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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 16 of 19)
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bushes, and other things growing thereon.

Before land is offered for building purposes it is very common to
remove and sell the turf. The true site value is the value of the land
after the turf has been taken off.


Sec. 17 (2).

In the case of agricultural land of which the " site value " exceeds
£50 per aero, Undeveloped Land Duty is chargeable on the amount by
which the site value of the land exceeds the value of the land for
agricultural purposes.

It is therefore to the advantage of the revenue that the Com-
missioners should place the " agricultural value " of so-called
undeveloped land as low as possible. They therefore maintain that


the " agricultural value " is the capitalised value of the actual rent
the landlord is accepting at the moment from an agricultural tenant,
although the tenancy may be subject to one month's notice, and all
sorts of other onerous restrictions. Recent auctions of large agricul-
tural estates show clearly that the rents were in many cases absurdly
low, the farms having realisod 40, 50 years' purchase, and sometimes
considerably more.

Owners contend that the " agricultural value " should be
assessed on the basis of the rent which an agricultural tenant would
give for the land let to him on lease free of onerous restrictions.
This being the true value for agricultural purposes. This annual rent
should be taken at not less than 25 years' purchase.



Sec. 17 (5).

Where agricultural land was let at the date the Act was passed,
Undeveloped Land Duty cannot be charged until after the earliest
date at which it is possible for the landlord to determine the tenancy
under the powers of the lease or agreement.

The Commissioners contend that where in such a case power is
reserved by the owner to obtain possession of part or the whole at
certain dates under certain circumstances, Undeveloped Land Duty
becomes payable at these dates, whether such circumstances have
arisen or not.

The Courts have held that such covenants should be construed
strictly, and that possession cannot be enforced by the landlord unless
the required circumstances have actually arisen (Johnson v. Edgware,
&c, Railway, 14 L. T. 45). In our opinion the same rule would be
hold as regards the liability to Undeveloped Land Duty. It would
have to be shown by the Commissioners that the landlord was actually
legally in the position to obtain possession. Several appeals have
been entered.


Sec. 17 (5).

The Commissioners are also claiming Undeveloped Land Duty in
respect to pasture land leased for a term of years on the ground that
such pasture land being leased together with a dwelling-house, ceases
to be Agricultural Land within the meaning of the Act. We can see
no authority for this contention, which would have grossly unfair
results. The object of Section 17 (5) is to pretend those who are
so bound by previous contract that they cannot, even if they would,
develop the land in question, and it is an unreasonable contention
that because the land in question is let with a mansion, therefore the
owner is excluded from the benefit of the section.

The section refers to " Agricultural Land." but it must be
remembered that this does not mean agricultural land in its usually
accepted meaning, its meaning under the Agriculture Holding Act
or any other Act. It means " Agricultural Land " within the
meaning of the Finance Act ; and that includes inter alia land
" used as meadow " (Sec. 41). Land " used as meadow " does not
cease to be " used as meadow " merely because it is held in con-
junction with a mansion. The definition in Section 41 contains no
such qualification, and in our opinion the claim of the Commissioners
is untenable.



Sec. 20 (2) (a).

The Act provides that the " rental value " upon which Mineral
Rights Duty shall be charged shall be taken to be " the amount of
rent paid by the lessee in the last working year in respect of that

The Commissioners contend that this includes all rent received
within the said working year, and that consequently rents accrued due
before the said working year began, but actually received during the
said working year, are the basis for the assessment of the duty.

Owners contend that the correct interpretation would be to take
the amount of rent paid in the last working year in respect of the right
to work minerals during that year as the basis.

This question was heard as a Special Case in the King's Bench
Division before Mr. Justice Hamilton (The Duke of Beaufort v.
Commissioners of Income Tax) and was decided in favour of the
Crown, but it may be taken to the Court of Appeal. 28 T.L.R. 301.


Sec 20 (2) (a) and Sec. 24.
The Commissioners contend that Surface Rights are subject to
Mineral Rights Duty.

