the donee can elect to pay the tax.

As I have said, this matter was discussed in Standing Committee. On 12th February, which was one of the days on which the matter was discussed, the Financial Secretary said:
"As regards the grossing up provisions, it is immaterial when the transferee and the transferor make the agreement between them, if they do make such an agreement, as to where the burden of the tax shall fall. In the absence of any agreement, it falls on the transferor, and recourse is had to him until his assets are exhausted. The hon. Gentleman"
—the Financial Secretary was referring to me—
"is quite right. But that presumption can be rebutted if there is an agreement between the transferor and the transferee that the transferee shall pay the tax."—[Official Report, Standing Committee A, 12th February 1975; c. 1336.]
We are seeking to make it clear that there is the possibility of such an agreement. Clearly that is the Government's intention. On 17th February the Chancellor, rather surprisingly, made a statement to the Daily Express rather than to the House. I refer to the article which appeared on 18th February. I shall not read it at length, but there was a section headed "Spreading the payments". The Chancellor was asked:
"Suppose I own a filling station or a shop valued at, say, £50,000. I give it to my son. How much tax must be paid and—assuming there are no other assets—would the filling station or shop have to be sold to pay the tax?"
The Chancellor replied:
"The tax cannot be spread in this way if you are paying it, but, provided your son undertakes the responsibility of paying the tax, you can, in practice, get the benefit of the instalment arrangement by making a gift to him of the amount of each tax instalment as it becomes due, which he can then pass on to the Revenue."
That is very important. It is slightly surprising, but we understand that the Chancellor does not feel up to facing the interrogation of my hon. Friends in the Chamber; it seems that he is prepared to answer only questions put by the reporter from the Daily Express. But we are grateful for his answers.

5.30 p.m.

My hon. Friend says, "They are wrong." However, I think that we must take it that the Chancellor intended to do this. There is nothing in the Bill which makes the position clear. This was conceded by the hon. Member for Llanelli (Mr. Davies), a distinguished lawyer, who said, when the point was raised,

"The hon. Member for Blaby (Mr. Lawson) was, I think, on a good point when he asserted that there was nothing in the Bill to state that one could elect as between donor and donee. My understanding also was that the liability was a joint and several liability, according to the Bill".—[Official Report, Standing Committee A, 12th February 1975; c. 1344.]
That is how the Bill is drafted. We had hoped that there would be an amendment, but there is no amendment other than that which we are now discussing.

This is an important matter because it affects the amount of tax that is payable and the time over which it is paid in view of the £1,000-a-year exemption over the period. If it is not clear that the donor or the donee can elect who is to pay, the Revenue will be able to go for the tax against the donor and get the money in one year instead of eight years and, indeed, get more money that way. Clearly, that was not the Government's intention, as was made abundantly plain by the Chancellor's answer in the Daily Express, which I am sure the Government will wish to honour, but which has not been honoured in the Bill.

There is another point about the Chancellor's interview which is reported in the Daily Express. The right hon. Gentleman—I will repeat this section—said:
"… you can, in practice, get the benefit of the instalment arrangement by making a gift to him of the amount of each tax instalment as it becomes due, which he can then pass on to the Revenue."
Hon. Gentlemen opposite may not appreciate that there is some curiosity about this point. It would appear that if a father passes money to the son to pay the instalment of tax, that instalment will be liable to capital transfer tax. Therefore, he will not be able to pass it on to the Revenue.

Therefore, we have put down Amendment No. 153, which is being discussed with this group of amendments, which ensures that no capital transfer tax will be payable on payments made by the transferor to the transferee to enable the transferee to pass them on to the Revenue. That appeared to be what the Chancellor was saying in the Daily Express interview. We wish to allow him to keep faith with what he said there. Despite the performance that we have witnessed recently, we believe that the Chancellor will wish to keep faith with what is printed in the Daily Express. We had various other debates in which it was clear that that was the sense of what the Government intended.

Finally, in commending the amendment to the House and hoping that the Government will accept it because it fulfils what clearly is their intention, I point out that the rates for this tax are very high. The Government have sought to reduce those rates, but the reduction is not very great. When the rates first came out, the tax payable on the transfer of a business with a net value of £250,000, according to a Written Answer given to my hon. Friend the Member for St. Marylebone (Mr. Baker) by the Financial Secretary, worked out at roughly 117 per cent. When the new lifetime scheme was introduced, which reduced the rates, which the Government accepted were too high, the tax payable on a business worth £250,000 seemingly—again this appears in a Written Answer by the Financial Secretary to me on 21st February—went down to 74 per cent., which was a very big drop.

When I asked, in a further Written Question, to which the hon. Gentleman gave a Written Answer on the same day, 21st February, what would happen if capital gains tax were included, assuming, looking to the future, that the business had been held for 25 years and that there had been inflation at 10 per cent. per annum and during that time the business had merely maintained its value in real terms—in other words, had gone up by 10 per cent. per annum in money terms but was worth no more—the amount of tax payable as a proportion of the asset transferred was given as 121 per cent. That is a staggeringly high figure, which the Government originally conceded was too high, which gives the lie to another of the Chancellor's remarks about the rates being no higher than estate duty.

Under the old estate duty, during lifetime one paid capital gains tax on disposal, not estate duty, and on death one had estate duty, not capital gains tax. However, under the Government's proposals we have both taxes both in lifetime and on death. Therefore, what the Chancellor has been saying ad nauseam about the rates of tax being no higher than the old estate duty is sheer nonsense. That can be put down only to his ignorance of the tax which he is nominally fathering. Therefore, anything which can minimise the savage impact of this tax is important.

The amendment would seem technical, but, if accepted—I am sure that the Government's intention is that it should be accepted and that there should be a right of election whether the donor or the donee should pay—it would slightly mitigate the severity of the tax. I hope that the amendment will be accepted without a Division.

How calm and pleasant the atmosphere has become now that the Chancellor has again left the Chamber. I hope that he will not attend our debates too often because he generates more heat than light. Whenever the right hon. Gentleman has talked about this tax he has revealed his total lack of comprehension of it. It is all good, clean fun in the House of Commons, but when he starts extending it to the Daily Express it is going too far.

