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House of Lords Hansard
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Taxation: Inheritance Tax
30 October 2008
Volume 704

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asked Her Majesty’s Government whether they propose to review the application of inheritance tax to cohabiting and dependent close family members.

The noble Baroness said: I am grateful to those who have come to discuss a topic which, I admit, I have raised earlier and on which many others have commented. I do so because of the unusual cross-party support that has been evident for what I propose. Thus, I urge the Government to implement it in the Finance Bill. I propose a small, humane change that will cost the nation nothing: that two close relatives who are living together at the time of death of one of them, who have lived together for seven years—echoing the period during which one may transfer assets before death—and who assert codependency should be entitled to defer the payment of inheritance tax until the death of the second.

It has often been said that there are problems of definition of who those people should be. I propose either parent/child and siblings, including half, step and adopted relationships or, more logically, all those relatives who fall within the prohibited degrees, which is quite a small category, because those are people who cannot get married and cannot form civil partnerships. So there is no real problem of definition.

What I suggest would cause no loss to the Treasury because the full amount of tax will be forthcoming eventually. Indeed, my proposal may save resources by avoiding the sale of a property to fund the tax, probably in the declining years of the survivor, which may result in the survivor going into a home. We know that the sale of a home is one of the traumatic events of older life to precipitate a turn for the worse.

Just as important in this discussion is the establishment of common sense in inheritance tax law. That common sense has been lost since the death tax advantages that attached only to marriage were extended to same-sex civil partners by the 2004 Act, but were denied to relatives. That was because representatives of at least two parties and the Minister said that the Civil Partnerships Act was the wrong place in which to enact that relief; they did not say that they disagreed with it. On the contrary, an amendment by the noble Baroness, Lady O'Cathain, was passed in this House but defeated in the other place. The principle was supported by, for example, the noble Lords, Lord Alli and Lord Goodhart, and the then Deputy Minister for Women and Equality, Jacqui Smith MP, who all said that the Civil Partnerships Act 2004 was not the place to achieve it.

I became interested in this topic because one of my most brilliant former students at Oxford was counsel for the two sisters in the case that I am about to describe. Not only was he my student, but he is to be introduced into your Lordships’ House in a few days time as a new Cross-Bencher, David Pannick, QC. He is wholeheartedly behind my proposal, and it is a matter of regret that it is too soon for him to join the debate.

The case to which I refer, and which is the best known in this field, is that of Miss Joyce and Miss Sybil Burden, sisters in their 80s who have lived together for 82 years. They remain single. They cared for their parents and two aunts to the end and did not allow them to go into a home. On the death of the first sister, inheritance tax is estimated to be around £120,000. All this is in the public domain because of the judgment in which the sisters lost their case of discrimination before the Grand Chamber of the European Court of Human Rights. The Court held that marriage was different. With respect, the judgment is unsatisfactory not only because of the narrow defeat in the Court but for the lack of logic. The Government took down the barriers between marriage and other forms of association by enacting advantages for same-sex couples entering a civil partnership.

This dismantling of a centuries-old definition recently gave rise to more demands. It is now being demanded by some that cohabiting different-sex couples should enjoy the same rights as married and civil partnerships. I hasten to distance myself today from that proposal. My position is not connected with the debates about the breakdown of cohabiting different-sex couples where two people who could have married have fallen out. I would say in parentheses that if two people who are free to marry do not do so, it is a denial of their human rights to force on them the least satisfactory elements of marriage, the money laws, and to remove their freedom to make their own contracts. The definition of cohabitation between two people of different sexes is difficult and open to manipulation, unlike the proposal I am making today. Bringing marriage law to bear on cohabitants of different sexes may eat up in legal costs an amount as big as the resources in dispute. It will certainly open the door to harassment through the threat of action as a man and woman separate.

