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The new land taxes and mineral rights duty. The Land Union's handbook on provisional valuations; being general advice to owners of land and house property in dealing with valuations under the Finance (1909-10) Act, 1910, as amended by the Revenue Act, 1911 online

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Online LibraryEngland) Land Union (LondonThe new land taxes and mineral rights duty. The Land Union's handbook on provisional valuations; being general advice to owners of land and house property in dealing with valuations under the Finance (1909-10) Act, 1910, as amended by the Revenue Act, 1911 → online text (page 13 of 19)
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acres. Such lands, valued separately before the passing of the Revenue
Act, 1911, may be revalued together on the request of the owner
within three months after the passing of the Act — that is to say,
before June 30, 1911. (Section 5.)

7. The Commissioners aro given the same right of appeal against
the decision of the referee as is given to the owner under the Finance
(1909-10) Act, 1910. (Section 7.)

8. Certain cases of leases are exempt from increased stamp duty.
(Section 15.)

It will thus be seen that the Revenue Act, 1911, touches only
the fringe of the difficulties and anomalies of the land clauses of the



LAND UNION HANDBOOK 123

Finance Act, 1910. The Government claim to have made great
concessions to the objectors to the Act. Mr. Hobhouse, in the
House of Commons on March 30, said : " The whole of this Bill has been
in the nature of concessions, but they have not been appreciated
by honourable gentlemen opposite. I do not think they have en-
couraged us to go in any way, or in any direction at all, to meet
them further than we have done." It will probably be thought by
many that the Revenue Bill has not met one-hundredth part of the
objections of the Finance Act. It has not even carried out the
clear and explicit promises of the Chancellor of the Exchequer. All
the Revenue Act has done is to remedy one or two glaring defects.

The provisions as to the valuation of contiguous lands and the
modification of reversion duty on the enfranchisement of leaseholds
clearly only righted obvious mistakes in the drafting of the original
Act. The rendering null and void of contracts for the shifting of
increment value duty is only a feeble, and probably futile, attempt
to interfere with the natural laws of exchange and the inevitable
fixation of price by the ordinary methods of bargain. The so-called
concession of extending the twenty years clause, by which an owner
may have the site value at the date of purchase within his lifetime
substituted for the original site value on April 29, 1909, is practically
worthless in any case other than that of vacant land, and this clause
will be of little use until a complementary provision is made by which
no increment value duty whatever shall be levied until the total
value on the " occasion " exceeds the total value at the date of
purchase. The levying of a tax on the occasion of a loss is too great
a travesty of justice for the conscience of the nation to permit when
once it is enlightened on the practical interpretation of the Act as
it still stands.

The only concession in the Act of any importance is the extension
of the exemption to undeveloped land duty of lands in the process
of building development, twenty years being substituted for ten
years as the time during which expenditure on roads, etc., must
have taken place in order to exempt one acre per hundred pounds
expenditure from the tmdeveloped land duty. This is the small
residue of truth in Mr. Hobhouse's statement that the whole Bill
is in the way of concessions.



REVENUE ACT, 1911 (1 Geo., Ch. 2).

Part I. — Duties on Land Values.
Section.

1. Avoidance of contracts for payment of increment value duty

by transferee or lessee.

2. Amendment of Sec. 2 (3) of the principal Act.

3. Explanation and amendment of law as to reversion duty.

4. Amendment of Sec. 16 (2) (b) of the principal Act.

5. Amendment of Sec. 26 (1) of the principal Act.

6. Saving in respect of the payment of increment value duty by

certain statutory companies.

7. Right of Commissioners of Inland Revenue to appeal against

decision of referee.

Part IV. — Stamps.
15. Exemption in certain cases of leases from increased stamp
duty so far as consideration consists of a capital sum.



124



LAND UNION HANDBOOK



Part VII. — Miscellaneous.
20. Repeal, construction, and short title.



CHAPTEE II.

An Act to amend the Law relating to Inland Revenue (including
Excise) and the National Debt, and for other purposes connected
with Finance. (March 31, 1911.)
Be it enacted by the King's Most Excellent Majesty, by and with

the advice and consent of the Lords Spiritual and Temporal, and

Commons, in this present Parliament assembled, and by the authority

of the same, as follows :

Part I. — Duties on Land Values.

