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Finance Bill

I am sure that my hon. Friend is right to suggest that a court order might be required to break a trust, but I cannot comment on that. My understanding is that the new clause would provide an effective route which, in substance, would reverse the transactions and create precisely the situation that would have existed had the arrangement not been entered into in the first place. That is to say, the settlor would be liable for inheritance tax on the value of the house, but there would be no tax liability on the now cancelled debt. I should say that things would not be quite as they would have been before, because the settlor would still be disadvantaged in the ways that I outlined earlier. There would be an element of penalty that perhaps would satisfy the Paymaster General’s general view that people should be deterred from engaging in tax planning by finding it expensive to exit from retrospective taxation arrangements once they are imposed. The Paymaster General did not give a time scale for the relief that she will possibly be able to introduce, and the time scale is extremely important. We are talking in many cases not about very wealthy people, but about people living on quite limited incomes who will now be required to meet an income tax charge until they have unwound these schemes. The Paymaster General did not attack the new clause itself, and it was drafted by a senior legal professional. Although I accept her intention to look at the matter further, I shall ask my hon. Friends to vote to indicate the strength of feeling that exists in the House and outside and to help to stiffen the Government’s resolve as they take the matter forward.