I have touched on the cohabitation proposals today because it is vital that the small amendment I am proposing is kept distinct from well-meaning but ultimately damaging attempts to create a full marital-type regime for heterosexual cohabiting couples. If that is combined with my proposal, it might sink it because of the deep resentment it causes in some quarters, I think for good reason. My case before your Lordships is for the mere deferral of inheritance tax payable on the death of a first sister in a relationship that is never ended except by death, where there is undoubted commitment and where one needs to avoid rehousing, and where it would be sensible to avoid the need to move house or borrow large sums of money at a vulnerable stage in life. This fits exactly the Government policy of keeping people housed, recognising the arrangements that people want for each other, and respecting the elderly. It would also recognise the invaluable service performed by carers, such as that performed by the daughter who gives up her independent life for an elderly parent living in the same house. After decades of devoted care the parent dies and the tax problem is incurred by the devoted carer, who should be recognised. I think it is the policy of this Government to assist carers who do a good job and relieve the state of such burdens.

If my suggestion is not adopted, I and possibly many noble Lords will be very puzzled. We will wonder whether it is not necessary to have a Royal Commission on the financial recognition that should be given to the whole variety of relationships that exist today.

I can see no case for giving generous treatment to civil partners and married people when it is not available to those who cannot enter a formal relationship, whose contracts may not be recognised by the courts, and who, as the sisters say, have tried every way to avoid the burden of the inheritance tax that is likely to fall on one of them. I would be very grateful to meet the Minister to discuss this. I take the liberty of urging him in the mean time to undertake to achieve this small, cost-free and kind deferral in the Finance Bill, which would be welcomed by so many in this House and by so many who have rendered valuable service to each other and to society.

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It gives me great pleasure to support the noble Baroness in her plea. One of the glories of the parliamentary system is the opportunities that it provides, away from the big set-piece debates and away from the clash of party animosities, for issues of principle and injustices to be raised in a manner in which one can have a civilised and straightforward dialogue with the Government of the day. The noble Baroness has drawn attention to one of those issues involving small numbers of people, with no great lobby to support them, who suffer a severe injustice.

It is very hard to say anything original on this subject after the speech made by the noble Baroness and after the exchanges that have taken place on the Floor of the House. The situation is very clear, and she has set it out very clearly. Basically, one is repeating many of the same arguments, which does not diminish either their force or the feeling behind them.

In my opinion, the establishment of civil partnerships has rightly given same-sex couples the same tax situation on death as married couples. In this respect—I am speaking here of financial and secular matters—marriage has lost its special status and an equality, which I support, has been established. It has been established, as I understand it, in the context of a belief on the part of the Government, and again I support this view, that it is right to promote stable, long-term family partnerships. If it is right to do so outside the framework of traditional marriage, I find it very difficult to see the objection to the proposal that the noble Baroness has put forward. Two members of the same family—whether sisters, brothers, parent and child, or, as the noble Baroness said, wider—can have as much co-dependence and as much of a supportive relationship as married couples and civil partners. Indeed, precisely because of the informality of the arrangement and the fact that there is no way of formalising it in law, the bonds can in some respects be deeper, longer-lasting and of a very particular order, based on supportiveness and caring one for the other.

It is very difficult to see an argument in principle against this, and it is equally difficult to see an argument in practice. The problems of definition, which at one time seemed rather difficult, were admirably dealt with by the noble Baroness, Lady Deech. It may be that the Government would wish to change them in some respect, but basically they seem to be very straightforward. I can see no rational argument, nor even a financial argument, why the proposal should not be accepted. Therefore, I add my voice to that of the noble Baroness and others in pleading with the Government to right a wrong for a small number of people, which will get very little publicity and which probably will not make any difference to their poll ratings, but which will be an act of justice and which will be thoroughly worthwhile.

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I start from the premise that inheritance tax has a valid role to play in our tax system. First, in a society in which social mobility is recognised to be declining, it is reasonable to take some steps to even up life chances. Secondly, the argument that inheritance tax is taxing assets that have already been taxed is largely false, since most of the assets being taxed are housing, on which no tax has ever been paid. I rather regret the auction of promises that broke out about a year ago. In particular, I feel that raising the allowance to £1 million, then doubling it and allowing that to be transferable, goes too far.

Even under the old system, two groups of people felt particularly disadvantaged; namely, siblings and surviving carers. In particular, these people are often asset-rich and income-poor. The disadvantages can be narrowed down to two; namely, a disadvantage in cash flow when the bill is paid and a disadvantage in how much is paid. HMRC makes some concessions on the cash flow: a tax bill can be paid in instalments over 10 years at a quite modest rate of interest. It is argued that equity release products are available from banks and insurance companies to enable people to borrow the money. But even before the credit conditions of the past few months arose, I do not think that there was a queue of banks and insurance companies wanting to lend 80 year-old ladies £10,000 this year, another £10,000 the next and more the following year. That is not a valid response.

