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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 3 of 19)
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been developed by the erection of dwelliug houses, glass
houses, or buildings for the purposes of any business, trade
or industry (other than agriculture), or is not otherwise
used bona-fide for any business, trade or industry other
than agriculture. Where the buildings have become
derelict, or the land has ceased to be used for business
purposes for more than one year, the land shall be treated
as " Undeveloped " until again built on or so used.

Quinquennial Re-valuations.

For the purposes of this duty all " undeveloped "
land will be re-valued once in every five years, and the
Site Value increased or decreased as circumstances require,
but it is important to remember that the original Site
Value as fixed on 30th April, 1909, will always remain
the datum line for assessing Increment Value Duty.
Therefore although it is advisable that the value fixed on that
occasion be not unduly high (thus entailing a large annual
payment of Undeveloped Land Duty), yet it must not be
put unduly low. For in that case the Owner will find
himself mulct of a very large slice of his capital in the
form of Increment Value Duty, when he sells at anything
over that value, or his estate may suffer correspondingly
when he dies.

When and by Whom Undeveloped Land Duty is payable.

Section 19 Undeveloped Land Duty becomes payable after the

1st January in every year on which it is assessed and is
payable by and recoverable from the owner for the time
being of the land notwithstanding any contract to the contrary.
Pending the settlement of the valuation, the Com-
missioners have the power to levy the duty on the


amount of the Provisional Valuation, viz., the Site Value
minus the value for agricultural purposes, or subject to an
adjustment of the sums then levied and paid, when the
valuation has been finally settled. Not more than three
years Duty is recoverable.*

Exoneration from Undeveloped Land Duly where Increment
Duty or Betterment Charges already paid.

Under Section 16, Sub-section 3, where Increment Value
Duty has been paid, the Site Value for the purpose of
assessing the Undeveloped Land Duty shall be reduced by
five times the amount paid as Increment Value Duty.

Under Section 36, any capital sum paid to a rating
authority in /respect of " betterment " shall be deducted
from the Site Value of the Land for the purposes of Un-
developed Land Duty.

Set Off and Allowances for sums paid for Increment Value
Duty and Betterment.

See corresponding heading on page 12, Chapter III., for
these allowances.

Hardships of the Tax.

The sum of one-halfpenny in the pound does not look
very formidable at first sight, but in reality this tax appears
likely to inflict the gravest hardships on Builders, the
Owners of building estates, and also on many Investors
of the smaller class who have purchased building plots at
comparatively high prices, and been content with a purely
nominal or no return on their capital for many years.

Those who own small farms or pieces of accommodation
land in the suburbs of towns, which are becoming ripe for
building purposes, may find that Undeveloped Land Duty
will swallow up the whole or a large part of the agricultural
rent, and this although they cannot get their land built upon,
there being no present demand for building. Under the
Finance Act the production of food for the nation is the
only " bona-fide business "f which does not give exemption
from Undeveloped Land Duty.

* The duty is being claimed from purchasers who were not
the owners at the time the duty accrued; intending purchasers
therefore should a certain whether there are any arrears of duty
down to the date of the purchase which are unclaimed or unpaid,
and if so, to allow for the same in fixing the price, as apparently
the arrears are not recoverable from the vendor.

| It is claimed by some (and nothing short of an action at law
can decide the point) that the words " used bona-fide for any business "
include the use of plots of land for the purposes of a building estate
or land developer's business. This exemption should be claimed,
pending a legal decision on the point.


One of the most serious objections to this tax is that in
its assessment under the Act no provision is made for
accumulated Interest on Capital, so that although the
price eventually obtained for a piece of land may only equal
the price originally paid, plus accumulated interest at a low
rate, the unfortunate investor is called upon to pay an
annual tax on its value notwithstanding that the land may
have been entirely unproductive of income for many years.
A still worse case is where the land is ultimately sold at a
loss, or fails to get built upon for an indefinite period. The
tax is proving a great hardship on Nurserymen, Market
Gardeners and Horticulturists who, for the purposes of
advertisement, must be near a town and consequently
occupy or own land which, although not required for
building for some years, still has a potential or latent
building value over and above its value for purely agricul-
tural purposes.