1. Any contract made after the passing of this Act between a
transferor and transferee or a lessor and lessee, for the payment
by the transferee or lessee, as the case may be, of increment value
duty, or any expenses incurred in connection with the payment
or assessment of the duty, or for the repayment or reimbursement
by the transferee or lessee to the transferor or lessor in any manner
of any payments made by the transferor or lessor in respect of that
duty, or any such expenses, shall be void. 1

2. Sub-section (3) of Section 2 of the principal Act 2 (which relates

1 Increment Value Duty is a stamp duty (Finance Act, Sec. 3 (6)) and payable
by the transferor or lessor (Finance Act, Sec. 4(1)). The principal Act, however,
left it open to the transferor or lessor to place the burden of the duty on the trans-
feree or lessee. This will still be possible by mutual consent, but no contract
to that effect can now be enforced. If the transferor or lessor wishes to shift (he
burden, he will have to estimate it and add its equivalent to the purchase price,
or to the rent, as the case may be. The intention of the Section, as explained by
the Financial Secretary to the Treasury, is " to make the burden of paying the
new duty rest where it was intended to rest by the original Act, on the shoulders
of the person who transfers or leases the land or interest upon which the Incre-
ment Duty arises." It would seem to be rather in the nature of a pious wish
than an effective interference with the ultimate incidence of the tax, and it is
as Mr. Balfour said, " a very strange clause to introduce into a Taxing Bill."
It does not increase the powers of the Government to collect the tax. It merely
interferes with a private arrangement which might have been made between
two independent parties. See page 16 above.

2 Section 2 Sub-section (3) of the Finance (1909-10) Act, 1910, reads as follows:—
" Where it is proved to the Commissioners on an application made for the pur-
pose within the time fixed by this section that the site value of any land at the
time of any transfer on sale of the fee simple of the land or of any interest in the
land, which took place at any time within twenty years before the thirtieth
day of April, nineteen hundred and nine, exceeded the original site value of the
land as ascertained under this Act, the site value at that time shall be sub-
stituted, for the purposes of increment value duty, for the original site value
as so ascertained, and the provisions of this part of this Act shall ajmly accord-
in "ly. Site value shall be estimated for the purposes of this provision by
reference to the consideration given on the transfer in the same manner as it
is estimated by reference to the consideration given on a transfer where incre-
ment value duty is to be collected on the occasion of such a transfer after the
pa Lag <>f this Act. This provision shall apply to a mortgage of the fee simple
of tin- land for any interest in land in the same manner as it applies to a
transfer with the substitution of the amount secured by the mortgage for the
com ideration. An application for the purpose of this section must be made
within three months after the original site value of the land has been finally
settled under this part of this Act."



LAND UNION HANDBOOK 125

to the definition of increment value) shall apply to the case of any
transfer on sale of the fee simple of the land or of any interest in
the land which took place twenty years or more before the thirtieth
day of April nineteen hundred and nine, and which was a transfer
to the person who is the owner of the land or any interest in the land
at the time when an application is made under that provision, as
it applies to the case of a transfer on sale which took place within
twenty years before the thirtieth day of April, nineteen hundred
and nine. 3

In the cases where the original site value has been finally settled
before the passing of this Act, an application may be made, notwith-
standing anything in Sub-section (3) of Section 2 of the principal Act,
under that Sub-section, for the purpose of giving effect to this pro-
vision within three months after the date of the passing of this Act,
and the Commissioners shall, in such a case, after the original site
value as finally settled in such manner (if any) as may be necessary
to give effect to the amendment made by this provision ; and,
in cases where any amount has been paid on account of duty, the
Commissioners shall make such repayment as may be necessary
to adjust the amount paid to any alteration of value made in pur-
suance of this provision. 4

3. (1) It is hereby declared that in relation to a lease which has Explana-
determined, the person in whom the lessor's interest was vested JjJSendment
immediately before the expiration of the term for which the lease was f law us to
granted, or, if the lease has determined before that time, immediately reversion
before the transaction or event in consequence of which the lease u y '
has determined, is the lessor for the purpose of Section 15 of the
Finance (1909-10) Act, 1910 (in this Act referred to as the principal
Act [10 Edw. 7, c. 8]), and is the person to whom any benefit accrues
from or by reason of the determination of the lease for the purpose
of the other provisions of that Act relating to reversion duty. 5