I must remind the Financial Secretary of what we read in the Daily Express. That paper, unlike Hansard—nobody reads Hansard—is read by millions of people. The Daily Express has the biggest circulation of any newspaper.

My hon. Friend always puts me right on matters of fact. Referring to this famous shop or garage having been transferred, the Chancellor said that the donor, the transferor, could pay the instalments of tax if the transferee accepted liability for the tax. That is not so. If the transferor pays the instalments they are capital transfers which attract further taxation.

It is no good saying, as the Chief Secretary said in Committee, that he was not defending the Chancellor and was not interested in his remarks, but merely wanted to talk about the amendment. We want to know how that article, with its terribly misleading statement, appeared under the name of the Chancellor of the Exchequer. The Chancellor showed himself woefully ignorant of everything to do with the tax by using his brute force rather than the skill and expertise that we have come to expect from the Chief Secretary and the Financial Secretary. We welcome their careful attention to the details of the tax. We wish that the Chancellor would emulate them. The matter must be cleared up. Is what is reported in the Day Express right?

I have put down some amendments to meet all the Chancellor's points in the Daily Express article. I am surprised and saddened that his name has not appeared under my name on the amendments, signifying that the Government wish to accept them. I put down amendments all over the Bill. I spent a whole evening working out the legislative implications of the article in the Daily Express and I have drafted the amendments with great care. I am surprised that I have not yet seen the Chancellor's name on my amendments. However, we know that the Treasury is very late in getting its amendments down and is having great difficulty in doing the drafting. Therefore, I am living in hopes that it has not yet got around to it and that the amendments will appear on Monday with the Chancellor's name on them.

Another worry arises from the amendments. I should like, for the sake of example, to take Mr. Freeman and Mr. Hardy. Mr. Freeman gives Mr. Hardy a sum of money. Shall we say it is shares? Suppose Mr. Freeman gives £100,000 worth of shares in the National Enterprise Board to Mr. Hardy, and two years later Mr. Freeman dies. The original transfer will have been taxed at lifetime transfer rates. The tax liability arose at the time of the transfer, and Mr. Hardy, who received the gift, had agreed to pay the tax. Unfortunately, in those two years the NEB does not do frightfully well and the £100,000 worth of shares which Mr. Hardy received are worth £10,000—a likely forecast of how that corporation will proceed. On the death of Mr. Freeman the tax has to be increased because it counts for tax within the three-year period and Mr. Hardy is called upon to pay a far greater sum of tax. Indeed, it may be greater than the amount he has left of the gift that was given to him if he has been foolish enough to invest in the NEB.

That is a possible set of circumstances, and it is directly relevant to the amendment. It shows how iniquitous is a tax when somebody who is a recipient of a gift carries a liability of unknown dimensions till such time as three years are up. In no sense, under estate duty, did anybody carry this liability, because the assessment to tax was on the value of the estate at the time that the transferor died, whereas in the case of an earlier death the liability to tax arises two years before and the valuation is taken then.

This is an example of a gross injustice, and the amendment would go a long way to meeting it. If the Financial Secretary is not keen on the amendment will he consider that at any time when there is a death after a lifetime transfer, a death within a three-year period following a lifetime transfer, the person who is liable to pay the tax can elect to pay the tax either on the value at the time of the transfer, or on the value at the time of the death? That election is not possible under the Bill at present—if we know how the Bill is at present, which, of course, we do not, but perhaps there are some who do. But it does not seem to be possible, and it is very unfair and onerous that it should be so.

It is the sort of point which the Government should deal with on the next Finance Bill. We have not long to wait for that—next month, I think—and we shall be looking for about 100 new clauses to tidy up this tax. Could one of them be that the taxpayer has the right to elect for payment if he is made responsible for paying the tax either at the value pertaining at the time of the transfer or for payment at the time of the death which caused him to go into the death rate rather than the lifetime gift rate?

This potential tax liability, now that the lifetime concession has been made, is the most obnoxious feature of the tax. I suppose it was inevitable in a tax which was originally drafted on the basis of a flat rate of tax whether one died or gave property during one's lifetime. The switch to a lifetime concession, welcome though it is, has raised a whole series of complicated problems at the margin, which is another reason why it would have been better if the Government had taken away the tax and put it to a Select Committee for proper consideration.

As the Government are obstinate and stubborn and will not do that, will they address themselves to the point that it is necessary to allow an election as I have described? Otherwise there could be cases of real unfairness and hardship Being given something by somebody could result in a person being bankrupted by having to pay taxes on a totally unrealistic valuation when the money is no longer there simply because somebody else dies. That, surely, cannot be the intention of the Government.

5.45 p.m.

I agree with the hon. Members for Blaby (Mr. Lawson) and Cirencester and Tewkesbury (Mr. Ridley) that the atmosphere has calmed considerably, though it has happened for reasons quite different from those put forward by the hon. Gentlemen.

The hon. Member for Blaby addressed himself to Amendments Nos. 56 and 153. The debate has centred around those two amendments, and in the interests of despatch, which I think is what the Opposition want, I shall confine myself to dealing with them.

Amendment No. 56 would give the transferor and the transferee the right between them to decide which of them should be primarily liable to the Revenue for the tax on a lifetime gift. Clause 25(2), to which Amendment No. 56 attaches, imposes a liability on both the transferor and the transferee. As between the transferor and the transferee the clause lays down no rules as to priority. Each of them is liable for the whole tax, except in so far as the position is modified by Clause 27(5) which postpones the transferee's liability until it becomes overdue. This is normally a period of six months, but there is a Government amendment to extend that period in certain cases.

Clause 25, to which Amendment No. 56 attaches, is concerned with identifying the persons from whom the Revenue can collect the tax. It is not concerned with who bears the tax at the end of the day. That is a matter which the transferor and the transferee are already free to decide between them, and the effect of their arrangements must, of course, affect the quantum of the gift and, consequently, the amount of tax that will be chargeable.

Since the transferor and the transferee are free to decide who will bear the tax and thus, in effect, to decide whether the grossing up provision should come into effect, and whether we are talking about a gross or net gift, there is no good reason for giving them the further right by agreement in effect to limit the powers of the Revenue to collect the tax. Let me explain how that consequence would come about.

