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England) Land Union (London.

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 4 of 19)
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persons is determined before the expiration of the original
term by the surrender of such Lease to the Lessor on the
understanding that he shall grant to the several persons
interested separate Leases for terms equal to the unexpired
term of the original Lease of the plots amounting in the whole
to the total area of the land originally leased and at such
rents as do not together exceed the rent originally reserved.



Section 20.



28 LAND UNION HANDBOOK

CHAPTER VI.

Duties on Minerals.

Under the Finance Act, 1910, there are two new Duties
chargeable on Minerals — Increment Value Duty and
Mineral Rights Duty — the other two taxes — Undeveloped
Land Duty and Reversion Duty — not applying to minerals.

Mineral Rights Duty.

This is an annual Duty of .Is. in the pound on the rental
value of all rights to work Minerals and of all Mineral Way-
leaves. The rental value is denned by the Act as follows : (a)
where the right to work the Minerals is subject to a Mining
Lease, the amount of rent paid by the working Lessee
in the last working year in respect of that right ; and (b)
where Minerals are worked by the Owner, the rental value
as determined by the Commissioners, based on the assump-
tion that the Minerals had been worked by him to the same
extent and in the same manner as they would have been
worked by a working lessee if let on the terms customary
in the district. The Commissioners must send a copy
of their valuation to the Proprietor, and if it is proved
to their satisfaction that the rent paid by the working
lessee exceeds the customary rent paid in the district,
and in part represents a return on capital expended by the
lessor, which would ordinarily be borne by the lessee,
the Commissioners when assessing duty shall substitute
for the rent paid such rent as they consider would have
been payable, if the expenditure had been made by the
Lessee. The duty is, as already mentioned, payable in the
case of Mineral \V ay leaves,* and in this case the rental
value shall, under the Act, be taken to be the amount of
rent paid by the working lessee in the last working year in
respect of the wayleave.

How Payable.

Mineral Rights Duty is payable on " the amount of rent
paid by the working lessee in the last working year,"
and the Commissioners contend that no deduction should be
allowed for Income Tax, rates or any expenditure which
it is necessary for the Lessor to incur to obtain his rent and
royalties, such as agency charges, &c. However, in the
recent case of the Duke of Beaufort v. the Commissioners
of Inland Revenuef [The Times, 7th March, 1912), Mr.

* See further, Meaning of Expressions it*ed in the Act. p. 29.
t 28, Times Law Reports, 301.



LAND UNION HANDBOOK



29



Justice Hamilton, in the King's Bench Division, decided
in favour of the Commissioners as to all rent paid
in the last working year (including arrears in previous
years) being taxable ; but he allowed a deduction for
all Income Tax actually deducted by the Lessees from such
rent, although he did not allow a deduction for Super Tax
paid by the Duke of Beaufort in respect of the same. This
decision may be appealed from.

When payable.

Mineral Rights Duty is payable at any time after the Section 24,
1st of January in the year in which the duty is charged s.s. 4.
and shall be recoverable as a debt due to His Majesty.

Right of Sub-lessees to deduct Mineral Rights Duty paid by
them from Rent payable to Head-Lessees.

A Lessee who has sub-let the right to work minerals and has Section 21.
paid duty in respect of the rent he receives from his sub-
tenant, is entitled, when paying rent to his Lessor, to deduct
the Mineral Rights Duty from the amount of rent he himself
pays, notwithstanding any contract to the contrary, and
should such deduction not be allowed, a penalty not
exceeding £50 can be enforced against the Lessor.

Duty of Proprietor to give particulars of Rentals, <&c.

It is the duty of every Proprietor of Minerals and every
person to whom mineral rents are paid (see definition,
Sec. 21), on notice being received from the Commissioners, to
give particulars of the rents and payments made to him, or Section 20,
where he is himself working the minerals, particulars of the s.s. 3.
minerals worked, to the Commissioners, and if the informa-
tion is not given in a time to be specified in the notice, which
shall not be less than 30 days from the date of notice, the
mineral owner is liable to a penalty not exceeding £50.

Meaning of Expressions used in the Act.