It is clear that lands used for agriculture (when
the Site Value exceeds £50 an acre), for market-
gardens, nurseries, woodlands and so on are all subject
to the Undeveloped Land Duty when any value exists over
and above the value for agricultural purposes.

Exceptions and Exemptions with Notes thereon.

Minimum Site Value Taxable.

(a) No land is chargeable with Undeveloped Land Duty
unless and until it has a Site Value of more than
£50 per acre.*

Exemption of Agricultural Value.

Section 17 (2) (b) In the case of Agricultural Land where its Site
Value for any purpose exceeds £50 per acre, the
Undeveloped Land Duty is chargeable only on the
difference between the value for agricultural purposes
and the Site Value when the latter is the greater.
Assuming, for example, that the Site Value of a
particular acre of land is £300 and the value for
agricultural purposes £50, and no expenditure has
been made in " development," then the land will be
taxed on the difference between £300 and £50, i.e.,
£250 = 10s. 5d. per acre per annum. Such an impost,
however, would evidently sweep away a large part of
the income derivable from the land. (Whether the

* But seemingly if any land has a site value of £51 per acre,
or over, it will be chargeable on the whole difference between its
agricultural value, however small, and its site value, whenever the
latter is the greater in amount.



Agricultural Value includes the value of the land for
the purposes of sport as regards Undeveloped Land
Duty or not, see page 42.)

An erroneous impression seems to prevail that £50 an
acre is to be allowed for the value of land for agricultural
purposes in deciding the question of duty being payable or
not. This is not the case, no limit being fixed as the
value for agricultural purposes.

In fixing the value for agricultural purposes it is con-
tended that the value of the land with the buildings and
all other existing improvements should be deductable,
as without these necessary conveniences for carrying on
farming operations the land would in many cases have
little value for any agricultural purpose.

Revenue Act,

Section 4.

Exemption for Expenditure on Roads and Sewers.

(c) Where under a scheme of development the Owner Section 16
(or his predecessors in title) has made any expenditure ( 2 ) (&)•
on roads or sewers, thus increasing the value for
building purposes, he will be relieved from the pay-
ment of the Undeveloped Land Duty on such land to
the extent of one acre of land for every £100 of
expenditure, provided such expenditure has been
made within 20 years before the date at which the
duty comes to be collected. It should be noted that
to obtain the benefit of this exemption the Owner
should furnish evidence of the expenditure. Sup-
posing, therefore, that the Site Value of a particular
estate (where no expenditure on roads or sewers has
been made within 20 years) is £500 per acre, the
owner would then pay on £500, less value for agri-
cultural purposes, say £60, i.e., on £440 at |d. in
the £=18s. 4d. per acre per annum until any of
the " occasions " arise for the payment of Increment
Value Duty (see Chapter III, page 8), or until 1914
and every subsequent fifth year when the land will be
re-valued for Undeveloped Land Duty.

Partial Exemption of Lands used for Games or

(d) Undeveloped Land Duty shall not be charged if the
land is bona-fide used for the purposes of games
or recreation, provided (a) the agreement under f,fw « n 17
which the land is held could not as originally made
be determined for five years or more, or (b) the
circumstances are such as in the opinion of the


Commissioners render it probable that the land
will continue to be so used.

Optional Exemption of Lands unbuilt upon in con-
nection with pre-arranged Scheme of Development.
Section 17 (3). (e) If in the opinion of the Commissioners it is in the
interest of the public that any land forming part
of a development scheme should remain unbuilt
upon Undeveloped Land Duty shall not be charge-
able thereon. But when the land has been exempt
under this provision it cannot be built upon without
the consent of the Local Government Board, who
may, in giving their consent, impose such conditions
as they may think desirable as to its method of
development. The Commissioners' decision on this
point is fiual. This ground of exemption is therefore
a very unsafe one to rely upon, as the conditions
imposed by the Board might prove quite unaccept-

Lands and gardens attached to dwelling houses.