The sense of grievance among these groups has increased for two reasons. Those who benefit from the spouse arrangements have been widened by the Civil Partnership Act and the arrangements have been made more generous by transferability. There are two levels of remedy. First, siblings and carers could still be regarded as individuals, but when the tax bill crystallises on the first death, that amount could be deferred with modest interest until the second death, as proposed by the noble Baroness, Lady Deech. The second remedy would be for these groups to be given the same benefits of transferability that are now available to people in marriages and civil partnerships.

In my view, the Government should accept the first remedy immediately, which does not break new ground. If, instead of leaving her share in the family home, the first sister leaves an old master painting, a plantation of trees, a farm or a business, the tax could be deferred even more generously than the existing 10-year arrangement. If this is accepted, it would deal with the cash-flow problem.

There would still, however, be the problem of equity. Previously, apart from when the tax was paid, the difference between the amounts of tax paid was not huge. But now it has become enormous and there is a case for saying that inheritance tax is transferred between generations. Here, in effect, there would be two transfers within the same generation; that is, the second sister would pay tax on her share of the joint wealth, plus the money that has been left to her after the first sister’s share has been subjected to tax. In effect, you have two rounds of tax coming one on top of the other. There is provision in the Inheritance Tax (Formerly Capital Transfer Tax) Act 1984 for “quick succession relief”. There may be a way to build on this, but I am told that at the moment it does not operate generously.

Clearly, in this case, money is not the issue. According to last autumn’s pre-Budget documents, the benefit of allowing spouses to pass money to a surviving spouse was £1.9 billion. The proposal put forward by the Government to allow the allowance to be transferred would be another £1.2 billion. In these absolutely colossal sums, if anyone wanted to raise that as an issue, I am confident that money could be found to deal with the probably limited number of cases indicated by the noble Baroness.

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I draw the Committee’s attention to my interest declared in the Register. I congratulate the noble Baroness, Lady Deech, on securing this debate.

I want to say at the outset that the main objection to inheritance tax is not double taxation, but that the very rich do not pay and the burden of the tax falls on middle England. That is what is so unfair about it. Quick succession relief is no assistance at all because it will bite on the second death, not the first, and it is the first death where the problem lies.

I was fortunate to have the opportunity of having two debates on inheritance tax, the first on 1 February last year and the second, which was on inheritance tax and capital gains tax, on 22 April this year. In the first debate I had a measure of success, because I advocated, among other things, transferability of nil-rate bands, and six months later the Government introduced that and made a modest increase in the nil-rate band. That was welcome.

I made a point in both debates of suggesting that siblings should be treated more fairly. There should be fair treatment, but it has to be narrowly defined. My view is that there should be a more generous relief between brothers and sisters, although it should not really go further than that. They cannot marry—that is a very powerful argument—and they cannot form civil partnerships.

If one alters the rules and makes them more generous so that it carries through the generations, though, you will have opportunities for tax avoidance. For example, if a mother dies, leaving her estate to her bachelor or married son—that is an exempt transfer because of what has then been allowed, which I am sure will not be allowed by the Government—the son then has a large estate. Say he is a bachelor when he inherits from his mother but then marries and leaves his entire estate to his widow; again, that will be exempt. This has to be rather carefully dealt with.

There is a powerful point regarding carers, which I mentioned in both my debates. Carers should have a more satisfactory, fairer and more sympathetic tax regime. I wonder if the Minister can talk to us a little about the possibility that commercial arrangements can be made along the Boden and Ralli principles—two cases in New South Wales from the early 20th century that are powerful precedents in this country—such as constructive trusts and so forth. For example, at the age of 70, Mrs Bloggs says to her daughter, “Please look after me, and when I die this house is yours”, and the daughter does exactly that and forsakes the opportunity of buying a house herself. There should be something along those lines. It is possible, I venture to suggest, and it will be interesting to hear what the officials have to say about this, that constructive law and commercial arrangements should be upheld in those circumstances. To the extent of that particular asset, it should pass as part of a commercial arrangement. I declare that I have an argument along these lines currently going with the Capital Taxes Office. So far, not so good, I am afraid.