By Section 24 of the Act, the expression " working year "
means the year ending 30th day of September or such other
day as may be approved by the Commissioners ; and the
expression " last working year " means the working year
completed immediately before the 1st of January in any
financial year for which the duty is paid. Under the same
section, the expression " mineral wayleave " means any
wayleave, airleave, waterleave, or right to use a shaft
granted to, or enjoyed by a working lessee, whether
above or under ground for the purposes of access to or the
conveying of the minerals, or the ventilating and drainage
of his land or otherwise in connection with the working
of the minerals.



30 LAND UNION HANDBOOK

It may be mentioned that Counsel has advised in one
case that the Duty is not assessable in respect of a wayleave
granted in relation to the mines or minerals of another
owner. We understand that this case will be brought
before the Courts and it may have far-reaching conse-
quences.

Surface Rents.

With regard to Surface Rents as distinct from rights
to work minerals, it is submitted that, as under the Act
the rental value is defined as the amount of rent paid in
respect of the right to work minerals, it would be straining
the words to claim that the surface rents of all lands
demised to the colliery are within the terms of the section,
although surface rent paid in respect of shafts, &c, might
be liable to assessment for Mineral Rights Duty, under the
definition of wayleaves. But the Act is not clear upon
these points, and it does not appear that Mineral Rights
Duty can be charged in respect of surface rents which
do not specially refer to the right to work minerals. For
instance, where agricultural land is demised and such
land is used for the grazing of pit ponies, &c, no Mineral
Rights Duty could, it is contended, be payable under
the clauses of the Finance (1909-10) Act 1910. (See
Referee's decision in Trustees of Sir Robert Peel, Bart.,
and the Commissioners of Inland Revenue, Land Union
Jouknal, March 1912, page 104.)

Exemptions from Mineral RigJits Duty.

Section 20, The duty is not charged in respect of the right to work

s - s - 5 - Brick Clay, Common Clay, Common Brick Earth and

Sand, Gravel, Chalk or Limestone. There is no definition
of minerals in the Act, and the question as to what sub-
stances are or are not within the meaning of the expression
bristles with difficulties. For instance, Kentish Ragstone
has been allowed to come within the degree of minerals
specially exempted, as being of " limestone formation,"
but Basalt found in limestone quarries is, in the opinion
of the Commissioners, chargeable.

Exemptions from Reversion Duty and Increment Value Duty.

No Reversion Duty is chargeable on the termination of
a Mining Lease. No Increment Value Duty is payable
on the grant of a mining lease where the minerals were
being worked on 30th April, 1909, but in the case of
minerals which were not leased or being worked on 30th
April, 1909, Increment Value Duty is payable annually
when they are leased. (See Chapter VII., Increment
Value Duty on Minerals.) In such cases, in paying Mineral
Rights Duty, an allowance may be deducted from such
duty equal to the amount of Increment Value Duty paid
for that year.



LAND UNION HANDBOOK



31



Doubt whether certain Limited Owners are Proprietors under
the Act.

In the definition of Proprietor under Section 24 of the Section 24.
Act, the Settled Land Act of 1882 and the general law-
relating to infants and persons under disability does not
appear to have been taken into consideration, and conse-
quently it is by no means -clear whether the trustees of a
settlement, when the owner for the time being is an infant,
would be treated as a " Proprietor " and further where
the estate of a tenant for life is being administered by a
Committee, the tenant for life being of unsound mind,
it is by no means clear whether such Committee would be
looked upon as a " Proprietor."

Definition of Mining Lease.

The expression " Mining Lease " means a lease for mining Section 24.
purposes, and is defined by the Act to include an agreement
for such lease or any tenancy created or licence granted,
whether by deed, parol or otherwise for mining purposes.
Where minerals are leased to a working company
or owned by a working proprietor, they shall be deemed
to be " worked " if they w T ould, in the ordinary course of
events, be worked by the same lessee or proprietor.

Definition of Capital and Total Values of Minerals.

For the purposes of arriving at the capital value of Section 23,
minerals, the total value of such minerals means the s.s. (1).
amount which the Fee Simple of the minerals if sold in
the open market by a willing seller in their then condition
might be expected to realise. From this total value the
Commissioners make such deductions as they consider
permissible in respect of any expenditure of a capital
nature incurred bona fide for bringing the minerals into
working, and the sum thus arrived at after making the
deductions represents the capital value.









32



LAND UNION HANDBOOK



CHAPTER VII.



Increment Value Duty on Minerals.