The transferee might be overseas, and the Revenue might within a period of a couple of years allowed by the amendment have already embarked upon proceedings to collect the tax from the transferor. At some subsequent time just before the end of two years the transferor and the transferee may say that it is not the transferor but the transferee who should pay the tax. That would put the Revenue back to precisely where it started, and might make its claim unenforceable.

That problem could be met by the fact that election of who is to be liable has to be made at the time of the transfer. There is no problem of something happening later. The problem that is worrying us is that, in the Bill as drafted, if the transferee decides that it will be paid by him in eight yearly instalments and in the first year he pays one-eighth, but the Revenue decides that it wants the other seven-eighths that year and that the transferor is liable, the charge will go to him. Therefore, the privilege of spreading the payment over eight years which the Chancellor showed in his Daily Express article, was intended, will have been removed.

The hon. Member for Blaby is under a misapprehension. If the right exists for the tax to be paid by eight annual instalments, that right remains. There will be no question whatever of the Revenue suddenly saying in the middle of that process, "We want it all at once". The hon. Gentleman is putting up an Aunt Sally that does not exist. If that is his concern, I can put his mind at rest.

The purpose of Amendment No. 153 is to exempt gifts made for the purpose of enabling the donee to pay tax by instalments. The basic principle of the tax is that a gift includes the tax upon it in so far as the grossing up provisions are concerned. There is no difference between an instalment of tax and the whole tax in this respect.

In logic, if we were to concede the principle that an instalment of tax should be free of the grossing-up provisions we should have to extend the principle to the whole tax. This would mean that the principle that the gift includes the tax upon it could be entirely sidestepped, if the donor made his gift on terms that the donee should bear the tax and then gave him money with which to pay the tax and that was not taxable.

The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) made a good point when he referred to the case of a death after a lifetime transfer of the assets which subsequently had a different value. There could be difficulties there and I certainly give him the undertaking he sought, that I will see whether any relief can be found to meet his anxieties.

I am grateful to the Financial Secretary. Could he tell hon. Members what he will do about the article in the Daily Express when the point of the amendment, which he denied, was put forward as policy by the Chancellor under his own name? If he does not have a copy of that article I am sure he can be provided with one.

I wish to address myself briefly to Amendment No. 56, which might appear to be technical in form and content but which raises a point of considerable importance. Since the Financial Secretary says that he has not had time to deal with the point made by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) I hope he will do the House the courtesy of listening to other interventions on this point.

The hon. Gentleman has singularly failed to appreciate the genuine concern of Conservative Members about this matter. The quantum of tax is different depending on whether it is paid by the transferor or the transferee. This is the first time that this provision has been implemented under the British fiscal system. The Revenue will be tempted to look first to the transferor. Indeed, the primary liability, as we were told in Committee, rests with the transferor. There should be some "let out"—I am sure that will be expanded to mean a loophole by the Government benches—for the taxpayer. The taxpayer should be given the right to elect who should pay the tax. The Financial Secretary has said that who bears the tax is a matter for decision between the transferor and the transferee but according to the Bill that is not so.

The Revenue could decide to proceed against the transferor because it will get a larger measure of tax on a lifetime gift and it is possible that it will pursue that through the courts. It would be idle for the transferee to say "But we have agreed between ourselves that the transferee should bear the tax", it being a lesser amount, because the Financial Secretary's minions would then say "Ah, but the prime responsibility rests with the transferor and we are entitled to enforce this charge against the transferor."

Amendment No. 56 is directed to guard against this situation. Nothing that I have heard from the Financial Secretary reassures me on this point. What prejudice would there be to the Revenue if Amendment No. 56 were adopted? If it were adopted there would be a right of election as between transferor and transferee. The transferee could elect to pay the tax. If the Revenue is unable to collect from him it could go to the transferor. It is a novel principle in English tax law that the quantum of tax from the same transaction differs depending on whether it is collected from the transferor or the transferee. Therefore, it is of crucial importance that those who are likely to be affected should be entitled to opt for the conclusion that will benefit them most.

The Financial Secretary sought to reassure us in Committee that the Revenue would not endeavour to collect the greater amount of tax from the transferor. However, there will always be that temptation, especially if the transferee is not immediately available. This amendment is to make sure that the fire of the Revenue will be directed, in the first instance, at the transferee. The Revenue's position is protected should it not be able to reach that target. It can then go against the transferor.

If the Financial Secretary cannot reassure hon. Members on this point we shall be left with the unworthy suspicion that there will be many cases where a larger amount of tax will be collected from the transferor because it suits the Revenue's book and that the interests of the taxpayer will once again go by default.

I should like to speak on this interesting point of principle. There is something quite extraordinary in the grossing-up provision. If there is no grossing-up in a transfer tax of this kind there will be a net tax which will be constant, independent of whether it is paid by the transferor or the transferee. Therefore, the joint wealth of both parties would be reduced exactly by the amount of the tax. However, the moment the grossing-up principle enters into the process of taxation we get, between the net tax on the joint wealth of both parties, a distinction which is different in one circumstance from what it would be in the other. This is the most extraordinary philosophical basis of taxation the House has ever been asked to consider.

By what extraordinary criterion has this grossing-up provision been introduced into the Government's thinking? By what strange set of criteria do the Government decide that in one case the net wealth of the two parties should be reduced by an amount £X and in another case that it should be reduced by an amount £Y? I am sure that this has been explored in some detail in Committee. However, I, the House and the country would like a little more elaboration from the Chief Secretary of what lies behind the Government's thinking in developing this fiendishly ingenious and fiendishly destructive tax.

I refer to Clause 25(2), which is a complicated subsection. The Opposition may well have understood it correctly, but I believe there is a slight misunderstanding among some Conservative Members when they say that the primary liability falls on the transferor. Clause 25(2) deals with the liability for payment of tax. Subsection (2)(a) says that the persons liable are:

"the transferor and the transferee".
They are put together. That means that there is joint and separate liability on the transferor and transferee. That is legal language.