This subject has two phases ; —

1. Where Surface Rights are separately rented.

2. Where Surface Rights are included in a general mining lease.
Owners contend that in neither case are Surface Rights liable to

duty, and that in the second case an apportionment of rent is

The question on a claim for duty in respect of land let as a spoil
bank went before a Referee on August 11th, 1911, and he held that
the Commissioners' assessment of Mineral Rights Duty on surface
rights was incorrectly made, and that the duty claimed was not
payable. The argument against the Commissioners' contention
is set out on p. 4 of the " Land Union Journal," November, 1911.
The Commissioners petitioned the High Court to set aside the Referee's
award, but have since withdrawn their petition.


Sec. 20 (2) (b) and 24.

Counsel has advised that Mineral Rights Duty is not assessable
in respect of a wayleave which gives facilities solely for the carriage
of minerals or ventilation of mines belonging to a third party.

This case will probably be brought before the Courts, and may
be of far-reaching importance.



Sec. 25 (4) (b).

Section 25 (4) (b) provides for an allowance for any part of the

total value which is attributable to works executed or expenditure of a

capital nature. This was intended to cover all improvement in

value attributable to the owner's enterprise. The Chancellor of the

Exchequer stated at his Conference with the Building Trade,

October 6th, 1910: " It is not merely the money that a builder

spends. It is the value which he creates with the money and with


his brains. Anything that is due to the expenditure or the brains
of the persons who are creating the value is not taxed at all."

In spite of this unofficial explanation of the Act by the Chancellor
of the Exchequer, claims are being made by the Commissioners upon
value which has been created by builders. It cannot be repeated too
often that the intention of the Finance Act as stated in Parliament
was to place Increment Value Duty only upon value created by the
community. All value created by the owner must be held to be
exempt — and there is no justification for these claims on the part
of the Commissioners.


The Commissioners contend that the purchase of ground rents
and the granting of a lease for a term of more than 14 years are not
such transfers of any interest in the land as to warrant a claim for
Substituted Site Value in accordance with Section 2, Sub-section (3)
as extended by the Revenue Act, 1911, Section 2.

The words in both sections are : " Transfer on sale of the fee
simple of the land or of any interest in the land."

There can be no question that the sale of ground rents which
include the reversion to the property is a transfer of an interest in the
land within the meaning of the Act, and Substituted Site Value should
be insisted upon, not only for the benefit of the owner of the ground
rents himself, but for the benefit of the owners of other interests in
the land, such as leaseholders, who will also benefit by the substitu-

The question as to whether the granting of a lease (which is of
course the creation of a new interest in the land, given to another
party on certain terms) is such a transfer of an interest in the land
as to come within the section, is a more difficult question. It should,
however, be tested by reference.

The Commissioners recently refused to treat the sale since
the passing of the Act of ground rents with the reversion as
an " occasion " under Section 1 (a), presumably on account of the
trouble it gives them in calculating the site value on the occasion
under Section 2 (2) (b), and


The Commissioners contend that Substituted Site Value cannot
be claimed in the case of settled property when the transfer took
place more than 20 years prior to April 30th, 1909, if the trust has
changed or been terminated, although the beneficiary is the same


The Commissioners contend that if an owner has not placed any
value on his minerals in Form 4, he is debarred from subsequently
placing a value upon them, and that they must be taken as being
worth nothing at April 30th, 1909, and will become liable to Increment
Value Duty if they are subsequently worked. Owners contend that
the filling up or otherwise of Form 4 cannot in itself fix the value of
the minerals at zero on April 30th, 1909, and the recent decision on
Form 4 would seem to strengthen this contention. In many cases
the minerals are not in the same occupation, as the surface by Section
23 (2) minerals are to be treated as a " separate parcel." Further,
Section 25 does not apply to the valuation of minerals (Sub-section 5).

See above, page 54.




THE FINANCE (1909-10) ACT, 1910.