Section 23,
s.s. (2).



It is intended in this Chapter to deal very briefly with
the question of Increment Value Duty in its relation to
Minerals, the subject being one of so technical a nature
that in all cases of importance a Mineral Agent should
be consulted. Except where otherwise stated in this
Chapter, it would appear that Common Clay, Chalk and the
other substances exempted from Mineral Rights Duty
by Section 20, Sub-section 5, are equally liable with all other
minerals to Increment Value Duty.

Minerals Valued Separately from Land.

Under the provisions of the Finance Act, Minerals
are to be treated as "a separate parcel of land" and
thus to be separately valued as on the 30th April, 1909,
subject as next mentioned.



Minerals to be Treated as of No Value unless Value stated in
Owner's " return " to Commissioners.

Section 23, It is provided in the Act that if a value is not placed

s s - ( 2 )- upon Minerals (not comprised in a Lease or being

worked) by the Owner at the time of making his
" return " for the purposes of the Finance Act, the value
of such minerals shall be counted as nil. The Commis-
sioners had till recently taken the view that the return
alluded to in the Act referred to Form 4, and that if an Owner
in making the return on that form had placed no value
upon his Minerals he could not at a later date ask to have the
same valued. It is submitted, however, that this reading
of the Act is not correct, and that an Owner has power
to have a value placed upon his Minerals at any time
before the Provisional Valuation has been agreed under
the general clauses of the Finance Act relating to such
valuation, i.e., the Owner shall be allowed 60 days from the
receipt of bis Provisional Valuation in which to claim an
insertion of a valuation of his Minerals for Increment Value
Duty purposes.

Definition of " Total Value " and Capital Value of Minerals.

Section 23 " Total Value " and " Site Value " as denned in Section

s.s. (1) and (4) 25 (see Sub-section 5) do not apply to Minerals, for which

a special " Total Value " and a new value called the Capital

Value, see page 31.



LAND UNION HANDBOOK 33

Exemption of Minerals Leased or Worked before Commence-
ment of Act.
Under Section 22, Sub-section 2, of the Act, Increment Section 22,
Value Duty shall not be charged on the grant or re-grant of a s - s -( 2 ) ancl < 8 )-
Lease in the case of Minerals which on 30th April, 1909, were
comprised in a mining lease or being worked by the Pro-
prietor, and which have not ceased to be so comprised or
worked for a period not exceeding two years, but this
apparently does not apply to Clay, Chalk and the other
substances mentioned in Section 20, Sub-section 5.

Increment Value Duty on Minerals : In what cases charged.

If on the 30th April, 1909, the Minerals were neither Section 22.
comprised in a mining lease nor worked by the Proprietor, S -M 3 ) and ( )•
or if they were on that date leased or so worked but have
since become derelict and ceased to be worked for a
period exceeding two years, Increment Value Duty becomes
payable on the grant of a mining lease, the death of the
owner, or a sale or working of such minerals by the owner.

Amount of Duty charged on sale, leasing or working of
minerals. When payable annually.

If in making his " return " of his land to the Com-
missioners, the Owner does not disclose the nature and
value of the Minerals, and they are, as previously explained
in this Chapter, treated as of no value on April 30th, 1909,
then apparently Sections 1, 2 and 3 apply and the duty Section 22,
payable on their sale will be twenty per cent., or one-fifth s.s. (3) to (8).
of the capital value of such minerals, and apparently in
the case of clay, chalk and the other substances mentioned
in Section 20 (5) the Duty is payable in a lump sum also on
death or any other " occasion." If a capital value is
declared by the Owner, as on 30th April, 1909, then pre-
sumably the Duty payable will be one-fifth of the difference
less 10 per cent, of the declared value.