There are these close family relationships between brothers and sisters. They rely on each other and live together. Of course they should be given favourable tax treatment. They should have an opportunity to make an inheritance tax election nominating their exempt beneficiary for inheritance tax purposes. If such an election were made, they should be treated, in terms of benefits and other such matters, as a married couple.

There is a plus, and possibly a minus, to that. The noble Baroness, Lady Deech, has made a very powerful case but, in my view, it should be limited to brothers and sisters. That would be far fairer. In those circumstances, I can see no reason why the Government will not give a very modest degree of help. It is not as if these people are isolated; there are a great many people of that sort, especially living in rural England. I hope that the Government will think again on that point. I say again how grateful I am to the noble Baroness for raising this very important point.

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I congratulate the noble Baroness, Lady Deech. She has highlighted and made a very strong case demonstrating flagrant discrimination against sisters and other family members who have often cohabited for a long period. I totally endorse what she said.

However, in hoping that the Government agree to deal with that very small change in legislative terms, in the longer term, for reasons of equality, parity and basic fairness, that could not be restricted to siblings alone. I want to emphasise the situation of long-term carers who are not related, but who may have spent 20 years together and devoted their lives to caring for someone, forfeiting their chance of a decent income from work and a subsequent pension and even of an adequate social life. In such cases, we are punishing a person for not having a sexual relationship, which is an anomaly which I am sure that your Lordships’ House would want addressed and which I hope that the Government will take very seriously.

This is not restricted to women; it often applies to men. In fact, in 1986, in the UK, 11 per cent of unmarried men aged under 60, and 13 per cent of unmarried women aged under 60, cohabited. Those proportions had roughly doubled by 2006. Many of those households consist of carers and cared-for people for a very long time. Social Trends reports that:

“The number of households with two or more unrelated adults sharing private accommodation ... has remained stable at 3 per cent”,

since that work was undertaken. Sometimes, those are family members. Focus on Families reports that the sample sizes of cohabiting carers are too small always to differentiate between carers and cohabiting relatives. We must take long-term carers into account.

I agree with the noble Baroness that any change in the law could initially be limited to sisters or family members, but in the long term, those anomalies must be addressed as a matter of some urgency to help people who, when the person they loved and cared for over many years dies, are suddenly left with having to get rid of the family home. That cannot continue and must be addressed.

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I, too, congratulate the noble Baroness, Lady Deech, on introducing this debate. As far as I know, it is the first time that we have had such a debate to urge on our colleagues in the Commons an amendment to the Finance Bill. As a general principle, we in your Lordships’ House have too little influence on Finance Bills, so that is a particular reason to welcome the debate.

I start from the same position as the noble Lord, Lord Turnbull, in believing that there is value in inheritance tax in terms of equality. I do not seek to undermine inheritance tax as a tax in any way. I also start with a background in this. My formative professional years were spent in Customs and Excise, where anyone who suggested any tax relief rapidly became a pariah among their colleagues. This experience and recollection are always on my shoulders.

In this case, the arguments as they relate to siblings are absolutely straightforward. I see no argument of any substance for denying siblings the right to benefit in the way that the noble Baroness proposes today. She referred to our debate on the Civil Partnership Bill, to which the noble Baroness, Lady O’Cathain, proposed a broadly similar amendment. We voted against that amendment, more because of the overall context of the debate than the specific issue of inheritance tax and siblings.

We need to be very clear about the definition of other family members. My mother lives next door to a family whose son was born in the house and has lived in the house until today. He is now broadly speaking my age: perhaps slightly younger. His mother and father lived in the house with him. His father died, his mother recently died, and he is now living alone in the house. It is not clear whether he was ever formally a carer. He looked after his mother to a certain extent, but he certainly did not give up a career to do it. He gave up no more than anyone would give up when looking after a relative as they got older. It is not clear to me that he should automatically benefit from this kind of relief. As it happens, the house is not above the inheritance tax threshold.

The amendment proposed by the noble Baroness, Lady O’Cathain, related to people over a certain age who had lived together for a certain amount of time; I think she proposed 12 years. These are narrowing definitions, which I would support, rather than a simple blanket provision.