Richmond Case (Sale of shop to occupying tenant. Increment
Value Duty on "occasion.")

Under considerable pressure, although the 60 days had expired,
the Land Union was able to re-open the question of the Provisional
Valuation in this case. The case was heard before Mr. Farrer,
one of the Official Referees, who raised the Total Value from £380
to £456 15s., thus getting rid of the greater part of the Duty. The
Commissioners still contend that the difference between £456 15s.
and £500 is Site Value, liable to increment. It was suggested that a
case might now be stated in order to test tins contention, in the
Hia;h Court, but it has been considered better to obtain the Referee's
decision on the assessment before proceeding to state a case. The
new assessment will now be served by the Commissioners, appeal
will be made under Section 33, and the ordinary course will be
followed. See The Land Union Journal of April, 1912.

Newcastle Case (Sale of Grocer's premises to Builder).

In this case it was contended by the Commissioners that the
house had been sold for more than it was worth, and that such
excess was Site Value. The Land Union contended that the site
not having risen in value, no Increment Value Duty was payable.
This case was heard before Mr. Clarke, the Referee, who has
given his decision on some of the facts. It will probably be
necessary for a case to be stated in the High Court so that the
question of law may be decided. The Land Union Journal of April
and June, 1912.

Plymouth Case (Sale of property to adjoining owner).

In this case the Trustees of a Nursing Home bought the
adjoining property at a certain price. A claim for Increment
Value Duty was made on the vendors who appealed under the
auspices of the Land Union. The appellants maintained that
the price paid was for the value of the buildings and not for the
site. The Commissioners contend that the premises were sold for
more than they were -worth, and that such super-value is taxable
increment. As in the previous case the Land Union takes up the
position that as the site had admittedly not risen in value no Incre-
ment Value Duty was payable. The case was heard before Mr.
Drew, Official Referee, who has requested the parties to allow
him to take legal advice. The Referee has decided in favour of the
owner. The Land Union Journal of April and May, 1912.


Palmer's Green Case (Sale of leasehold interest within three days
of purchase at a profit of £25).

In this case a demand had been made for Increment Value
Duty on the ground that the £25 was taxable increment. The
vendor appealed to the Referee, Sir Alexander Stennino;, who
decided that no Increment Value Duty was due. The Commissioners
are appealing against this decision, and the Land Union will support
the case in the High Court.

In all the above cases it has been admitted that there has been
no actual rise in the value of the land. Duty has, however, been
demanded in spite of these admissions, and the question of principle
raised is of the utmost importance to all investors in house property
and land. The Land Union Journal of March, 1912.

Deptford Case (Original Site Value and value attributable to roads).

In this case the Land Union are joining with the appellants
against the original valuation in the case of a building estate near
London. Questions involved are (1) Whether the original Site
Value shall be taken to be the value of the land in its present condi-
tion, i.e., its value being secured by the buildings, or whether the
value is the prairie value unsecured by the buildings, having regard
to the provisions at the end of Section 25 to the effect that no allow-
ance shall be made for the removal of the buildings unless it is
necessary to remove them in order to realise the full site value.
(2) The appellants claim deductions for that part of the Total Value
attributable not only to the owners' expenditure on roads but
to the appropriation of land for roads under Section 25 (4) (c).
The appellants contend that the value attributable to the giving
up of land for streets and for the making of the streets is the difference
between the value of the land before it was developed and the value
of the land immediately after the development. The Commissioners
contend that the giving up of land for streets does not give any
additional value to the land, but the value attributable is practically
limited by the amount of expenditure. This case is of the utmost
importance to owners of estates which have been developed under
the leasehold system. The Referee has given a decision in favour
of the owners. The Land Union Journal of May and June, 1912.