3 It should be noted that the new clause does not negative any provision in
the principal Act, but simply extends it to cover the lifetime of the actual
owner. The principal Act does not limit the sale to a sale to the present owner.
Any sale within the period may be put forward for the purpose of obtaining a
substituted site value. The new section limits the sale to a sale to the actual
owner of the dutiable interest. It leaves the provisions as to mortgages as it was
before. The new section throws no light on the method to be adopted for
arriving at the site value at the time of sale, nor does it explain how site value
should be derived from the amount secured by a mortgage. The method of
valuation is still governed by the provision of Section 2 of the principal Act
being similar to that adopted on the " occasion " on which the duty is collected.

4 In cases where no original site value has been finally settled, an application
to take advantage of the new provision must be made within three months
after the original site value has been finally settled, in accordance with Sub-
section 3 of Section 2 of the principal Act. In cases where the original site value
has been settled, the new section gives the owner three months from March 31st,
1911, to claim the benefit of the new provision. It is important that in all cases
where valuations have been agreed, owners should at once reconsider the
valuations and ascertain whether they are in a position to take advantage of the
section. It may prove eventually to be of very material importance to their
interests.

6 Section 15, Sub-section 1 of the Finance (1909-10) Act, 1910, reads as
follows : — " Reversion duty shall be recoverable from any lessor to whom any
benefit accrues from the determination of a lease as a debt due to His Majesty.
. . . ." Sub-sections 2 and 3 place upon the lessor the obligation to deliver
particulars under penalty. This definition in the Revenue Act as to who is the



126 LAND UNION HANDBOOK

(2) Where, whether before or after the passing of this Act, 6 a
lease of any land determines on the vesting of the lessor's interest
and the lessee's interest in the same person" before the expiration
of the term for which the lease was granted, the amount of the rever-
sion duty (if any) payable shall not be the full duty, but such an
amount as would, with compound interest at the rate of four per
centum per annum for the residue of the term for which the lease
was granted, produce the amount of the full duty. 8

For the purposes of this provision the full duty means the duty
(if any) which would have become payable if the lease had not
determined until the expiration of the term for which it was
granted, and, if the total value of the land were at that time the
same, as it is when the lease actually determines. 9

(3) No reversion duty shall be charged on the determination of any
lease of land where the lease is determined in pursuance of an agree-
ment between the lessor and the lessee for the acquisition by the
lessee of the lessor's interest, if at the time of the determination of
the lease —

(a) the lease has at least fifty years of its term to run, and

lessor liable to pay the duty and return particulars, seems to have been rendered
necessary by the difficulties involved in certain cases of merger. It will be
remembered that Lord Haldane stated in the House of Commons that in the
event of a tenant purchasing his own freehold, he himself became the landlord
(Hansard, Vol. 8, No. 101, Col. 456). Legal opinion appeared to differ considerably
as to who paid the duty in the case of a lessee purchasing the freehold interest,
thereby causing determination by merger. It is now definitely laid down that in
every case the liability rests upon the owner of the lessor's interest immediately
before determination of the lease.

6 This provision is retrospective.

7 Note that this provision is applicable whether the lessee purchases the
lessor's interest or vice versa or in the event of a third party purchasing both
the interests. All that is necessary is that the lessor's and the lessee's interests
shall be vested in the same person, thus causing a determination of the lease
by surrender and merger.

8 This section mitigates the injustice which was obvious under the provisions
of the principal Act, caused by the definition of " benefit accrued " and the
hard and fast fixing of the duty at the rate of one pound for every complete
ten pounds of the value of the said benefit. (Finance Act, Section 13 (1) and
(2).) The effect of the new provision may be paraphrased as follows : The duty
now payable will be such sum as, invested at compound interest at 4 per cent,
would amount at the date of the natural expiration of the lease to the sum
which would have been payable under the principal Act, namely, one-tenth of the
value of the benefit accruing to the lessor by reason of the determination of
the lease. (Inwood's table xxiv. Present value of £1 payable at the end of
any number of years.)