The broader proposal made by the noble Baroness, Lady Greengross, warrants further consideration, because the value of carers to society is clearly very great. I have seen the old and frail parents of family members and friends having to rely on the state, on their own resources or on third parties to look after them, and finding either that the provision is not very good or that the financial burden of getting in paid caring staff is considerable. It is therefore in the interests of the state to see how carers can be supported in tax-efficient ways. This may be one way of doing it. It is not a proposal that I had heard about before today, however, and I want to look at it further before formally committing myself to it. It certainly has a number of merits.

I very much hope that the Minister can be rather more generous-spirited than he was when we debated this earlier this year. His arguments had little or no merit, frankly. I know him to be a generous-spirited man, and I look forward to his reply.

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I do not think that I will be echoing those sentiments. I congratulate the noble Baroness, Lady Deech, on securing this debate. As the noble Lord, Lord Newby, has pointed out, we are not normally allowed to dabble in tax matters, and are certainly never allowed to propose amendments to a Finance Bill or, indeed, to propose tax law generally. We are not, fortunately, prohibited from debating the issues, and we have had many fine debates on inheritance tax, led most recently by the noble Lord, Lord Burnett, and have had another good debate today.

Inheritance tax is an unfair tax. As the noble Lord, Lord Burnett, pointed out, it tends to attack middle England, while the rich can use a number of mechanisms to avoid or minimise its impact. Middle England has increasingly been dragged into the inheritance tax net, principally because house prices outstripped the general inflation increases to the IHT thresholds.

In the 10 years from 1997, the proportion of estates paying inheritance tax doubled to just under 6 per cent, though the changes that the Government made in this year’s Finance Act should reduce that by about a third. The inheritance tax yield is actually very low. The Government raise relatively little from it. But, of course, in these straitened circumstances, with the Government’s cupboard being virtually bare, any amount raised in taxes is something they would find difficult to give up, though it has to be noted that it is also one of the most expensive taxes to raise, with costs being over 1 per cent of the yield. Therefore, it is not a particularly efficient tax.

Overall, my party is not a fan of inheritance tax. We believe that there are theoretical objections to it. I note the views of the noble Lord, Lord Turnbull, but we see the element of double taxation, because it taxes wealth which has been accumulated from taxed income—perhaps not entirely, but it certainly does do that to some extent—as a very important issue. We also believe that it does nothing to encourage savings. Unlike the Government, we believe that savings are an important issue. The savings ratio has virtually disappeared in the past 10 years. We think that there should be incentives to save. Even Mr Stephen Byers, not normally seen as a right-wing thinker, described inheritance tax as a penalty on hard work, thrift and enterprise.

But statistics and theories mean absolutely nothing to ordinary families. For them it is the possibility of paying inheritance tax on modest wealth which is so distressing. That is why the subject has a political resonance which goes way beyond the bare statistics of yield and numbers of estates paying tax.

My party’s policy is to increase the inheritance tax exemption to £1 million and this would be transferable between spouses and civil partners, as is the Government’s exemption. The Government often copy our policies. They knew that we had touched a chord in middle England when we announced our £1 million exemption. However, instead of copying our policy properly, they produced their own half-baked version of transferability of the existing exemption limits. It is because the Government were so timid in relation to IHT that it remains a big issue. It may have been partly neutralised as between married couples and civil partners, but the increased generosity for them was not matched by generosity for any others. That is why there continues to be a call for some of the remaining inequities to be dealt with. The noble Baroness, Lady Deech, has well outlined the case for cohabiting and dependent close family members, but the issue can as easily be dealt with by raising the threshold. If it were increased to £1 million, as is our policy, the case that she has put would fall away because relatively few estates would need additional relief.

As has already been said, when the Civil Partnership Act was considered in your Lordships’ House, my noble friend Lady O’Cathain, whom I am glad to see is in her place, successfully moved an amendment which would have allowed close family relations who had lived together for a period to register a civil partnership. I believe that the motivation behind my noble friend’s amendment was the inequity of inheritance tax, though, of course, civil partnership brings in other tax and benefit changes. The Government overturned the amendment in another place. This was an area where my party, unlike the other parties, had a free vote. I have to say—I think that my noble friend already knows this—that I supported the Government’s position on that, not because I have no sympathy for the dependent relatives involved, but because I was concerned, like the Government, to keep the concept of civil partnership relatively discrete.