Section 17 (4). (f) Gardens and pleasure grounds up to one acre in extent
occupied with dwelling-houses (this would presum-
ably include farm houses and also combined houses
and shops if in one occupation) are wholly exempt
from the payment of Undeveloped Land Duty.
They are also exempt up to -five acres in extent so
long as the Site Value of the whole, i.e, the
Site Value of the house and the Site Value of
the grounds, does not exceed twenty years' pur-
chase of the annual value of such gardens, pleasure
grounds and dwelling-house as assessed for In-
come Tax purposes, Schedule A. Where there
is no separate assessment of the lands apart
from the dwelling-house, the Commissioners are
empowered to make an apportionment for the
purpose. Any area over and above this five acres
of conditionally exempted land will be chargeable;
It is clear that this duty will be payable in respect
of many large suburban gardens, particularly where
the Site Value is a high one. It would seem
advisable, therefore, to claim every possible
Deduction allowed by the Act in order to reduce the
Site Value so far as regards Undeveloped Land Duty.
As regards the exemption of one acre, it should be
borne in mind that the acre exempted (whatever
its use) is in addition to the area actually forming
the site of the dwelling-house and offices attached
thereto, or used in connection therewith.


Exemption of Public Parks, Gardens, &c.

(g) Undeveloped Land Duty is not payable in respect Section 17 (3)
of these, nor on private parks, &c, to which the ( a ) an< * ( & )«
public have reasonable access and such access
is, in the opinion of the Commissioners, of benefit
to the public. This latter provision applies equally
to lands to which troops have regular access for
the purpose of training and exercise.

Agricultural Land let for a term.

(h) The duty is not payable where land is let for agricul- Section 17 (5)
tural purposes under any lease or agreement created
before the 30th April, 1909, until the expiration
of such agreement, or if the term is determined
before then, the date of such determination, or until
the earliest date after the commencement of the
Act (April 29th, 1910), upon which the owner could
under power reserved in the lease or tenancy
agreement, resume possession of the whole or any
part of the land for any purpose.*

Conditional Exemption of Occupying Owners of
Small Agricultural Properties.

(i) Undeveloped Land Duty is not payable where the Section 18.
total value of any agricultural land occupied and
cultivated by the Owner does not, in conjunction
with any other landf owned by him, exceed five
hundred pounds.

The expression " Owner " here includes a lessee whose
original term when granted was for 50 years or more.

Personal Exemptions.

(j) For the exemptions applying to Rating Authorities, Section 16 (2).
Friendly Societies, Charities, Railway and other
Statutory Companies, see Chapter XL

Minerals Excepted.

For the purposes of Undeveloped Land Duty the expres- Section 19
sion " undeveloped land " does not include " minerals."

* The point has still to be settled in the Courts as to
whether a power in a tenancy agreement to resume land at short
notice for building or similar purposes makes such land liable to duty
prior to the date of resuming possession, the power being only
exerciseable when the land is bona fide required for such purposes.

f'Land." it will be remembered, includes buildings, &c.


Presuming therefore that the definition of "minerals" as
used in Sub-section 4 of Section 16 includes the minerals ex-
empted from Mineral Eights Duty (see Chapter VI., page 30),
it would appear that where valuable beds of brick-earth,
limestone, chalk, or other minerals exempt from Mineral
Rights Duty exist these should not be valued with the laud
but should be treated as a separate parcel for valuation
purposes, and their nature and value " declared " by
the owner prior to the settlement of the Provisional

Land union handbook



Reversion Duty.

This is a duty or tax of ten per cent, on the " Benefit Sections 13 to
accruing " to any owner of property which has been leased 15 «
for a term of more than 21 years which expires
whether by effluxion of time, merger, surrender, or otherwise
after the passing of the Act. Agricultural Leases are

How Assessable.

The only Values required in connection with the Assess- Section 25 (3).
ment of Reversion Duty are : the Total Value at the date
of the original grant of the Lease and the Total Value at
the date of its determination, the duty being payable
whenever a Reversion to a greater interest takes place
on the expiration of a term which had more than twenty-one
years to run when originally granted.

The tax is assessable on the difference between the two Section 13 (2).
values just mentioned subject to a deduction in respect of
any works executed or capital expenditure incurred by the
lessor (i.e. the landlord) during the term of the lease and
of any compensation payable by him.

