(except clauses 4, 5, 20, 28, 57 to 77, 86, 111 and 282 to 289, and schedules 1, 3, 11, 12, 21 and 37 to 39) - Clause 84 - Charge to income tax by reference to enjoyment of property previously owned
Finance Bill
3:00 pm
Mr Michael Jack (Fylde, Conservative)
I do not want to have a long discourse on who is to blame, but I acknowledge that sequential changes to the law have brought us to the position that we are in now. In philosophical terms, however, we should go back to the beginning of the process—estate duty itself. I think that it raises a fundamental issue. Before we had the range of taxes that we have today, the only way to get at people's rolled-up income was to
tax them at the point of their death. Suddenly the income crystallised out, and there was a sum of money available to be taxed.
The world has moved on, as table T1.2 of the Inland Revenue statistics lays out in considerable detail. It lists where all the money in our tax system comes from. For example, while inheritance tax yielded £2.5 billion for the financial year 2003-04, income tax dwarfed it with £115, 220 million—or £115 billion. That puts inheritance tax into context.
I can understand why the Treasury might wish to protect its interests, given the way that the tax is constructed. A further visit to the Inland Revenue website that deals with inheritance and capital transfer tax reveals a list, for those who wish to know how to circumnavigate the tax, of all the ways in which that can be done, including transfers between husbands and wives. As we will see in schedule 15, if a range of assets is made available to a third party, they will be subject to that schedule—but if they are passed on to a person's wife, she can carry on using his house with no charge, because that is the way the law is. The Government have not sought to challenge that.
The Inland Revenue website helpfully lists transfers to national bodies, charities, political parties, various forms of lifetime gifts, wedding gifts, reversionary interests, certain securities held by the UK Government, farms, and so on. There are various ways legitimately to avoid paying this tax. In this clause and in schedule 15, however, the Inland Revenue has picked out for special treatment one method in a long list of methods of avoiding inheritance tax.