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

. (page 5 of 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 5 of 19)
Font size
QR-code for this ebook

" of the Commissioners, the restraint imposed by the
" covenant or agreement so entered into or made on
" or after that date was when imposed desirable in the
" interests of the public, or in view of the character
"and surroundings of the neighbourhood; and the
" opinion of the Commissioners shall in this case
" be subject to an appeal to the Referee, whose
" decision shall be final."

This is the Value of the property as a Freehold or Fee
Simple in possession (including all buildings, structures,
&c.) as it stood on 30th April, 1909, but in this case subject
to any restrictions, rights of way, and other drawbacks
then existing. It is probably a nearer approach to the
real Market Value, as this is generally understood by
surveyors, than any of the numerous other " values "
mentioned in the Act. It is found by deducting from
the " Gross Value " defined on page 35 such portion of
that value as represents the sum previously added (in
imagination) to the market and existing value to meet the
supposition that the drawbacks, restrictions and charges
previously referred to do not exist.

It is clear that in fixing " Total Value," full
weight must be given to all existing rights of way,
public footpaths, easements of light or air enjoyed by the
owners of adjoining property, Estate Covenants restricting
the use of the land to certain purposes and so on.

" Original Assessable Site Value"

" The assessable site value of land means the ' Total
" Value ' after deducting : —

" (a) The same amount as is to be deducted for the
" purpose of arriving at Full Site Value from Gross
" Value ; and

" (6) Any part of the Total Value which is proved
" to the Commissioners to be directly attributable
" to works executed, or expenditure of a capital
" nature (including any expenses of advertisement)
" incurred bona fide by, or on behalf of, or solely in
" the interests of, any person interested in the land,
" for the purpose of improving the value of the land
" as building land, or for the purpose of any business,
" trade, or industry other than agriovilture ; and


" (c) Any part of the total value which is proved
" to the Commissioners to be directly attributable
" to the appropriation of any land or to the gift of any
" land by any person interested in the land for the
" purpose of streets, roads, paths, squares, gardens,
" or other open spaces for the use of the public ; and

" (d) Any part of the total value which is proved
" to the Commissioners to be directly attributable
" to the expenditure of money on the redemption of
" any land tax, or any fixed charge, or on the en-
" franchisement of copyhold land or customary free-
" holds, or on effecting the release of any covenant or
" agreement restricting the use of land which may be
" taken into account in ascertaining the total value
" of the land, or to goodwill or any other matter which
" is personal, to the owner, occupier, or other person
" interested for the time being in the land ; and

" (e) Any sums which in the opinion of the Com-
" missioners it would be necessary to expend in order
'* to divest the land of buildings, timber, trees, or
" other things of which it is to be taken to be divested
(i for the purpose of arriving at the full site value
" from the gross value of the land, and of which it
" would be necessary to divest the laud for the
" purpose of realising the full site value.

" Where any works executed or expenditure
" incurred for the purpose of improving the value of
" the land for agriculture have actually improved the
" value of the land as building land, or for the
" purpose of any business, trade, or industry other
" than agriculture, the works or expenditure shall for
" the purpose of this provision be treated as having
" been executed or incurved also for the latter
" purposes."

This is the most important " Value " contained
in the Act. In plain language it represents the value of
the land in a bare and unimproved state and assuming
it to be divested of all buildings, timber, &c, and subject
to any of the easements, restrictions, fixed charges and
drawbacks previously referred to under the heading
" Total Value." It is obtained by deducting from the
" Total Value " (1) such portion of that value as is attribut-
able to the existence of buildings, timber, &c. (this deduction
being the " Difference " between the Gross Value and the
Full Site Value), and (2) at the option of the Owner, upon
whom the onus of proof rests, such of the following items
as may be applicable : —

Any part of the Total Value due to :

(a) Any Works executed.


(b) Expenditure of a capital nature incurred by any

person interested in the land for the purpose of
improving the value of such land for building
purposes, including the costs of advertising.

(c) Expenditure incurred in redeeming any Land Tax

Tithe or other fixed charges. The cost of enfranchising,
if the land was originally copyhold, or in obtaining
the release from any restrictive covenants.

(d) The setting apart or surrendering of other lands
for the purpose of, say, widening the approach to
the Owner's land, the laying out of a recreation
ground in the vicinity, the building of a church
or library, and so on.

(e) Goodwill or matters personal to the Owner, and

(f) The cost of removing or divesting the site of any

buildings, timber, &c, which it would be necessary
to remove before the land could be utilised to its
greatest advantage. See also Section 25, Sub-
section 4.

It is most important to note that as regards any of the
items (a) to (d) and those mentioned in the preceding
paragraph, it is the value attributable to such works and
expenditure that can be deducted and not merely the
actual cost. It is submitted that for the purpose of these
deductions, it is not necessary to prove the exact amount
of capital expenditure, but only to give reasonable evidence
that the expenditure was made. In many cases the portion
of the Total Value " attributable " to such works and
expenditure may be many times in excess of the actual
outlay, and a very small outlay may entitle the owner
to a very large deduction. On the other hand, the amount
to be deducted may be less than the actual outlay if the
expenditure has been excessive or not productive of the
anticipated result.*

This point is of supreme importance in fixing the value
for Undeveloped Land Duty, and obtaining exemption
from it. This subject is discussed in detail in Chapter IX.

