TAXATION AND THE RICH

Hauraki Plains Gazette, Volume XXXVIII, Issue 5078, 21 January 1927, Page 4

TAXATION AND THE RICH

PEERS FORM PRIVATE COMPANIES LESSENING BURDEN OF DUTIES. It was recently announced that, following the lead of eight dukes and many other members «f the peerage the Earl of Rosebery had “turned himself into a company.” Under the style of Rosebery Estates an unlimited company has, been registered in Edinburgh to administer the earl’s estates and interests. The two dUectors are. Lord Rosebery and his heir, Lord Dalmeny; the nominal capital is £362,500 ; and the articles p£ association prohibit any invitation to the public to subscribe far shares or debentures. During tht last 'few years many great landowners, dukes, marquises, and others have turned themselves into private companies, limited or unlimited. The first to set the fashion was the. Earl of Warwick, who became the Warwick Estates Company, Ltd., it 1889, with £120,000 share capital, to aco-’ire from the Earl and Countess df Warwick the life interest off the earl in the Warwick estates, and certain policies of assurances on their respective lives. For a long time this remained the solitary example, but since tlie war the practice has spread. The list is a large and growing one, and includes : Duke of Devonshire, Chatsworth estates, £2,304,000 ; Duke of Poitland Welbeck esta+ns, £780,000 ; Duke Of Rutland, Belvoir estates, £500,000 ; Duke of Marlborough, Blenheim estates, £200,000 ; Duke o>f Buccleuch, Buccleuch estates, £loo', 000 ; Duke of Sutherland, Sutherland estates, £100,000; Duke of Grafton, Gra'fton estates, £70,000; Duke of Montrose, Montrose estates, £35,000 ; Marquis of Northampton, Compton estates, £300,000 ; Marquis of Linlithgow, Hopetoun estates, £235,735; Marquis of Granby, Haddon estates, £lOO,000 ; Marquis of Zetland, Zetland tates, £3o’, 000 ; Earl o'f Mexborcugh, Mexborough estates, £600,000 ; Earl cf Moray, Moray estates, £312,500 ; Eayl o'f Levtn and Melville, Leven estates, £200,000’; Earl of Strathmore, Strathmore estates, £134,01'0 ; earl of Ellesmere, Bridgewater estates, £100,000'; Earl o’f Ilchester, Strangways estates, £30,000; Earl o'f Lucan, Lucan estates, £12,500 ; Earl of Dudley, Himloy estates, £lO,lOO ; Viscount Wimborne, Guest Consolidated, estates, £50,000 ; Lord Leconfleld, Leconfleld estates, £400,000; Lord Methven, Corsham estates, £150,000; Lord Dal-

meny, Leclburn Land Company, £lOO,000 ; Lord Saltoun, Parloth estates, £100,000; Lord Hylton, Merstham Manor estates, £lo'o,ooo'.

The object of the formation of these companies is tjjat a company is not liable to super-tax, and the owner o'f shares in an estates company would be liable 'for super-tax only on the amout he received as; dividends from the company. Frequently the owner of an estate is desirous of making provision for various members o'f his family, and, having transferred his estate to a. company in consideration of the allotment of 'fully-paid shares, he Is in a position to direct .that certain of the shares should be. allotted to various individuals instead of himself. As a result the taxable income o'f the owner may be reduced, and, assuming that he does not die within threeh years, a reduction of the amount of duties payable at his death is also effected. Obviously the possibility of the death of one, or more o'f the allottees dying first should not be overlooked. As the same time, the owner must carefully consider the effect df making an outright gift of part of the shares, as, of course, the allottee could not be compelled to surrender them. If the. income o'f the company should be less .than the personal assessment o'f the owner. t° income tax at the date 6f incorporation, the. amount of such tax payable would be presumably reduced. So far, however, as super-tax is concerned, it is hardly likely that there would be any material saving in such d tax, having regard to the provisions of the Finance Act o'f 1922. This Act prevented the avoidance of the payment of super-tax through the withholding of distribution df income o’f a company which would otherwise be. distributed. Companies can no longer use their, profits, for creating large surplus funds to. be turned into capital by the issue df bonus shares. Another advantage to be derived from turning an estate into a company would be that where an estate owner has several children or grandchildren the respective interests o’f the beneflearies under the will could be more clearly defined. It, is generally considered unnecessary to limit the liability of the members of the company, and all the. other advantages inay be obtained by registering an unlimited company. By adopting this course payment df the 1 per cent, capital duty on incorporation is avoided.