Leaving aside grossing-up and the complications following from that it means that the transferor and transferee can get together and pay the whole amount of tax or the transferor can pay the tax. If the transferor pays the tax he discharges the full, several or separate liabilities. If the transferee pays the tax he discharges the full liability.

6.0 p.m.

So it is not a case, I should have thought, of the Revenue being able first of all to go against the transferor, because if the transferee discharges the full liability, the separate or several liability has been discharged and the whole of the tax has been paid. If the tax has been paid by the transferee the gross income does not apply. If, on the other hand, it is paid by the transferor—again, discharging the whole liability by himself—then the grossing-up provisions do apply.

I am glad that my hon. Friend mentioned instalments. Where there is some difficulty is where the transferee decides to pay the tax, but over eight years. In the first year only one-eighth of that joint and several liability has been discharged, and grossing-up does not apply to that one-eighth. But what about the second, third and fourth years? Presumably, if the transferee pays the tax in the second year, again grossing-up does not apply. The transferor cannot discharge the tax in the second year, presumably, because he is not allowed to pay by instalments.

I understand the principle of the joint and several liability, but if my hon. Friend says that the Revenue would not go back against a transferor in the case of a payment by instalment I should have thought that sufficient to satisfy the Opposition. There is some difficulty here. Because the transferor is not entitled to pay by instalments and because there is a spreading over eight years, one can see some difficulty in theory.

I am happy to abide by the assurances that we have had, and I hope that the Opposition will do the same, but it is not a question of a primary liability on the transferor: it is a joint and several liability which either party could fulfil completely.

My hon. Friends and the hon. Member for Llanelli (Mr. Davies), who made a notable contribution in Committee on this point and in many other parts of our debates, have put their finger precisely on the difficulty and the apparent conflict in the Bill. It has been said many times—I have here a particular example when the Financial Secretary said it, but the Chancellor has, too—that this is a donor- or transferor-based tax and that the primary liability is laid on the donor. In case there is any doubt, the Financial Secretary said in Committee that

"the primary liability … is laid upon the donor".—[Official Report, Standing Committee A; 12th February 1974, c. 1347.]
This is clear.

Treasury Ministers have made some play with the importance of the principle that the donor is liable to pay the tax. I do not see how there can be any ambiguity about what the Financial Secretary and the Chief Secretary believe to be the central principle of the Bill. If the Bill becomes an Act, no doubt that is the principle upon which those who seek to collect and levy the tax will base all their calculations. To be fair, without any amendment or clarification of this point, they would be right to do so.

That is the present position. In case not every hon. Member has been able to follow all the appalling ins and outs of the tax, let us make it clear what an important principle this is. If the donor pays, we know that the grossing-up takes place and the tax itself, as well as the amount, is a chargeable transfer. We know that he will be paying anyway in relation to any previous gifts that he has made, so the accumulating principle will come into play. We know that, when the donor pays, he will not be allowed—so both Ministers have told us—to pay by instalments, nor will he have any of the other rights regarding interest and so on. It will literally be the difference between the gift, particularly if it is a family firm or a farm, being smashed up or sold to another firm, or remaining intact. That is a crucial difference, affecting the jobs and interests not just of the transferor, the proprietor or farmer, but of all the workpeople who derive their livelihood from that concern. It matters intensely that we get this matter right, and we cannot let it rest until we do.

It should be made clear in the Bill that there is a right of election. Both the Chief Secretary and the Financial Secretary have got a little confused—who can blame them, with all the complexities of this matter?—and the donor liability point which they have made several times is not entirely right. What they mean is that an election is necessary. We have that on high authority. The Chancellor said explicitly in the Daily Express that that was the situation.

I make no apology for quoting the Chancellor's words yet again, because they are explicit and they reinforce precisely the point that there is an election, there is freedom to choose, whether the donor or the donee shall pay. If that is so, we say that that situation should be reinforced in the Bill. The Chancellor said:
"The tax cannot be spread in this way if you are paying it, but provided your son undertakes the responsibility of paying the tax you can in practice get the benefit of the instalment arrangement by making a gift to him of the amount of each tax instalment as it becomes due, which he can then pass on to the Revenue."
That is an absolutely explicit and clear statement which the Chancellor is entitled to make.

I know that there may be some small print or things unsaid which may be brought into play to suggest that perhaps that example is rather special, but the ordinary reader—indeed, the reader who is familiar with the ins and outs of the tax, like my right hon. and hon. Friends who have studied the matter closely—can draw only one general and crystal-clear conclusion. It is that there is a freedom to choose between the donor and the donee paying.

The reason that it matters so crucially is precisely that, as the hon. Member for Llanelli has so clearly said and as my hon. Friend the Member for Blaby (Mr. Lawson) has said, ambiguity is bound to arise, if, after a year, an instalment is paid by the donee and the Revenue, taking their lead from the Financial Secretary and the Chief Secretary, and reading that, apparently, the Bill unamended—or the Financial Secretary's interpretation of it—still insists that the primary liability is on the donor, will proceed, rightly, in its professional capacity to collect the revenue due from the donor. When it does so, of course, it will be getting much more revenue much sooner than it would if the instalments were paid ungrossed-up by the donee.

It is important that we know. It is clear that there is a right of election and that that election is made in precisely the sort of transaction about which the Chancellor was talking—the garage with a turnover of £50,000, or the shop or farm with a turnover of £100,000, or any small business employing 20 or 30 people.

My hon. Friend should not mention a garage. A garage might not be exempt to permit payment by instalments under the schedule. It is only land and private company shares on which the tax can be paid in instalments, and a garage or shop is a very bad example because it might not fall into either category.

That may be so, but my hon. Friend will see from the following paragraph that there are further definitions. I would join him in being confused, as paragraph after paragraph makes qualifications about what is exempt and what is not, but it may be that businesses, of which a garage can be described as one, are included. I sympathise with him in being unclear about what is and what is not excluded.

The basic issue is, either the Chancellor or the Bill is misleading us. There is no middle way. Either there is a right of election and the Chancellor is right when he says that it is possible for the transferor to hand over the instalments—no mention of additional grossing-up, and Amendment No. 153 would reinforce the points implied so clearly by the Chancellor that no additional tax is attracted—or the Bill, the Financial Secretary and the Chief Secretary are right.