I have much sympathy with the issues that the noble Baroness raised so well this evening, but I am far from convinced that the answer lies in creating special tax reliefs. Our approach to tax is driven by a desire for simplicity. If the noble Baroness’s wishes were granted, I can guarantee that for every line of tax legislation which introduced the reliefs, there would be 20 or 30 lines of anti-avoidance provisions. The noble Lord, Lord Burnett, with his inventive mind on this subject, referred to the possibilities for avoidance. This is the path that the Government have consistently taken on tax legislation over the past 10 years and it is the very antithesis of the path that my party would want to see tax legislation taking.

I am sorry not to be able to pledge my wholehearted support for the noble Baroness, Lady Deech, in the specifics of her proposals, but I hope she sees that we would want to achieve substantially the same result by another route.

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I am grateful to all noble Lords who have spoken in this constructive and interesting debate, and in particular to the noble Baroness, Lady Deech, both for introducing the debate and for presenting the case with such sensitivity and care. I want to address the politics first. I heard what the noble Baroness said in a little knockabout regarding the virtues or otherwise of inheritance tax. However, these are changing times and if she is going to have a dip at the Government that we are concerned to maintain revenues—we certainly are—is she prepared to see no value in inheritance tax so that the ill-gotten gains of those huge bonuses and resources that have gone to bankers will be free of taxation when they pass on? She is welcome to argue that case, but I will maintain the position of the Government, which is that inheritance tax is an important part of taxation, although as she and other noble Lords have rightly indicated, it raises a relatively small proportion of the total resources available to the nation.

I will be cast as the bad guy because I am not going to be able to accept the argument put forward by the noble Baroness, Lady Deech, and supported so well by other noble Lords who have spoken in the debate. However, I understand entirely the motivation behind her proposal and the concern that fairness should be observed for our fellow citizens. We all recognise that although the Burden case did not convince the European Court of Human Rights and was rejected, we have sympathy for the nature of the case and we know of others in a similar position. If we were not concerned about this issue, we would be lacking in basic humanity and unable to see the difficulties that people can face. However, I want to emphasis this: the reason why we cannot accept the premise behind the noble Baroness’s case is that we need a basis in law.

Before the recent legislation on civil partnerships, the reason why inheritance tax exemptions related only to married couples was straightforward. It was a question of the law: marriage is a state entered into as a legal position, and a civil partnership now reflects that. The trouble with any definition that departs from the law flows from two considerations. First, there will always be hard luck stories. If it was said, for example, that the exemption should apply to siblings who have lived together for 20 years, what of the pair of siblings where one of them dies after 19 years? There would be concern about such a situation and the problem of the hard-luck case would not be solved. The second difficulty is obvious enough. The moment we move from the straight legal position that clearly defines who is entitled and who is not, the Revenue would become involved in investigations and intensive scrutiny in order to see whether the couple qualify by meeting the criteria.

We all have proper reservations about the extent to which the Inland Revenue carries out inquiries of that kind. There are real difficulties about a sensitive circumstance after a death where scrutiny would have to be applied to the nature of the relationship that obtained before the death had occurred.

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I am sorry to intervene, but the Minister is running together a situation for married couples and civil partnerships where inheritance tax is exempt and the proposition advanced by the noble Baroness, Lady Deech, that inheritance tax be deferred.

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If it is suggested that there is no cost attached to the Treasury with regard to deferral, that is obviously not so. Of course there is a cost when resources are not being returned in the year for which deferral takes place. So we have that problem; the question is how extensive it would be. We are not talking about one of the major revenue taxes in the land, but that does not alter the fact that taxes have to be applied with fairness.

At present, it can be in the interests of those who secure the inheritance to emphasise the costs that they may sustain, which might even lead to the loss of the house in which they live, which is the most acute loss. However, the Revenue is not in the business of turfing people out of their houses. In those circumstances, it carries out the process of deferral, which has been identified, over a period as long as 10 years, and graduates the payments that need to be made. I may appear somewhat heartless on behalf of the Treasury in not accepting the full argument that has been presented today, but I would be selling the Inland Revenue very short if I did not emphasise the care that is taken in circumstances where real hardship might obtain, particularly the loss of a home, through the application of the inheritance tax.