9 Section 13 (2) of the principal Act defines the benefit accruing to the lessor
as the difference between the total value of the land at the time the lease deter
mines (subject to certain deductions) and the total value of the land at the
time of the original grant of the lease. The Revenue Act merely makes it clear
that the benefit accruing is to be calculated from the total value at the date
of the actual determination, and not upon what the total value might be expected
to be at the date of the natural expiration of the lease.



LAND UNION HANDBOOK 127

(b) the total value of the land does not exceed five hundred
pounds. 10

(4) Where a lease of any land held upon trust for any body of
persons is determined before the expiration of the term of the lease
by the surrender thereof to the lessor upon the terms that he shall
grant to those persons severally leases of various plots of land repre-
senting in the aggregate the whole of the land comprised in the
original lease, for a term in each case equal to the unexpired term
of the residue of the original lease, and at rents amounting in the
aggregate to, but not exceeding, the rent reserved by the original
lease, no reversion duty shall be payable on the determination of
the lease :

Provided that the lessor shall, in any case to which this provision
applies, deliver an account under Section 15 of the principal Act in
the same manner as if reversion duty were payable on the deter-
mination of the lease.

(5) Sub-section (3) of Section 14 of the principal Act shall cease
to have effect, and shall be deemed never to have had effect. 11

4. Twenty years shall be substituted for ten years as the limit Amend-
of time for taking expenditure into account for the purposes of para- s^lon^e
graph (b) of Sub-section (2) of Section 16 of the principal Act. 12 (2) (ft) of the



10 This sub-section definitely exempts the lessor from reversion duty in certain
cases of merger. The essentials are (1) there must be an agreement for pur-
chase between lessor and lessee ; (2) the lessee must be the purchaser of the
lessor's interest ; (3) the lease must have at least 50 years to run at the date
of the determination ; (4) the total value of the land must not exceed £500.
This provision covers considerable ground, and does much to remedy a hardship
which the principal Act imposed in the case of the enfranchisement of small
leaseholds. It is, however, desirable that it should be extended to cover all cases
of merger due to the purchase of the lessor's interest by the lessee, particularly
where a contract was made or an option given before the passing of the principal
Act.

11 Section 14, Sub-section 3, of the Finance Act, reads as follows : — " Where
a lease of any land is determined before the expiration of the term of the lease
by agreement between the lessor and the lessee, whether express or implied,
and a fresh lease of the land is then granted to the lessee the term of which
extends at least twenty-one years beyond the date on which the original lease
would have expired, the Commissioners shall make an allowance in respect of the
reversion duty payable of two and a half per cent, of the duty for every year
of the original term of the lease which is unexpired when the lease is determined,
and any sum so allowed shall be treated as having been paid : Provided that the
allowance shall not exceed fifty per cent, of the whole duty payable." A lease
determined in such circumstances will now be dealt with under Section 3,
Sub-section 2, of the Revenue Act. Before the fresh lease is granted, the old
lease will be surrendered and both interests will vest in the lessor, who will be
liable to the payment of reversion duty as provided in that section. The
discounting terms under the new section are slightly better than the 2A per cent,
allowance under the original Act, and there is no limitation of the allowance
to fifty per cent, of the whole duty payable.

12 Section 1G, Sub-section (2) (b) of the Finance Act reads as follows : — " Where
the owner of any land included in any scheme of land development shows that
he or his predecessors in title have, with a view to the land being developed
or used as aforesaid, incurred expenditure on roads (including paving,
curbing, metalling, and other works in connection with roads) or sewers, that
land shall, to the extent of one acre for every complete hundred pounds of that
expenditure, for the purposes of this section, be treated as land so developed
or used, although it is not for the time being actually so developed or used, but



prii'Cipal
Act



128



LAND UNION HANDBOOK



Amend-
ment of
Section 26
(1) of the
principal
Act.