From the point of view of future management of the tax, I hope that the Chancellor is right, but having watched the other two Ministers struggle over the weeks with their briefs trying to understand the Bill, I hope that they do not have to renege on their oft-repeated undertaking that the primary liability is laid upon the donor. One or other must be the position.

I would ask whether it were possible for the Financial Secretary to catch your eye, Mr. Deputy Speaker, to try to explain, with the leave of the House, this matter to us once more to clarify it. This is important. The hon. Member for Llanelli has emphasised, with his great experience and skill in these matters, what confusion exists. If it were possible for the Financial Secretary to intervene again in the debate, with the leave of the House, that would help matters.

I was hoping to catch your eye, Mr. Deputy Speaker. With the leave of the House, may I say that I am grateful to the hon. Member for Guildford (Mr. Howell) for his invitation. I shall see what I can do to clear up the difficulties.

First, perhaps I may address myself to one or two of the general points made by the hon. and learned Member for Dover and Deal (Mr. Rees). He suggests that this tax involves a novel principle and that the quantum of tax will vary according to who pays the tax on the same transaction. But they are quite different transactions, depending on who pays the tax. I am glad to see the assent of the right hon. Member for Down, South (Mr. Powell). That is the whole principle of grossing-up.

The hon. Member for Havant and Waterloo (Mr. Lloyd) was not, unfortunately, with us in Standing Committee. We missed his good nature there. Quite understandably, he did not have the advantage—if I may so put it—of our discussions there. He talked about the distinction between the tax on the joint wealth of both parties. The whole purpose of the tax is to distinguish between the wealth of the parties separately. This is a tax on a transfer from one individual to another.

I rather gathered that the hon. Gentleman thought that the whole principle of grossing-up was a totally novel concept in English tax law. I am sure he will be the first to recognise and acknowledge that the principle of grossing-up is provided in relation to estate duty. If someone were to be given something entirely free of estate duty, different consequences would apply if the beneficiary were to be paying the tax. I am grateful for the hon. Gentleman's acknowledgement of that.

I turn to some of the technical difficulties involved here Not for the first time, my hon. Friend the Member for Llanelli (Mr. Davies) has it absolutely right, as I understood him, and he put it much more lucidly than I ever could. But I think that I could go a little beyond what he said. He rightly points out that under Clause 25(2) the transferor and the transferee are the persons liable. If, however, one looks forward to Clause 27(5), on page 22, one sees that
"Where a person is liable for any tax … under subsection (2) of section 25 of this Act otherwise than as transferor"
—in other words, if it is the transferee—
"he shall be liable only if the tax remains unpaid after it ought to have been paid."
In other words, I had in mind when the tax is overdue—and, as I said earlier, this will normally be six months after the due date or, I should says, six months after the end of the months in which the transfer is made.

I say to the hon. Member for Guildford that when I said that the transferor is primarily liable, I meant that for the first six months until the tax becomes overdue it is the transferor who is liable and then subsequently, after the option of Clause 27(5) comes into effect, they are jointly liable.

The hon. Gentleman does not meet the point. What subsection (5) is concerned about is to protect the transferee from having to pay the tax in certain circumstances. It obviously does not protect the transferor. What we are concerned about is the point that the hon. Member for Llanelli (Mr. Davies) made and the point that I have made in moving the amendment. It is the one point at issue here. How can we be sure in the Bill as it is drafted—I do not believe that we can be sure—that if, after one yearly instalment of the eight is paid by the transferee, there is not immediate recourse by the Revenue to the transferor for the whole of the remainder?

I think that the hon. Gentleman is on to a different point. I shall try to come to that shortly. We ought to get this absolutely clear. As far as the first six months are concerned, the liability is on the settlor as the result of the operation of Clause 27(5). Subsequently there is the joint liability on the transferor and the transferee under Clause 25(2).

Nothing in the operation of Clause 27(5) excludes, as I understand it, an arrangement whereby the transferee should pay the tax. It would, therefore be a net gift rather than a grossed-up gift within the first six months. The option is always there as between the transferor and the transferee. As I said in my original remarks, they are already free to decide who is to bear the tax. Clause 25(2) lays down no order of priority. Each of them is liable to the whole tax, but the amount of the tax will depend on who pays it.

6.15 p.m.

I come now to the point raised about instalments. As I understand the situation, if the transferee takes advantage of the instalment provisions under Schedule 4, paragraph 13(5)(a), and pays the first instalment properly and then subsequently, shall we say, it is impossible for the Revenue to collect from him, for whatever reasons, the right to pay by instalment is not affected by that, even though the Revenue's rights revert back to the transferor. But in those circumstances a higher rate of tax would be involved because if the tax was no longer being paid by the transferee the grossing-up effects would apply to that proportion of the tax which was unpaid.

We had a detailed discussion in Committee about how one calculated the grossing-up provisions with regard to the unpaid portion of the tax when the transferee had started paying and then, after a period, it had become impossible for him to pay any longer and the transferor would take up the payments.

I see the point that the hon. Gentleman is trying to make, but it appears to contradict flatly what the Chancellor said in his prepared reply in the Daily Express. He makes no mention of an additional tax being allowable if the transferee starts paying instalments. There is no mention of that. How can it be that both the Chancellor and the Financial Secretary are right? It does not make sense.

By the leave of the House, I am trying to assist the House. I think I have given an accurate exposition of the matter. The hon. Gentleman has me at a disadvantage. I do not have that newspaper article in front of me. I do not think it is helpful to bandy newspaper articles about at present. I have gone carefully through the effects of Clauses 25 ad 22 and Schedule 4 and I think that I have made matters clear.

The hon. Gentleman says that if the transferee pays one instalment and then the Revenue cannot collect any more from the transferee because the transferee refuses to pay, the Revenue can go to the transferor. What we are concerned about is the Revenue going to the transferor simply because there is a liability all the time with the transferor even though the transferee may be well content to pay the second instalment in the second year, the third instalment in the third year and so on. There is nothing in the Bill to ensure that the Revenue does not seek the tax from the transferor, because they are both liable.