On the occasion of the falling in of the Reversion the
question of ascertaining the Total Value is comparatively
simple. But when we come to the ascertainment of the
value on the original grant of the term the question becomes
more complicated, and when the term was a lease of say,
ninety years, any " value " thus ascertained must be almost
if not entirely conjectural.

The " Total Value " at the date of the original grant is
to be ascertained on the basis of the consideration for the
lease, i.e., rent and payments made, and where the rent
reserved is a " nominal " one the consideration will include
the value attributable to any covenant entered into by the
lessee for the erection of buildings, &c. The intention of
the Act is to arrive at something approximating to the
value of the lessor's interest at the date when the lease
was granted. (See Section 32 as to the value of any
consideration for a lease.)

What constitutes a nominal rent must depend upon the
circumstances existing at the time of the original grant.
(See Referee's decision in Richard Carlyon Coode and the
Commissioners of Inland Revenue. — Land Union Journal,
March, 1912, page 103.)


Many difficult questions must arise as to the value of
the different " considerations " given to the owner of the
land to induce him to " tie it up " for a century, and in
many cases at what appears to be a purely nominal rent.
Presumably also the purchasing power of £1 at a long past
date must be first ascertained and compared with the
purchasing power of the same sum at the present time, as
it would be obviously unfair to capitalise such sum on the
basis of its present value, if its real value in the community,
fifty or one hundred years ago was quite different to its
present value. How, after the greater part of a century
has passed, is it to be ascertained whether the original
ground rent was a rack rent, or whether a fine or premium
was paid for the granting of the lease at a comparatively
low annual rent ?

Caution to Owners of Reversions.

The owner of a Reversion should in considering the figures
put forward by the District Valuer also look at the
question from the point of view of the future valuations
for Death Duty, remembering that figures adopted
for any one of the valuations under the Act may
be cited and used against him at some future time. But
owing to the great depreciation in the value of land and
house property caused by the Finance Act, owners should
strenuously resist all attempts to settle the Site Value under
the Act and the valuation for Estate Duty purposes at one
and the same time, and on the same basis.

Owners should therefore be very chary of estimating or
agreeing any figures where this comparison of " Total
Values " has to be made, until the subject is more fully
understood and some definite lines have been authoritatively
laid down for guidance.

When and by Whom Payable.

Section 15(1) The duty is payable by the Lessor or immediate rever-
sioner, and is recoverable as a debt due to His Majesty.

Allowance for Increment Value Duty Paid in respect of the
same benefit.

Section 14 (4) provides that Increment Value Duty and
Reversion Duty shall not both be paid in regard of the
same interest or benefit accruing to the Owner.

Obligation of Lessors to make Returns.
Section 15, The obligation lies on the Lessor under heavy penalties

( > »n )• upon the determination of a Lease (where Reversion Duty is
payable), to deliver an account to the Commissioners with


particulars of the Land and the estimated value of the
Benefit accruing to the Lessor by the determination.*

Exemptions from Reversion Duty.
Exemption of Reversions purchased before 1909.
Reversions purchased before 30th April, 1909, are exempt Section 14(1).
from duty provided that, at the date of purchase, the lease
had less than 40 years to run, and provided also that such
lease is determined by effluxion of time, except under a
power of sooner determination contained in the Lease.
The object of this exemption was no doubt to relieve
Friendly Societies and other purchasers of Ground Rents
from having to pay duty on such part of the value of their
security as represented the price paid for the reversion to
the rack rent on the expiration of the lease. It i3 not clear
whether the exemption applies to any subsequent pur-
chasers of the same security, but presumably they, having
notice of the tax, are in a position to discount its payment
in fixing the purchase price.

Personal Exemptions.

For the exemptions applying to Rating Authorities,
Friendly Societies, Charities, Railway and other Statutory
Companies, see Chapter XL

Exemption of Leases of Agricultural Land.

