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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 17 of 19)
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the value of the Site or not, and in the month of July, 1911, the
revelation of the notorious Instructions of the 21st January, 1911,
showed that the inference was correct, but the explanation was not
exactly on the simple lines which we had imagined, for it was now
evident that the method of valuation adopted was not due to any
spontaneous zeal on the part of the District Valuers to obtain revenue
for their employers as early as possible but was part of a scheme
devised at headquarters. These Instructions were laid on the table
of the House of Commons and ordered to be printed. They are
as follows : —

" Instructions issued by the Inland Revenue Department to Valuers,
dated the 2\st day of January, 1911.

" Ordered by the House of Commons to be printed, 28th July,

1911.

" FINANCE (1909-10) Act, 1910.

" ASCEBTATNMENT OF SlTE VALUE ON ' OCCASIONS.'

" Firstly — Ascertain the value of the fee simple on the basis
of the value of the consideration in accordance with Section 2 of
the Act.

" Secondly — By an independent calculation, and without
necessarily being bound by the actual consideration paid, ascertain
the Gross Value at the time, i.e., on the occasion, in accordance with
the definition contained in Subsection (1) Section 25.

" Thirdly — As an independent calculation, and without neces-
sarily being bound by the actual consideration, ascertain the full
site value at the time as defined in Subsection (2) Section 25.

" The difference between these two figures ascertained under
Subsections (1) and (2) of Section 25 respectively will then give the
amount of the first deduction to be made in accordance with the
provisions of Subsection (4) of Section 25.

" Any other site value deductions must, of course, also be
made.

" By this method, the following results should be achieved : —

(1) The transferor will not be called upon to pay Increment

Value Duty in respect of any recovery in the value of
buildings.

(2) Increment Value Duty would be collectible in all cases

whore there has been either —

(a) an increase in the value of the site as compared
with the original site value ; or

(b) the unit of valuation (or an interest therein) has
actually been sold for more than it is worth at the time.

" 21st January, 1911."

This is one of the most remarkable and most important docu-
ments that have so far been issued in connection with the working
of the Valuation Clauses of the Finance Act. It came as a great
shock to those who had studied the Act and it is bound to give rise
to much controversy. It not only helps to explain the Elstree case



162 LAND UNION HANDBOOK

and the other cases to which we refer in these notes, but taken in
conjunction with the arguments by which the Inland Revenue
Commissioners support their claims for Increment Value Duty in
the cases to which we refer below, it shows that the Inland Revenue
Department, with the concurrence of the Government, are admin-
istering the Finance Act so far as relates to the Increment Value
Duty in a spirit and on an assumed construction of the Act quite at
variance with the statements of the Chancellor of the Exchequer
and the Attorney-General to which we have already alluded. Thus,
in the House of Commons, on the 29th April, 1912, the Secretary
to the Treasury, Mr. Masterman, in referring to cases where the
value of the property as estimated by the District Valuer was not
the same as the price given on the occasion, said that under those
circumstances the windfall which teas above the market value of the
buildings had always been interpreted as a fitting subject for increment
duty. Again, in answer to Mr. Pretyman's question whether he
claimed that a profit on a building and not only on the bare land
was to be taxed, Mr. Masterman answered " the profit on the composite
subject land and building above the market value of the building "
(" The Times," 30th April, 1912). Here we have a definite claim on
the part of the Government to tax casual profits on Buildings apart
from the site.

Turning to the Instructions, it will be observed that the docu-
ment comprises three directions to the District Valuers to make three
different valuations of the property on the "occasion" and a remark-
able statement of the results to be achieved, among which are

(1) That the transferor will not be called on to pay Increment

Value Duty in respect of the recovery of the value of
buildings; and

(2) (6) That Increment Value Duty will be payable whenever

the unit of Valuation (or an interest therein) is sold for
more than (what in the opinion of the District Valuers)
it is worth.
We would direct the attention of our readers to the words in italics
" the value of the buildings " and the " unit of Valuation," that is
to say, the property including buildings. After the statements of
the Chancellor of the Exchequer and the Attorney-General one would
have thought that no Increment Value Duty could be claimed unless
the site rose in value through the enterprise of the community or of
the landowners' neighbours, whatever might be the profit on the
unit as a whole. However, as will appear from the contentions and
arguments of Counsel in the concrete cases to which we refer
shortly, the Inland Revenue Commissioners have claimed duty
although there was either no evidence that the Site Values had risen
or it was admitted that it had not risen in value.