Again, there is a possible misunderstanding here. I shall look at the matter again. As I am advised, the situation is quite clear. Quite obviously, in situations of this sort different people may come to different interpretations of any statute, and these things are eventually determined by the courts. However, we should prefer to get the matter clear between us across the Floor of the House this afternoon if possible. My explanation does not, apparently, satisfy hon. Members of the Opposition.

The right to the instalments is enshrined in Schedule 4. That right is available only to the transferee in the first place. Therefore, once it is agreed that the transferee is to be liable and he has begun his payments under Schedule 4, clearly the Revenue will not proceed Against him unless for any reason he is unable to make payments.

May I ask the Financial Secretary to take this as an illustration of the many unresolved difficulties still existing in this legislation? Listening to this matter for the first time, as it were—although I have attempted to understand the argument before coming to the debate—it is clear that there is here real scope for misunderstanding.

The hon. Member for Llanelli (Mr. Davies) draws attention to the importance of the point. There are many comparable points littered throughout this legislation. It is not sufficient to say, if it is humanly avoidable, "Well, let that be resolved in the courts by litigation in due course." I am sure that the Financial Secretary appreciates this.

May I have the hon. Gentleman's assurance that in preparing the next Finance Bill, which must now be cooking, he will ensure that attention is given to this and many comparable points? With legislation on a new tax we have no opportunity of putting it right in another place, but we have the opportunity to do so in the next Finance Bill, as the right hon. Member for Down, South (Mr. Powell) pointed out.

I give notice that we intend to deliver to the Chancellor of the Exchequer a well-intentioned and reasonable schedule of all the remaining outstanding points of importance. I hope to receive the Minister's assurance that serious attention will be given to all those points, otherwise many difficulties will arise for the taxpayers.

I am obliged to the right hon. and learned Gentleman for his constructive intervention. I accept that there are difficulties. I acknowledge straight away that he has come on to the Opposition Front Bench with his present responsibilities in the middle of a Finance Bill. It must be difficult for him. As one who arrived on the Opposition Front Bench in a junior capacity in the middle of a Budget debate three years ago, I know the sort of difficulties that confront him.

I accept that difficulties are present in what is an extremely complex piece of legislation, as all legislation introducing a fundamentally new tax must be. I undertake to consider seriously the memorandum that the right hon. and learned Gentleman proposes to put before my right hon. Friend. I give him that assurance without any reservation.

With the leave of the House, may I say that if there were another stage to the Bill we would accept the Financial Secretary's undertaking to look at the matter again, which is roughly what he is saying. But there is no such further stage. All this confirms that we shall approach the next Finance Bill constructively. The present exchange also confirms our belief—if it needed confirming—that the Bill is an unholy muddle. Another of the central principles appears to be riddled with ambiguity and shrouded in doubt. I must urge my right hon. and hon. Friends to press Amendment No. 56 in an attempt to get some clarity back into the Bill and to underpin the undertakings of the Chancellor, which appear to need increasing underpinning these days.

If it is possible to have a vote on Amendment No. 56, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Division No. 132.]


[6.24 p.m.

Adley, RobertFletcher, Alex (Edinburgh N)Lester, Jim (Beeston)
Aitken, JonathanFookes, Miss JanetLloyd, Ian
Alison, MichaelFowler, Norman (Sutton C'f'd)Loveridge, John
Amery, Rt Hon JulianFox, MarcusMcCrindle, Robert
Atkins, Rt Hon H. (Spelthorne)Fraser, Rt Hon H. (Stafford & St)MacGregor, John
Awdry, DanielFreud, ClementMacmillan, Rt Hon M. (Farnham)
Baker, KennethFry, PeterMcNair-Wilson, M. (Newbury)
Banks, RobertGardiner, George (Reigate)McNair-Wilson, P. (New Forest)
Beith, A. J.Gardner, Edward (S Fylde)Madel, David
Bennett, Dr Reginald (Fareham)Gilmour, Rt Hon Ian (Chesham)Marshall, Michael (Arundel)
Benyon, W.Gilmour, Sir John (East Fife)Marten, Neil
Berry, Hon AnthonyGlyn, Dr AlanMates, Michael
Biffen, JohnGoodhart, PhilipMather, Carol
Biggs-Davison, JohnGoodhew, VictorMaude, Angus
Blaker, PeterGoodlad, AlastairMawby, Ray
Bowden, A. (Brighton, Kemptown)Gorst, JohnMaxwell-Hyslop, Robin
Boyson, Dr. Rhodes (Brent)Gow, Ian (Eastbourne)Mayhew, Patrick
Brittan, LeonGriffiths, EldonMeyer, Sir Anthony
Brotherton, MichaelGrimond, Rt Hon J.Miller, Hal (Bromsgrove)
Brown, Sir Edward (Bath)Grylls, MichaelMills, Peter
Bryan, Sir PaulHall, Sir JohnMiscampbell, Norman
Buchanan-Smith, AlickHall-Davis, A. G. F.Mitchell, David (Basingstoke)
Buck, AntonyHamilton, Michael (Salisbury)Monro, Hector
Bulmer, EsmondHampscn, Dr KeithMontgomery, Fergus
Burden, F. A.Harrison, Col Sir Harwood (Eye)Moore, John (Croydon C)
Carlisle, MarkHarvie Anderson, Rt Hon MissMore, Jasper (Ludlow)
Carr, Rt Hon RobertHastings, StephenMorrison, Charles (Devizes)
Chalker, Mrs LyndaHawkins, PaulMorrison, Hon Peter (Chester)
Churchill, W. S.Hayhoe, BarneyMudd, David
Clark, Alan (Plymouth, Sutton)Hicks, RobertNeave, Airey
Clark, William (Croydon S)Higgins, Terence L.Nelson, Anthony
Clarke, Kenneth (Rushcliffe)Holland, PhilipNeubert, Michael
Clegg, WalterHooson, EmlynNewton, Tony
Cockcroft, JohnHordern, PeterNormanton, Tom
Cooke, Robert (Bristol W)Howe, Rt Hn Sir GeoffreyNott, John
Cope, JohnHowell, David (Guildford)Onslow, Cranley
Cormack, PatrickHowell, Ralph (North Norfolk)Osborn, John
Corrie, JohnHowells, Geraint (Cardigan)Page, John (Harrow West)
Costain, A. P.Hunt, JohnPardoe, John
Crouch, DavidHurd, DouglasParkinson, Cecil
Crowder, F. P.Irving, Charles (Cheltenham)Pattie, Geoffrey
Davies, Rt Hon J. (Knutsford)James, DavidPenhaligon, David
Dean, Paul (N Somerset)Jenkin, Rt Hon P. (Wanst'd & W'df'd)Percival, Ian
Dodsworth, GeoffreyJessel, TobyPeyton, Rt Hon John
Douglas-Hamilton, Lord JamesJohnson Smith, G. (E. Grinstead)Prior, Rt Hon James
du Cann, Rt Hon EdwardJones, Arthur (Daventry)Raison, Timothy
Durant, TonyKaberry, Sir DonaldRees, Peter (Dover & Deal)
Dykes, HughKellett-Bowman, Mrs ElaineRees-Davies, W. R.
Eden, Rt Hon Sir JohnKershaw, AnthonyRenton, Rt Hon Sir D. (Hunts)
Edwards, Nicholas (Pembroke)Kimball, MarcusRenton, Tim (Mid-Sussex)
Elliott, Sir WilliamKing, Tom (Bridgwater)Rhys Williams, Sir Brandon
Emery, PeterKirk, PeterRidley, Hon Nicholas
Eyre, ReginaldKnight, Mrs JillRidsdale, Julian
Fairbairn, NicholasLamont, NormanRifkind, Malcolm
Fairgrieve, RussellLane, DavidRoberts, Wyn (Conway)
Farr, JohnLatham, Michael (Melton)Rossi, Hugh (Hornsey)
Fell, AnthonyLawrence, IvanRost, Peter (SE Derbyshire)
Finsberg, GeoffreyLawson, NigelShaw, Giles (Pudsey)
Fisher, Sir NigelLe Merchant, SpencerShaw, Michael (Scarborough)