5. Notwithstanding anything in Sub-section (1) of Section 26 of
the principal Act, 13 the Commissioners may, 14 on the request of the
owner of any pieces of land which are contiguous, and which do not
in the aggregate exceed one hundred acres in extent, 15 value those
pieces of land together for the purposes of that Act, although those
pieces of land are under separate occupation, if they are satisfied
that in the special circumstances of the case it is equitable to do so 16 ;



for the purposes of this provision, no expenditure shall be taken into account
if ten years have elapsed since the date of the expenditure, or if after the date
of the expenditure the land having been developed reverts to the condition of
undeveloped land, and in a case where the amount of the expenditure does not
cover the whole of the land included in the scheme of land development, the
part of the land to be treated as land developed or used as aforesaid shall
be determined by the Commissioners as being the land with a view to the
development or use of which as aforesaid the expenditure has been in the main
incurred."

13 Section 26, Sub-section (1) of the Finance Act reads as follows : — " The
Commissioners shall, as soon as may be after the passing of this Act, cause a
valuation to be made of all land in the United Kingdom, showing separately
the total value and the site value respectively of the land, and in the case of
agricultural land the value of the land for agricultural purposes where that
value is different from the site value. Each piece of land which is under separate
occupation, and, if the owner so requires, any part of any land which is under
separate occupation, shall be separately valued, and the value shall be estimated
as on the thirtieth day of April, nineteen hundred and nine." There was thus no
provision in the Original Act for the valuation of contiguous lands in the same
ownership if at that date of valuation they happened to be in separate occupa-
tions. The unit of occupation was the necessary unit of valuation, but a
valuation arrived at on this basis was obviously not the true value to the
owner.

14 The provision is only permissive and not obligatory on the Commissioners.
A great effort was made by the Opposition to make the clause obligatory, but
the Government would not change its view, though ultimately it agreed to the
word " equitable " being inserted later in the section. It is to be presumed
that the refusal of the Commissioners to aggregate contiguous lands for valuation
would be a proper subject matter for appeal under Section 33 of the principal
Act. Section 33 provides for appeal, inter alia, against " the determination
of any other matter which the Commissioners are to determine or may deter-
mine under part 1 of the Act " except as expressly provided in the Act. The
Revenue Act does not say that the opinion of the Commissioners upon the
question of aggregation is final as is the case in regard to certain exemptions
to undeveloped land duty in Section 17 of the principal Act, and consequently
any person aggrieved may appeal against a decision under this section.

15 The limitation of the extent of such lands to one hundred acres was inserted
as a compromise between the extreme views of Mr. Wedgwood and those who
would have made the extent unlimited. Mr. Wedgwood's fear was that the
application of the section to large tracts of agricultural land having portion
of such land ripe for building would have had the effect of exempting the ripe
land from undeveloped land duty. The object of the new clause is, of course,
to enable owners of contiguous sites in urban districts to have such lands valued
at their true value when aggregated.

16 The use of such a word as "equitable " in a taxing Act, as it is used here,
destroys that sense of certainty which should be inherent in the subject. The
section appears to place great power in the hands of the Commissioners. A
question will probably arise as to whether satisfaction as to a certain course
being equitable is a matter which can be referred to a court of law. It is certainly
a matter for the determination of the Commissioners, and any matter for the
determination of the Commissioners may be appealed against.



LAND UNION HANDBOOK 129

and any such valuation may be made under this provision, although
any of the pieces of land have been valued before the passing of this
Act, if the request for the valuation under this provision is made by
the owner of the land within three months after the passing of this
Act, 17 and in that case any valuation previously made shall be of
no effect.

6. Notwithstanding anything contained in the principal Act Saving in
where under the provisions of any lease or agreement any statutory the pay-
company are required to pay over any part of the increment value ment of
of any land to his Majesty, or to any person on behalf of his vTlmTduty
Majesty, or any Department of Government, that part of the incre- by certain
ment value shall, for the purposes of the provisions of the said Act 8tatut< n ^ 8
as to the collection of increment value duty, be treated as increment

value arising in respect of land held by his Majesty.

7. It is hereby declared that the Commissioners of Inland Revenue, ^Usht of


1 2 3 4 5 6 7 8 9 10 11 13 15 16 17 18 19

Online LibraryEngland) Land Union (LondonThe new land taxes and mineral rights duty. The Land Union's handbook on provisional valuations; being general advice to owners of land and house property in dealing with valuations under the Finance (1909-10) Act, 1910, as amended by the Revenue Act, 1911 → online text (page 13 of 19)