The Palmer's Green Case.

Hewitt v. Commissioners of Inland Revenue.

Referee : Sir Alexander Stenning.

In this case the Appellant had in July, 1910, bought a leasehold

house for £400, and three days later sold it for £425 — i.e., at a profit

of £25. The Commissioners, acting on the lines of the Instructions

of January, 1911, claimed that the whole of the profit of £25 was

in respect of the Site Value, served a Provisional Valuation, putting

the Gross Value at £592,* the difference due to buildings at £462,



* It will be remembered that the property was Leasehold, and these
values related to the Fee Simple.



LAND UNION HANDBOOK



163



deductions for roads and sewers £25, and the Assessable Site Value
at £105, all based on the purchase of the leasehold at £400.

Subsequently the Appellant received a claim for Increment Value
Duty on tho second " occasion " of the sale of the leasehold for £425.
The claim was made out thus : —



Value based on consideration (£425)

Value due to the buildings (i.e., the difference between the

Gross and the Full Site Values) . . . . £462

Works executed . . . . . . . . . . £25



£617



£487








. £130
. £105








£25
£10




10




£14

£2


10




Site Value on occasion
Original Site Value

Increment Value
Allowance of 10 per cent

Increment taxable
Net Duty

Here, as in other cases, the Value due to the buildings
and the amount of the works executed are the same as
on the first occasion, and therefore the alleged incre-
ment (£25) is simply the difference (£25) between the
Gross Value on the second and first occasions. As the
transferor (the Appellant) held only a leasehold
interest, his share of this Increment Value Duty was
•975 of the Net Duty £1 19

The Referee, on hearing the arguments for the Appellant and
the Commissioners, decided that there was no increment in the
Site Value and therefore no duty was payable.

It is understood that the Commissioners of Inland Revenue
intend to appeal to the High Court.

The Richmond Case.

Mrs. Jane Kirby and Miss Fanny Walker v. Commissioners of
Inland Revenue.



Appeal against Provisional Valuation of 53, Market Place, Richmond,

Yorks.

Under the auspices of the Land Union.

Counsel for Appellants : Mr. William Allen (instructed by Messrs
Rutter, Veitch and Bond, London, and Messrs. Moore and
Armstrong, South Shields).

Counsel for Commissioners : Mr. W. Finlay.

Referee : Mr. John Farrer, V.P.S.I., Leeds.

Heard at Richmond (Yorks), January 31st, 1912.



In this case the Appeal was against the Provisional Valuation.

This property was a freehold shop in the Market Place. Rich-
mond, Yorks, and was purchased in 1893 by Mr. Francis Walker
for £500. He died in 1887, and by his will he left it to his widow for



164 LAND TTNION HANDBOOK

life and afterwards to his two daughters, the Appellants. The widow
died in May, 1910. The Value for Death Duty was £500, which
figure was accepted by the Estate Duty Office, and duty was paid
on this £500.

In July, 1910, the Appellants sold the property to a Mr. Foster
(who was then and had for the previous four years been the tenant)
for £500, this sale being completed on the 7th October, 1910.

In September, 1910, the Appellants received Form IV., and
in their return they stated that the property had been sold to Mr.
Foster for £500, and that he was in possession, and in reply to
question (*) they stated that the annual value of the property was £22.

On 13th March, 1911, a Provisional Valuation as on the 30th
April, 1909, was served on the Appellants, in which the values were
placed as follows : —

£ s. d.

Gross and Total Values 380

Difference between the Gross and the Full Site Values 321 15



Assessable Site Value . . . . . . . . £58 5

The ladies, thinking that as they had sold this property the
Valuation did not concern them, allowed the 60 days allowed by
the Statute for Objections to elapse.

