If we could have a brief explanation of this Clause, which is somewhat difficult to follow, it would help the Committee. I realise that the learned Attorney-General is at the moment resting, but perhaps the Chancellor of the Exchequer or the Financial Secretary could explain its purport. I understand that certain securities escape Death Duty if the person who owns them is not domiciled or ordinarily resident in this country. However, from the Clause it would appear that some adjustment is to be made to benefit the Treasury, and there has been some litigation which resulted unfavourably to the Treasury, in that other securities escape duty, which went a little outside the definition of this Clause. If I am wrong about that I wonder if we could have a brief explanation in rather simpler language than is to be found in the Clause, because the matter is of value to all of us.
It is essentially a legal point and I trespass on it with diffidence, but my right hon. and learned Friend the Attorney-General is having a deserved rest for a short time. This Clause springs out of the provisions in the Finance Acts of 1915 and 1931 giving the Treasury power to issue securities with the condition that they are exempt from all tax present or future so long as it is shown that the securities were in the beneficial ownership of persons who are neither domiciled nor ordinarily resident in the United Kingdom.
A case occurred recently where securities enjoying this privilege passed, on the death of a life tenant who was domiciled and resident in England, to beneficiaries who were domiciled and ordinarily resident abroad. In those circumstances it had always been assumed by the Inland Revenue, and, I think, by everybody else, that tax would be payable on the ground that the previous owner was domiciled in this country. However, the beneficiaries of the legacy contended that it was the domicile of the living beneficiaries that determined whether exemption was due, and finally succeeded in winning their case.
That unexpected change in the definition of the law had various unfortunate consequences. For one thing it threw doubt on the completeness of the exemption from taxation enjoyed by holders abroad, which was, of course, the whole purpose of the original exemption, namely, to encourage overseas residents to hold British Government securities. That main purpose would have been impeded if the definition of the law had been allowed to stand in this altered form, which had never been intended.
The Clause restores, in all aspects and with retrospective effect, what was always thought by all parties to be the position of the securities with regard to Estate Duty. That is to say, it will confer exemption where holders of such securities die and are ordinarily resident abroad and bar it where they are not. That is the simple explanation and I hope it will recommend itself to the Committee.