Earl Fitzwilliam's Case (Inclusion of License Value in Total Value.
Reversion Duty).
This was an assessment of Reversion Duty upon a Reversion
to licensed premises. The Commissioners included the value of
the license in the Total Value and claimed Reversion Duty upon
the difference between the Total Value at the expiration of the
lease including the license, and the Total Value when the lease
was granted, at which time there was no license. Lord Fitzwilliam
appealed. Mr. Howard Martin, the Referee, decided that the
value of the license to use the dwelling-house on the land in question
as a public-house ought not to be included in the total value of the
land, and should not, therefore, be considered as an element in
determining the value of the land for the purpose of assessing
Reversion Duty. This case, which is of the utmost importance
to all interested in licensed properties, is being contested on their
behalf by the Land Union, the Commissioners having appealed
from the Referee's decision. In the meantime owners should be
warned that while this matter is sub judice all Provisional Valuations
of licensed properties must be held in abeyance. The Land Union
Journal of February, 1912.


Case re Substituted Site Values where Ground Rents have been

The Commissioners of Inland Revenue refuse to grant Sub-
stituted Site Values where Ground Rents have been purchased,
before the 30th April, 1909, thus owners of property are refused the
benefits which the Statute gave them. The Land Union is con-
testing this question on their behalf, and claims that however
difficult it may be to calculate, the figure which should be substituted
is the actual value of the land at the date the Ground Rent was pur-
chased. This case is of the utmost importance, and where these
Ground Rents have been dealt with, a claim should in every case be
made for Substituted Site Value.

Burghes v. The Attorney-General. Form VIII. Case.

This case, full particulars of which have already been pub-
lished in the Press, was undertaken by the Land Union, and we
were successful both in the High Court and in the Court of Appeal
in proving the invalidity of this Form.

In addition to these cases my Committee has supported and
is still supporting cases where Mineral Rights Duty has been
demanded on arrears of rent and on Surface Rights and we are
at the present time assisting several members who may ultimately
be compelled to submit their cases to the Referee for decision on
important questions of principle. We are, moreover, supporting
an important case in Scotland where the legality of Minus Site
Values is being contested, and this case will affect many thousands
of valuations not only in Scotland, but throughout the United
Kingdom. 28 Times Law Reports 72; Land Union Joiirnal
Supplement, December, 1912.

Herbert v. Commissioners of Inland Revenue Minus Site Values.

In this case the Gross Value was taken to be £4,828, the
difference between Gross and Full Site £4,320, the Total Value
£3,775 and the amount to be deducted for Feu duty, £1,053, giving
a Site Value of minus £545. On a Case stated for the Valuation
Appeal Court, Edinburgh, heard on the 9th March, 1912, before
Lords Johnston, Salvesen and Cullen the Court unanimously held
that there could not be a Minus Assessable Site Value and that in
this case the Assessable Site Value must be taken as nil. Land
Union Journal of March, April, and May, 1912.


Until the publication of the " Instructions issued by the
Inland Revenue Department to Valuers " of the 21st January, 1911,
set out below, it was universally understood and accepted by all
who had studied the People's Budget and had followed the debates
in the House of Commons, and the Conferences between the
Chancellor of the Exchequer and the Building Trade, that the Govern-
ment professed to impose and did in fact impose a tax of 20 per cent,
of the value accruing after the 30th April, 1909, to land or the sites
of buildings from the enterprise of the community or the landowner's
neighbours — in other words, 20 per cent, of the strictly unearned
increment of land and sites.

It is sufficient to refer to a few extracts from the speeches
of the Chancellor of the Exchequer and other members of the
Government. Thus, in " The People's Budget Explained by the
Right Honourable D. Lloyd George " (Hodder and Stoughton,
London), there will be found at page 50 the following passages in
the Chancellor's speech in the House of Commons on the introduction
of the Budget.

" First it is proposed to levy a tax on the increment of value
accruing to land from the enterprise of the community or the land-
owner's neighbours."

" We do not propose to make this tax retrospective. It is to
apply to future appreciation in value only."

" We begin therefore with a valuation of all land at the price
which it may be expected to realise at the present time and we
propose to charge this Duty only upon the additional value which
it may hereafter acquire."