Subsequently a valuation on the occasion, i.e., as on the 7th
October, 1910 (the date of the conveyance to Mr. Foster) was served
on the ladies, in which values were placed as follows : —

£ s. d.
Gross and Total Values being the consideration . . 500

The difference between the Gross Value and the Full

Site Value, i.e., the value due to the buildings.. 321 15



Difference being the Site Value on occasion . . . . £178 5

From the Site Value on the occasion . . . . . . 178 5

They deducted the original Site Value. . . . . . 58 5



Increment Value *£120

If these figures stood the ladies would have to pay one-
fifth of the difference between this sum and 10 per
cent, of the original Site Value, i.e., one-fifth of
£114 3s. (£120 less £5 17s.), and in fact a claim for
£22 was made upon them . . . . . . . . £22

The ladies therefore consiilted their Solicitor who applied to the
Commissioners for leave to extend the time for objecting to the
Provisional Valuation ; this was at first refused, but, after some
discussion on the matter in Parliament, the Commissioners consented
to such extension of time and the matter came before the Referee
on that objection.

* Note (hat in this case, as in others referred to in these notes, this sum
is simply the difference between the price paid on the occasion and the
original total value. The Valuers in effect treat the value due to the presence
of buildings as invariable



LAND UNION HANDBOOK 165

Evidence on both sides was given as to value and on behalf
of the Appellants that other persons had been willing to give £500
for this shop, and Mr. Allen, on behalf of the Appellants, contended
that the price paid by Mr. Foster was evidence of the value, quoting
the case of the Attorney-General v. Jameson, 1894, 2 Irish Reports.

Mr. Finlay, Counsel for the Inland Revenue Commissioners,
said that although Death Duty had been paid on £500 on the death
of the tenant for life, no valuation had been made by the Estate Duty
Department, and he denied that this consideration for the sale to
Mr. Foster was conclusive as to the value and suggested that the
goodwill of his business was an element in the price.

He called Mr. William Townend, the Superintending Valuer of
the Northern Division of England, who after supporting the valuation
of £380, explained the system adopted in valuing such premises,
which was in fact based on a rate per square yard arrived at by
taking a number of typical premises of a similar description, and
after adding a small sum for a rent paid to the owners for a right-of-
way, he assessed the market value at £380. Asked as to the valuation
of the site at £58 on the 30th April, 1909, and £178 in September,
1910, he replied that one was a valuation made in the ordinary way,
the other was a valuation under Section 2 of the Finance Act based
on this consideration. Asked whether there could be a rise in the
Site Value on the occasion without there being in fact an actual rise
in the value of the land, he replied there could be a rise in the assessable
Site Value on the occasion because the purchaser had given a higher
price than the property was worth, and consequently by Section 2 the
difference became the site value on the occasion. And he further
stated that on deducting from the price the difference between true site
value and the true gross value the balance became the assessable site
value which was not the same thing as the true value of the site.

Mr. Howell Thomas, Deputy Chief Valuer, called by Mr. Finlay,
explained the method of valuation and stated that as regards the
site value being put at £58 on the 30th April, 1909, and £178 in
September, 1910, it was due to this statutory method of valuation.
£178 ivas not the value of the site ; it was the Statutory Assessable Site
Value calculated in accordance with Section 2 of the Finance Act.

Mr. Allen, in replying for the Appellants, urged among other
points that the price on the occasion should be treated as the value
in making the valuation under Section 2. In this way no Increment
Value Duty would be leviable unless the bare site value had actually
risen in value.

The Referee gave his decision on the 8th March, 1912. He
found that the total value of the property on the 30th April, 1909,
was £456 15s. and the Assessable Site Value £69 10s. To these he
added £10 as the value of certain rights attached to the property,
so that in his view the District Valuer's original total value was in
error to the extent of £86.

A new assessment of £5 instead of £22 duty will doubtless follow,
but this will probably be disputed.

Reports of other cases raising the same or similar points already
heard by the Referees are given in the " Land Union Journal " of
March, April, and May, 1912, and short notes of the same with the
Referee's decisions are given in the List of Cases mentioned in the
Appendix, page 157.