Amendment proposed, No. 56 in page 19, line 25, after 'transferee', insert:

'Provided always that the transferor and the transferee or, when appropriate, the personal representatives of either of them, may within two years of the date of a chargeable transfer, jointly state by notice in writing to the Board that one or the other shall be primarily liable, in which event the other shall be discharged from all liability unless and until the one made primarily liable shall fail to pay the tax assessed on him;'.—[Mr. Lawson.]

Question put, That the amendment he made:

The House divided: Ayes 217, Noes 264.

Shelton, William (Streatham)Steel, David (Roxburgh)Walker, Rt Hon P. (Worcester)
Shepherd, ColinSteen, Anthony (Wavertree)Walker-Smith, Rt Hon Sir Derek
Shetsby, MichaelStewart, Ian (Hitchin)Walters, Dennis
Silvester, FredStokes, JohnWeatherill, Bernard
Sims, RogerStradling Thomas, J.Wells, John
Skeel, T. H. H.Taylor, R. (Croydon NW)Wlggin, Jerry
Smith, Dudley (Warwick)Tebbit, NormanWinterton, Nicholas
Speed, KeithTemple-Morris, PeterWood, Rt Hon Richard
Spence, JohnThatcher, Rt Hon MargaretYoung, Sir G. (Ealing, Acton)
Spicer, Jim (W Dorset)Townsend, Cyril D.Younger, Hon George
Spicer, Michael (S Worcester)Tugendhat, Christopher
Sproat, Iainvan Straubenzee, W. R.TELLERS FOR THE AYES:
Stainton, KeithVaughan, Dr. GerardMr. Adam Butler and
Stanbrook, IvorViggers, PeterMr. Richard Luce.
Stanley, JohnWakeham, John