" The Valuations upon the difference between which the tax
will be chargeable will be Valuations of the land itself — apart from
buildings and other improvements — and of this difference the strictly
unearned increment, we propose to take one-fifth, or 20 per cent, for
the State."

The italics are our own.

Again, at his Conference with the Building Trade on the
6th October, 1910, the Chancellor stated : — " It is not merely the
money that a builder spends. It is the value which he creates with
the money and with his brains. Anything that is due to the expenditure
or the brains of the persons who are creating the value is not taxed at

Again, on the 7th July, 1909, on the consideration of Clause 2
in Committee of the House of Commons, the Attorney-General
stated : — " We adhere to the plain principle of our tax, which is
that we are taxing a site, and all we have to do is to ascertain the
value of that site." He further pointed out that under Section 2
they had got back to the " bare site value," hypothetically divested
of buildings, so that the valuations were " exactly comparable."


However, from the earliest cases of an " occasion " on sales
which took place after the passing of the Act, it was apparent that
the Inland Revenue Department was straining to levy Increment
Value Duty when there was not the least evidence of a rise in the
value of the site.

One of the first of these was the Elstree Case where a builder
had purchased for £40 a plot of land on a building estate and on it
erected a house at a net cost of £337 10s., the house and land thus
costing him £377 10s. In 1910, after the passing of the Act, he sold
the property for £375, i.e., at a loss of £2 10s. He was then served
with Provisional Valuation in which the total value was put at
£358 — the value due to the building at £318, and the site at £40.
Not understanding the nature of these values and thinking that
they did not concern him since he had sold the property, he allowed
the time for objecting to pass. Subsequently, to his surprise he
was called upon to pay Increment Value Duty, the Inland Revenue
asserting that the Site had risen £17 in value. This assertion was
manifestly absurd, because quite apart from the fact that he had
incurred a small loss, other precise! v similar plots were still for sale
at £40.

The " calculations " of the Inland Revenue Department were
as follows : —

Total Value on the Occasion . . . . . . £375

Deduct the value thereof due to Buildings — this

being the same as in the Provisional Valuation £318

Site Value on the Occasion . . . . . . . . £57

Deduct Original Site Value as on 30th April, 1909 . . £40

Increment .. .. .. .. .. £17

This case is only one example of numbers from all parts of the
country that have come under the notice of the Land Union in which
a purely fictitious site increment is shown on paper. All these cases
had one common feature, namely, that the value due to the buildings
was put at one and the same figure in the Provisional Valuation
(as on the 30th April, 1909), and the Valuation on the " occasion,"
whenever this occurs it will be found that the alleged Increment of
the Site Value is merely the difference of the Total Value in the Pro-
visional Valuations and on the ''occasion." Some other cases are
given in another part of this Handbook, but we will give one example
in which no " occasion " has yet arisen, but the owner resists the
attempt of the District Valuer to place a very low Total Value on
the property as on the 30th April, 1909.

This is the case of a shop in an important London thoroughfare,
which on the 30th April, 1909, was let to a relative of the owner
at what in the opinion of the owner and his adviser is a very moderate
rent, namely £180.

The owner for some years previous to 1910 had received from
different persons offers to purchase this property, the highest offer
being for £6,800 in February, 1909. This he declined, as he con-
sidered the property worth over £7,000.

He received a Provisional Valuation in which the Total Value
was put at £3,200, the value duo to the buildings at £1,950 and the
Site Value £1,250. He objected that the Total Value was much
too low — in fact even on the basis of the low rental, £3.200 is
altogether inadequate — but the Commissioners refuse to make any
substantial alteration and tho matter will therefore go to a Referee.


From these examples it was a fair inference that in valuing
house and shop property the District Valuers were acting on some
common plan or system with a view to ensuring the collection of
Increment Value Duty whether there was in fact any actual rise in

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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 16 of 19)