In all other cases where Increment Value Duty on
minerals becomes payable, the duty is not paid in a
lump sum, but is an Annual Duty of twenty per cent,
assessed as follows : (a) If no Capital Value was put
upon the Minerals on April 30th, 1909, the charge would
presumably be one-fifth of the full " annual rental value "
of the minerals when leased or worked by the Proprietor,
e.g., supposing the annual rental value for Mineral Rights
Duty to be £100, then the annual Increment Value Duty
would be £20. (6) If a Capital Value has been put upon the
Minerals (either in making the original " return," or on the
expiration of a lease or the minerals ceasing to be worked)
the basis for taxation would be the sum (if any) by which
the rental value (as defined in the Act) exceeds the " annual



34 LAND UNtON HANDBOOK

equivalent " of the Original Capital value of the Minerals
or of their Capital Value on the last preceding occasion when
Increment Value Duty was collected in a lump sum. The
annual equivalent is two twenty-fifths, which is equal
to 8 per cent, of the Capital Value. Assuming, therefore,
that the Capital Value had been fixed at £1,000 and the
Annual Value for Mineral Eights Duty is £150 for the year
assessed, then from this latter sum £80 {i.e. 8 per cent,
of £1.000) would be deducted and the year's Increment
Value Duty would be one-fifth of £70, i.e.. £14.

In assessing the "Annual Value" of the Minerals for the
purposes of this Duty, an allowance is to be made when it
is shown to the satisfaction of the Commissioners that the
Rental Value upon which Mineral Rights Duty is charged
represents in part a return for money expended within
fifteen years by the Lessor in boring or otherwise proving
the minerals.

Section 22, Where Increment Value Duty on Minerals which are

3 - 3 - ( 3 )- leased or being worked by the Proprietor is payable it is to

be an annual payment and is recoverable as a debt due to
His Majesty from the Proprietor of the Minerals.

Set off of Increment Value Duty against Mineral
Rights Duty.

Section 22, In paying Mineral Rights Duty an allowance may be

s-3- ( 6 )- deducted from such duty equal to the amount of Increment

Value Duty paid for that year. When Minerals cease to be
comprised in a lease or to be worked the capital value at
that time should be ascertained and should be treated as
the original Capital Value of the Minerals.



LAND UNION HANDBOOK S5

CHAPTER VIII.

THE VARIOUS "VALUES" UNDER THE ACT.

In the preceding chapters an attempt has been made
to set forth as briefly as possible the nature of the new
Taxes, and the exemptions and conditions under which they
are imposed. Before proceeding to a consideration of the
Provisional Valuations it is necessary for the Owner to
know something of the different " Values " referred to in
the Act, so that he may be able to grasp the true meaning
of the Provisional Valuation which has been or will be
served upon him, whether he be the possessor of a single
cottage or plot of land, or the owner of a ducal estate.
These " Values " are numerous and of an extremely technical
character. They are of a more or less hypothetical nature,
and with the exception perhaps of " Total Value " none
of them are values in ordinary use. The aim here is to
eliminate as far as possible all expressions of a technical
nature and to endeavour to express the meaning of the
hypothetical " Values " under the Act in language which
can be understood by everyone. As regards property
subject to leases it is most important to realise that so far
as the valuations are concerned the lease and all rent
reserved thereon have to be ignored — the position of a
leaseholder under the Act being that of a part owner or
owner of an interest in the land, who, according to the
extent of his interest, has to bear his share of the duties.

I. — Valuation as on 30th April, 1909.
" Gross Value."
" The gross value of land means the amount which the ^ eot j° Q 25
" fee simple of the land, if sold at the time in the 3 ' 3 ' * '"
" open market by a willing* seller in its then con-
" dition, free from encumbrances, and from any
" burden, charge or restriction (other than rates
" or taxes) might be expected to realise."

This may roughly be taken to be the estimated value
of the fee simple in possession of any Property on the 30th
April, 1909, whether consisting of Land alone, or with

* It is submitted that the words " willing seller," taken in con-
junction with the expression " in the open market," mean that the
Owner is prepared to accept the best price he can obtain by free
bargaining within a reasonable time, according to the nature of his
property.



36 LAND UNION HANDBOOK

buildings or structures and minerals on, in or under the
surface, under the supposition that it is not subject to any
drawbacks such as the existence of a Public Footpath,
an Easement of light, Restrictive Covenants, the payment
of a Tithe Rent Charge, a Fee Farm Rent, and so on.
In practice it is found by adding to the Total Value {i.e.,
the value of the property in the market) the amount by
which the property would be increased in value if it were not
subject to Footpaths, Easements and other drawbacks neces-
sarily taken into account in arriving at Total or Market
Value. Even if the property is held under Lease or on Copy-
hold tenure, it mast, for the purpose of arriving at this value,
be treated as Freehold — in other words, it must be regarded
as a Fee Simple in possession, free of all charges except
rates and taxes, including Land Tax, and free of all ease-
ments, public rights of way, and restrictions as to its
present or future use.