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I am sorry to intervene, but we have time and I want to clarify the position. When I brought this suggestion up in the first place, we thought that the house was the major capital asset. Things have changed, however. It is fine for the Minister to say that Her Majesty’s Revenue and Customs could defer the payment, but if the house were actually falling in value—we are now realising that houses are not always an appreciating asset—what would be the situation then? There would be genuine hardship. People would be left homeless, because there would be no way they could pay the deferred tax on an asset that they knew at the end would leave huge debts.

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That has not been the situation in the recent past. We are in changed circumstances, and those very circumstances mean that the Treasury is scrupulous in defending the revenue to which it is entitled. I understand what the noble Baroness is saying, and there may be a greater number of cases than at present where the necessity for deferral and consideration by the Treasury is to be taken into account. The Government have already said to mortgage lenders that we expect there to be consideration of special circumstances in order to minimise repossession so far as we can—we all recognise that the numbers are increasing. By the same token, it is to be anticipated that the Revenue, which is well used to using deferral procedures with regard to inheritance tax, will have to deploy them rather more extensively if property values decline substantially and over a period of time. Of course, we all hope that we are talking about a drop that is not too far and a time period that is not too long. I hear what the noble Baroness says, and I merely give an assurance about the Revenue’s responses to that position.

I fully understand the questions asked by the noble Lord, Lord Burnett. On the Australian example, I am not briefed on that legal case, and I will have to respond to him in writing. The briefing is fairly extensive, but it does not go quite that far.

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These cases may have emanated from New South Wales, but they are very good law in Britain, which practitioners sometimes forget. I very much look forward to hearing from the Minister in a letter exactly what the Revenue’s view is on constructive trust matters, and particularly on commercial arrangements for carers. That is very interesting for all of us.

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I take what the noble Lord says, and I shall write to him. I am not a practitioner, but nor have I forgotten it readily, because I never knew it. Therefore, when I write to him I shall be on a learning curve, as most others would be in my situation.

I say to noble Lords, and in particular to the noble Baroness, Lady Deech—she deployed the case so ably and I understand its significance—that we are not persuaded at present that it is possible to draw a line, which would have to be a legal definition. We are not going to allow the Treasury—no noble Lord who has spoken in this debate would—the degree of discretion to say that it should make an adjustment on whether it thinks that siblings have been carers or how long they have been together. The great danger is that any change could affect human behaviour. If it were the case, in the most extreme circumstances, that siblings merely living together for a year would solve the inheritance problem, we would see long-lost love between siblings who had been apart for a long period of time being brought together when illness occurred. I know that the noble Baroness, Lady O’Cathain, thinks that I am little far-fetched on this. There are big resources at stake in particular circumstances of inheritance tax, and it would not be right for us to be innocent about that.

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I just ask for clarification. Is the meaning of the Minister’s words that if we on our side can come up with a good definition, the Minister would be happy to arrange the deferral?

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That is pressing me a little far. The noble Baroness will recognise the position of the Treasury’s defence on this. We have a clear definition in law of those who are entitled, and we would need a very clear definition before there was any possibility of departure. I do not accept that there is no cost involved as far as the Treasury is concerned. She will forgive me if I emphasise that point. It may be marginal, and it may be suggested that there is a counterbalance because people’s behaviour in caring for each other may save the state costs in other respects. That is an issue that I know we will debate in future, as we have debated it so often.

From the point of view of the Treasury, there is bound to be the question of legal definition, and a substantial case has to be put against it—at this time of all times—of what the advantage would be against the inevitable cost in terms of lost revenue.

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I absolutely take the point that the Treasury would experience a cash-flow problem with a temporary deferral of perhaps 10 years, which might be the maximum age span in probable death between, say, siblings. The noble Lord, Lord Turnbull, also mentioned the possibility of some modest interest. After that initial 10 years, the fall-in to the Treasury of the total sum due would be exactly the same as now. The cost is so marginal that you can barely count it.

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The cost is there and I am not prepared to concede that point of principle at this stage. Nor am I prepared to concede the point that everyone else has stuck to their time limits, but I have taken 14 minutes when I only had 12.

The Committee adjourned at 5.55 pm.