Abse, LeoDunnett, JackKelley, Richard
Allaun, FrankDunwoody, Mrs GwynethKerr, Russell
Anderson, DonaldEadie, AlexKilroy-Silk, Robert
Archer, PeterEdelman, MauriceKinnock, Neil
Armstrong, ErnestEdge, GeoffLambie, David
Ashley, JackEdwards, Robert (Wolv SE)Lamborn, Harry
Ashton, JoeEllis, John (Brigg & Scun)Lamond, James
Atkins, Ronald (Preston N)Ellis, Tom (Wrexham)Leadbitter, Ted
Bagier, Gordon A. T.English, MichaelLever, Rt Hon Harold
Bain, Mrs MargaretEnnals, DavidLewis, Ron (Carlisle)
Baker, KennethEvans, Gwynfor (Carmarthen)Litterick, Tom
Barnett, Guy (Greenwich)Evans, Ioan (Aberdare)Loyden, Eddie
Barnett, Rt Hon Joel (Heywood)Evans, John (Newton)Luard, Evan
Bates, AlfEwing, Harry (Stirling)Lyon, Alexander (York)
Bean, R. E.Fernyhough, Rt Hon E.Lyons, Edward (Bradford W)
Benn, Rt Hon Anthony WedgwoodFitt, Gerard (Belfast W)McCartney, Hugh
Bennett, Andrew (Stockport N)Flannery, MartinMacCormick, Iain
Bidwell, SydneyFletcher, Ted (Darlington)McGuire, Michael (Ince)
Blenkinsop, ArthurFoot, Rt Hon MichaelMackintosh, John P.
Boardman, H.Ford, BenMaclennan, Robert
Booth, AlbertForrester, JohnMcMillan, Tom (Glasgow C)
Boothroyd, Miss BettyFowler, Gerald (The Wrekin)McNamara, Kevin
Bottomley, Rt Hon ArthurFraser, John (Lambeth, N'w'd)Madden, Max
Boyden, James (Bish Auck)Garrett, John (Norwich S)Magee, Bryan
Bradley, TomGarrett, W. E. (Wallsend)Mahon, Simon
Bray, Dr JeremyGilbert, Dr JohnMarks, Kenneth
Brown, Hugh D. (Provan)Ginsburg, DavidMarquand, David
Brown, Robert C. (Newcastle W)Golding, JohnMarshall, Dr Edmund (Goole)
Buchan, NormanGould, BryanMarshall, Jim (Leicester S)
Butler, Mrs Joyce (Wood Green)Gourlay, HarryMason, Rt Hon Roy
Callaghan, Jim (Middleton & P)Graham, TedMeacher, Michael
Campbell, IanGrocott, BruceMellish, Rt Hon Robert
Canavan, Dennis
Cant, R. B.Hamilton, James (Bothwell)Mikardo, Ian
Cnrmichael, NeilHamilton, W. W. (Central Fife)Miller, Dr M. S. (E Kilbride)
Carter, RayHardy, PeterMiller, Mrs Millie (Ilford N)
Carter-Jones, LewisHarper, JosephMitchell, R. C. (Soton, Itchen)
Castle, Rt Hon BarbaraHarrison, Walter (Wakefield)Molloy, William
Clemitson, IvorHattersley, Rt Hon RoyMoonman, Eric
Cocks, Michael (Bristol S)Hatton, FrankMorris, Alfred (Wythenshawe)
Cohen, StanleyHayman, Mrs HeleneMulley, Rt Hon Frederick
Colquhoun, Mrs MaureenHealey, Rt Hon DenisMurray, Rt Hon Ronald King
Cook, Robin F. (Edin C)Heffer, Eric S.Newens, Stanley
Corbett, RobinHenderson, DouglasNoble, Mike
Cox, Thomas (Tooting)Hooley, FrankOakes, Gordon
Craigen, J. M. (Maryhill)Horam, JohnOgden, Eric
Crawford, DouglasHowell, Denis (B'ham, Sm H)O'Halloran, Michael
Crosland, Rt Hon AnthonyHoyle, Doug (Nelson)O'Malley, Rt Hon Brian
Cryer, BobHuckfield, LesOrbach, Maurice
Cunningham, G. (Islington S)Hughes, Rt Hon C. (Anglesey)Owen, Dr David
Dalyell, TamHughes, Mark (Durham)Padley, Walter
Davidson, ArthurHughes, Robert (Aberdeen N)Palmer, Arthur
Davies, Bryan (Enfield N)Hughes, Roy (Newport)Park, George
Davies, Denzil (Llanelli)Hunter, AdamParker, John
Davies, Ifor (Gower)Irving, Rt Hon S. (Dartford)Parry, Robert
Davis, Clinton (Hackney C)Jackson, Colin (Brighouse)Perry, Ernest
Deakins, EricJackson, Miss Margaret (Lincoln)Prentice, Rt Hon Reg
Dean, Joseph (Leeds West)Janner, GrevillePrice, William (Rugby)
de Freitas, Rt Hon Sir GeoffreyJay, Rt Hon DouglasRadice, Giles
Dell, Rt Hon EdmundJeger, Mrs LenaReid, George
Dsmpsey, JamesJenkins, Hugh (Putney)Richardson, Miss Jo
Doig, PeterJenkins, Rt Hon Roy (Stechford)Roberts, Albert (Normanton)
Dormand, J. D.Johnson, James (Hull West)Roberts, Gwilym (Cannock)
Douglas-Mann, BruceJohnson, Walter (Derby S)Robertson, John (Paisley)
Duffy, A. E. P.Jones, Dan (Burnley)Roderick, Caerwyn
Dunn, James A.Kaufman, GeraldRodgers, George (Chorley)

Rodgers, William (Stockton)Stewart, Donald (Western Isles)Watkinson, John
Rooker, J. W.Stoddart, DavidWatt, Hamish
Roper, JohnStott, RogerWeitzman, David
Rose, Paul B.Strang, GavinWellbeloved, James
Ross, Rt Hon W. (Kilmarnock)Strauss, Rt Hon G. R.Welsh, Andrew
Ryman, JohnSummerskill, Hon Dr ShirleyWhite, Frank R. (Bury)
Sandelson, NevilleTaylor, Mrs Ann (Bolton W)White, James (Pollok)
Sedgemore, BrianThomas, Dafydd (Merioneth)Whitehead, Phillip
Selby, HarryThomas, Jeffrey (Abertillery)Whitlock, William
Shaw, Arnold (Ilford South)Thomas, Mike (Newcastle E)Willey, Rt Hon Frederick
Sheldon, Robert (Ashlon-u-Lyne)Thomas, Ron (Bristol NW)Williams, Alan Lee (Hornch'ch)
Shore, Rt Hon PeterThompson, GeorgeWilliams, Rt Hon Shirley (Hertford)
Short, Rt Hon E. (Newcastle C)Thorne, Stan (Preston South)Williams, W. T. (Warrington)
Short, Mrs Renée (Wolv NE)Tierney, SydneyWilson, Gordon (Dundee E)
Silkin, Rt Hon John (Deptford)Tinn, JamesWilson, Rl Hon H. (Huyton)
Silkin, Rt Hon S. C. (Dulwich)Tomtinson, JohnWilson, William (Coventry SE)
Sillars, JamesTorney, TomWise, Mrs Audrey
Silverman, JuliusVarley, Rt Hon Eric G.Woodall, Alec
Skinner, DennisWainwright, Edwin (Dearne V)Wrigglesworth, Ian
Small, WilliamWalden, Brian (B'ham, L'dyw'd)Young, David (Bolton E)
Smith, John (N Lanarkshire)Walker, Harold (Doncaster)
Snape, PelerWalker, Terry (Kingswood)TELLERS FOR THE NOES:
Spearing, NigelWard, MichaelMr. Laurie Pavitt and
Springs, LeslieWatkins, DavidMr. Tom Pendry.
Stallard, A. W.

Question accordingly negatived.

Amendments made: No. 57, in page 19, line 44, at end insert—

'(3A) Where the chargeable transfer is made within three years of the transferor's death, then, with respect to so much of the tax, as exceeds what it would have been had the transferor died more than three years after the transfer, subsection (2)(a) above shall have effect with the omission of the words "the transferor and" and subsection (3) above with the omission of paragraph (d),'.

No. 58, in page 21, line 1, leave out second 'a' and insert 'another'.

No. 59, in page 21, line 2, leave out '26th' and insert '27th'.

No. 61, in page 21, line 3, leave out 'the transfer' and insert 'both transfers'

No. 62, in page 21, line 5, at end insert 'other'.—[ Dr. Gilbert.]