No Reversion Duty is payable on the determination of Section 14 (2).
these, notwithstanding that there may be a large increase in
annual and capital value. This would seem to be only fair
and proper having regard to the fact that farmers and market
gardeners are now so fully protected by the Compensation
Clauses of the Agricultural Holdings Act 1908, and the
Market Gardeners' Compensation Act of 1896, particularly
as the provisions of the latter have been made retrospective,
and as a consequence the improvements made by the lessee
are sooner or later paid for by the landlord.

Exemption of Leases for not more than 21 years.
No Reversion Duty is payable on the determination of Section 14(2).
short term leases, but as is previously shown Increment
Value Duty is payable on the granting of any terms of
more than 14 years.

No duty is payable where the interest or term of the Section 14 (2).
Lessor does not exceed 21 years.

* It may sometimes happen that a merger takes place without
the knowledge of the reversioner, e.g., on a sale by auction of the
reversion to a person in whom, unknown to the vendor, the lease 13
vested. It inay be observed that the penalty in terms attache*
when a person knowingly fails to deliver the particulars.



Section 14. Partial Exemption in case of Mortgages of Leaseholds.

s.s. (5). j n caS es where a reversion has been mortgaged

before 30th April, 1909, and the mortgagee has foreclosed
prior to the determination of the lease, he is only liable to
duty to the extent of any excess of the Total Value of the
land over and above the amount due under the mortgage
at the date of the foreclosure.

Exemption of Mining Leases.

Section 22, Mining leases are exempt from Reversion Duty on their

s.s. (1) and (8) determination, except that in the case of Common Clay,
Brick Earth, Sand and other minerals exempt from
Mineral Rights Duty apparently the Duty is payable.

New Provisions under the Revenue Act, 1911.
Allowance of Duty on Surrender and Re-grant of Lease.

Under Section 14 (3) of the original Act, where a lessee
by arrangement surrendered his existing lease and the
lessor granted him a fresh lease for a term extending
for at least 21 years beyond the remainder of the original
term, an allowance was to be made, from the Reversion
Duty otherwise payable, of 1\ per cent, of the duty for
every year that was unexpired, of the original term, but
such allowance could not in any case exceed 50 per cent,
of the total duty due on the occasion. The maximum
allowance was therefore obtainable by the surrender
of the original lease 20 years before its expiration by
effluxion of time, but this Sub-section has now been repealed
by the Revenue Act of 1911, which provides for the amend-
ment of the original Act on the following points relating
to Reversion Duty : —

Section 20,
s.s. 5.

Section 14(3).

Revenue Act,

Section 3 (2).

Section 3, Sub-section (2). Where, before or after
the passing of this Act a Lease of any "Land" (see
definition, page 1) 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 duty payable
shall not be the full duty payable as on the expiration
of the term, but such a sum as would with compound
interest at 4 per cent, per annum for the remaining
years of the term produce the amount of the full duty.

* The broad effect of this amendment is that where
the leaseholder purchases the freehold, or the freeholder

* Until this very necessary amendment was passed the effect
of the Finance (1909-10) Act 1910, was for nearly two years to stop
sales of freehold interests to lessees by the landlords, and vice
versa — because on the " merger " of the interests a heavy fine
was payable, although no pecuniary benefit might have accrued to
either party.



purchases or accepts a surrender of the leaseholder's interest,
or the original lease is surrendered and a new one granted,
the amount of duty is still 10 per cent, of the value of
the " benefit accruing " on the determination of the term
by effluxion of time as explained on page 23. But the actual
sum payable is the present value of such duty, deferred
on the 4 per cent, compound interest tables for the
period of the unexpired term.

Sub-section (3) of the Revenue Act provides that no Revenue Act,
Reversion Duty shall" be charged where the determination 1911,
takes place in pursuance of an agreement under which Sectlon 3 ( 3 )-
the Lessee has agreed to purchase the Lessor's interest if at
the time of the determination of such Lease

(a) the Lease had at least 50 years to run ; and

(b) the " Total Value " of the " Land " (which expression

includes buildings, &c.) does not exceed £500.

Sub-section (4) provides that no duty shall be payable
where a Lease of Land held upon trust for any body of

1 3 5 6 7 8 9 10 11 12 13 14 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 3 of 19)