166 LAND UNION HANDBOOK

As the matter now stands the Commissioners, with the full
support of the Government as evidenced by the statement of
Mr. Masterman above quoted, are now openly claiming Increment
Value Duty in cases where they admit that there is no rise in the
value of the Site, but where the owner or leaseholder has made a
casual profit on the Buildings. So far as the Land Union is aware,
the Referees have decided against this claim of the Commissioners
in all cases which have come before them on appeal — it now remains
for the Courts of Law to decide whether the contention of the Com-
missioners is justified by the obscure and intricate language of the
Act. The question really turns on the meaning of the words " like
deductions " in Clause 2. Now it cannot be seriously contended
that these words mean deductions of the same amounts as were
made on the Original Valuations — thus the buildings may have
deteriorated or new buildings may have been added since the 30th
April, 1909. Obviously, some new Valuation has to be made.
Referring to the text of Section 2, it will be seen that the " like
deductions " to be made are such as under Section 25 are made
" for the purpose of arriving at the Site Value of the land from the
Total Value." This involves the determination of a new Gross
Value and a new Full Site Value, to obtain the amount of the first
deduction. The Land Union contends that this can be carried
out consistently with the wording of the Act so as to give full effect
to the representations of the Government in the years 1909 and 1910.
Thus, in the case of a transfer or sale of the Fee Simple in possession,
the Gross Value on the " Occasion " should be obtained from the
Value of the Fee Simple in possession, which, pursuant to Section 2,
is the consideration for the transfer (and therefore the measure of
the Total Value at the time) by adding to such value an amount
corresponding to the depreciatory effect of the actual fixed charges,
rights of way and other easements and incidents (if any) affecting
the property,* while the new Full Site Value on the " Occasion "
has to be made by an independent Valuation in accordance with
Section 25, Sub-section 2, at the date of the " Occasion," and if this is
fairly carried out no Duty would be payable unless it appeared that
the Site had risen in value.

If the Courts should uphold the Commissioners' interpretation
of Section 2, the Original Total Value of all house property will
become of great importance as regards the Assessment of Increment
Value Duty — at any rate for many years to come — because it is
obvious that the Valuers in following the Instructions of January,
1911, will be inclined to make their Valuations of the property at
the time of the " Occasion " practically the same as on the 30th
April, 1909, so that their first deduction will be the same as on
the Original Valuation, with the result that on a sale of the Fee
Simple in possession the Duty will be charged on the difference
between the purchase money and the Original Total Value less
one-tenth of the Original Site Value, and on a grant of a lease or
the sale of a lease or other interest in the land, the Duty will be
charged on the difference between the Value of the Fee Simple in



* That this is the correct way of arriving at the Gross Value on the
"Occasion" in borne out by the fact that in the particular case of a periodical
"Occasion" in regard to Corporations, Clause (il) of Sub-section 2 of
Section 2 declares that the figure iiom which the "like deductions" have
to be made is " the Total Value." See above pages " dross Value'" pp. 35-36



LAND UNION HANDBOOK 167

possession as calculated from the term of the lease or the value of
the interest and the Original Total Value less one-tenth of the
Original Site Value.

We will conclude with a comparison of the respective amounts
of duty payable in a concrete case reported in the " Land Union
Journal " of April, 1912 (the Plymouth Case), according to (1) the
Instructions of 21st January, 1911, and (2) the Land Union's inter-
pretation of Section 2.

In this case, No. 83, Durnford Street, Plymouth, was purchased
by the late Mr. Buchanan in 1902 for £700, and his Executors sold
it for £1,000 in September, 1910, to the Trustees of a Nursing Home
which was carried on in the next house, the property being purchased
for the purpose of providing additional accommodation for the
nurses — and at the hearing of the appeal before the Referee it was
strongly urged by Counsel and witnesses called for the Commissioners
that the Nursing Home Trustees had paid a higher price for the
property than an ordinary purchaser would give.

The Provisional Valuation was as follows : —

Gross and Total Values £750

Difference between the Gross and Full Site Value —

due to the buildings . . . . . . . . 560



Assessable Site Value .. .. .. £190

The Site Value on the " Occasion " was arrived at by the
Commissioners in the manner following : —

Take the consideration for the sale £1,000, as

the new Total Value on the " Occasion " £1,000

To arrive at the first deduction in accordance
with the Instructions of 21st Jan., 1911,
they had to ascertain : —

(1) The Cross Value on the "Occasion"

(ignoring the price paid). This they
put at the same figure as in their Pro-
visional Valuation . . . . . . £750

(2) The Full Site Value on the " Occasion,"

also ignoring the price paid. This they
put at the same figure as in the Provisional
Valuation, viz. . . . . . . . . 190

Difference, giving first deduction . . . . £560

560



The Commissioners' figures for the Site Value

on the " Occasion " . . . . . . . . £440

From this the Commissioners deduct £190, the Original Site
Value, and show an increment in the Site Value of £250. The duty
being one-fifth of this £250 after deducting £19 (one-tenth of the
Original Site Value), that is to say, one-fifth of £231 =£46 (counting
only integral multiples of £5).