If it possesses any of these drawbacks they must be
disregarded and absolutely ignored, so far as the Gross
Value is concerned.

If the land can, under Estate Restrictions or Covenants,
only be used for the erection of a certain class of property,
this restriction is to be ignored, and presumably if, by existing
contract, a property can only be used for private residence
or for certain specified trades, the owner must assume that
he could carry on any trade he wished thereon.

Value to be ascertained as at the date fixed by the Act.

It is important to note in this respect that' the
imposition of the new duties on land has, in the opinion
of many persons competent to judge, caused great
depreciation in the market value of all land and house
property by restricting the number of investors prepared
to accept it as security for their capital whether as pur-
chasers or mortgagees. Owners should therefore be at
great pains to see that the values fixed are the values as at
30th April, 1909, and not the values at a time when prices
are unduly depressed whether by political or investment
conditions.

Full Site Value.

" The full site value of land means the amount which
" remains after deducting from the gross value
" of the land the difference (if any) between that
" value and the value which the fee simple of the
" land, if sold at the time in the open market by
" a willing seller, might be expected to realise if the
" land were divested of any buildings and of any
" other structures (including fixed or attached
" machinery) on, in, or under the surface which are



LAND UNION HANDBOOK 37

" appurtenant to or used in connection with any
" such buildings and v of all growing timber, fruit
" trees, fruit bushes, and other things growing
" thereon."
This is, if anything, a more hypothetical value even than Section 25,
" Gross Value," but it may probably be taken to be the value s.s. (2).
of the fee simple in possession of the property regarded as a
bare site, divested of all buildings,* structures, trees and grow-
ing things and presumably f free of all drawbacks, restrictions
and charges other than the usual rates and taxes. The only
purpose it servesj, when it has been ascertained, is
to obtain a " Difference " between two values, i.e., the
" Gross Value " and the " Full Site Value," to be used
as a deduction in obtaining the " Assessable Site Value."
It is important to note that " Full Site Value " is not fixed
by making deductions in respect of buildings, &c, from
" Gross Value " ; but the value attributable to the existence
of the buildings, &c, is itself only the arithmetical difference
between the value of the land equipped with buildings, &c,
and the value of the land not so equipped.

"Total Value:'

§" The total value of land means the gross value after

" deducting the amount by which the gross value

" would be diminished if the land were sold subject

" to any fixed charges, and to any public rights

* For the meaning of Buildings see Appendix II., p. 152.

f Although the words " in its then condition . . . restric-
tions" do not occur in s.s. 2, they must be implied, otherwise the
difference between Gross and Full Site Values might in particular
cases indicate only Easements or Capitalised fixed charges, and in
any case fixed charges, &c, would be deducted twice over in
arriving at Site Value.

% It should be noticed, however, that Mr. Masterman stated
in the House of Commons on the 29th April, 1912, that " high
authorities referred to the Full Site Value as a necessary item in
connection with the proposed re-adjustment of local and national
expenditure " — If by this Mr. Masterman means that the Full Site
Value will be the basis of rating, the result would be somewhat
startling, as a simple case in point will show. Thus, imagine two
fields of equal size adjoining one another in an area which has a
considerable building value, one of them being crossed by a public
footpath and the other free from such drawback. The market value
of the field not subjected to the footpath might be (say) £1,000,
and the market value of the other £250, yet the Full Site Value of each
would be roughly £1,000, that Value ignoring the depreciating effect
of the footpath on the land. Do we rightly understand that the
high authorities referred to by Mr. Masterman seriously propose
to impose the same rates on the owners of these two fields ?

A Bill has actually been brought into the House of Commons
to authorise Rating Authorities to levy rates on the Full Site Value.

§ As to the importance of " Total Value " see Appendix II. :
•'Note on the Government's mode of assessing Increment Value
Duty." Page 159.



38 LAND UNION HANDBOOK

" of way, or any public rights of user, and to any
" right of common, and to any easements affecting
" the land, and to any covenant or agreement restrict-
" ing the use of the land, entered into or made before
" the 30th day of April, 1909, and to any covenant or
" agreement restricting the use of the land entered
" into or made on or after that date, if, in the opinion


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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 4 of 19)