According to this method the Commissioners would collect a
substantial amount of duty, but to justify it they have to put
forward the absurd contention that the bare site of this house
had risen in value from £190 to £440 — that is, by £250 between the
30th April, 1909, and the 29th September, 1910.



168 LAND UNION HANDBOOK

How this inflated Site Value would be dealt with in the Com-
missioners' Register of Values as regards this property there is
nothing in the Act to show — apparently the Commissioners did not
claim that the value of the Site had in fact risen one penny in market
value, but only contended that it had risen for the purposes of
assessing Duty.

The Appellants appealed against both the Provisional Valuation
and the Valuation on the " Occasion " — but we will work out the
Increment according to the Land Union's interpretation of Section 2
on the supposition that the Provisional Valuation had become
binding. There being no easement, fixed charges or other incident
differentiating the Gross and the Total Values, the purchase money
would be the Gross as well as the Total Value on the " Occasion,"
thus we should have : —

Total Value on the " Occasion " £1,000

Gross Value on " Occasion ". . . . . . £1,000

Full Site Value on " Occasion " . . . . 190

Difference, being the first deduction

Deduct this difference from the Total Value

Site Value on the " Occasion "
Original Site Value

Increment

This is precisely the result which, in accordance with the
representations of the Chancellor of the Exchequer and the
Attorney-General as to the scope and effect of the new duties above
referred to, we should have expected on the view (which Counsel
for the Commissioners admitted to be correct) that the market value
of the Site had not risen, and therefore that the excess of the price
over the original Total Value was in respect of the buildings.



£810


810




£190
£190




nil



THE LAND UNION'S VIEW AS TO
THE MODE OF PRESENTING
OBJECTIONS TO PROVISIONAL
VALUATIONS FOLLOWED BY A
FORM OF OBJECTION.

At the request of several of its members, the Land Union
has tentatively drawn up the subjoined form of objection
to Provisional Valuations for the use of owners in con-
nection with simple cases, but in so doing it is necessary
to point out that two or three points of difficulty arise on
Subsection (2) of Section 27 of the Act which is somewhat
obscurely worded — see the text above, page 107.

The Subsection after opening with the following words
" If the owner considers that the Total or the Site Value
as stated in the Provisional Valuation is not correct,"
proceeds to say that " with a view to an amendment of the
Provisional Valuation " (not merely of those two particular
values) the Owner may within sixty days send in an
" objection to the Provisional Valuation," stating the
grounds of his objection to the Provisional Valuation and
the amendment which he desires.

It further provides that if the Commissioners amend the
Provisional Valuation so as to be satisfactory to the persons
objecting, the Total and Site Values stated in the amended
Provisional Valuation shall be adopted as the original Total
and original Site Values.

The first point is whether an Owner can in terms " object "
to the Gross Value, Full Site Value or the Value for Agri-
cultural purposes. It would seem that providing an
objection is taken to the Total Value or the Assessable Site
Value, the Owner can " object " to any other items in the
Provisional Valuation ; but until this is decided by the
Courts, it would be prudent to assume that the only matters
to which " objection " can be taken under Subsection (2)
of Section 27 are the Total and Assessable Site Values and
the items which affect them, that is to say, the Deductions
from Gross Value for arriving at Full Site Value, the
Deductions from Gross Value for arriving at Total Value,
and the Deductions from Total Value for arriving at the
Site Value.



170 LAND UNION HANDBOOK

With regard to the other matters, such as the Gross
Value, Full Site Value and Value for Agricultural Purposes, if
it should be held that they are not strictly the subject of an
" objection " under Subsection (2) of Section 27, it would
still appear that, under Section 33 and the Rules issued
under the Act, an owner aggrieved in respect of any of these


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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 17 of 19)