Another point which has lately come into unexpected
prominence is the question whether what is called a " Minus
Site Value " is legal.

It frequently happens, especially in the North and West
of England and in Scotland, that owing to the magnitude
of the fixed charges, such as fee farm rents or rent charges
and in Scotland, ground animals and feu duties, the

* The expenditure need not have been made by the present
Owner. Expenditure by any predecessor in title is equally the subject
of a deduction. (See also Chapter IX. on " Site Value Deductions.")


deductions to be made from Total and Gross Value exceed
the Total Value, and thus the Site Value works out as a
minus quantity. An important question arises in such
cases, as to whether the Site Value should be taken as nil
or a negative. One case involving this question has already
been tried before the Court of Session at Edinburgh, and
the Judges unanimously decided that a site could not have
a negative value. The Government has announced its
intention to appeal to the House of Lords. See below, p. 158.

" Substituted Site Value."

It is important to note that under Section 2 (3) the
Owner can, when the " Land " (which expression includes
buildings, &c.) or any interest in land (which expression
includes Leaseholds and presumably Ground Rents and
Reversions) has been purchased or mortgaged within
20 years of 30th April, 1909* — on making application to
the Commissioners at any time within three months after
the Original Assessable Site Value has been finally settled
under Section 25 of the Act, require the Commissioners
to substitute for the Site Value thus found, the estimated
" Site Value " (not the purchase money) of the land as at
the date of the purchase or mortgage, provided such
Substituted Site Value is higher than that obtained under Section 2 (3).
the process of the Act as on 30th April, 1909. This
Substituted Site Value is to be inserted for the
purpose of assessing Increment Value Duty only, and
consequently where in the case of " Undeveloped " land
such land has depreciated in value, the owner should take
care that he only pays the Undeveloped Land Duty on the
Assessable Site Value as found under the Act, while receiving
the protection against excessive Increment Value Duty
given him by this section. The object of " Substituted
Site Value " is to prevent property which happened,
from temporary causes, to be depreciated in value at the
introduction of the Act, being charged with Increment
Value Duty on its recovery in value. Owners should be
particularly careful to avail themselves of this protection.
(See also reprint from Land Union Journal of Memor-
andum on " Substituted Site Values," Appendix II., p. 147.)

Value for Agricultural Purposes.

No definition of this Value occurs in the Act, but it is
essentially a capital value and will probably be taken as

* By Section 2 of the Revenue Act, 1911, it is provided
that the benefit of the provision of Section 2 (3) of the original Act
shall be extended to apply to cases where the transfer on sale of any
land or interest in land has taken place more than 20 years before
30th April, 1909, provided the transfer was to the Owner claiming
to exercise the right of making the application under the Act.



Section 41.

25 to 30 years' purchase of the net rent at which the property
is or might be expected to let, to the best advantage, for
agricultural purposes.

Section 7 and The Act provides that so long as the land has no value
Section 17 (2). [ n excess of its value for agricultural purposes, no charge
can be made upon it either for Increment Value Duty or
Undeveloped Land Duty, but immediately it possesses any
value in excess of such agricultural value, Undeveloped
Land Duty becomes payable on such excess value after
quinquennial re-valuation (subject to any exemptions
where expenditure has been made on development for
building purposes. See page 19). In addition thereto
the land becomes chargeable with Increment Value Duty
on any of the " occasions " (sale, transfer, death, grant of
lease, &c.) which arise after 30th April, 1909. The expression
" Land used for agricultural purposes " includes the use of
the land as woodlands, market gardens, allotments, nurseries,
&c, and generally speaking it may be assumed that " the
agricultural value " will be the full market value of the
land, including the buildings, under existing conditions.
Where Sporting rights exist an important question arises
whether the Agricultural Value includes the values of
Undeveloped Property for Sporting purposes. Although
for ordinary rating purposes the annual value of agricul-
tural land in hand or let to a tenant, without express reserva-
tion of the Sporting rights, will include the Annual Value
for sporting purposes, the Commissioners claim that under
the Finance Act the value for agricultural purposes does not
include the sporting rights. The definition of Agriculture
in Section 41 neither excludes nor includes it, but the
reference in Section 7 to the value for agricultural purposes
and the value for sporting purposes, and the fusion of the
two for the special case of Increment Value Duty, seems
rather to imply that the two values are regarded as distinct.
Provided, however, that where the value for sporting purposes
exceeds the value for agricultural purposes, a separate
value will then have to be fixed in respect of such sporting

There is no limit of value for agricultural purposes
and it is clear that while in some cases it may be only a
few pounds, yet it may be as much as £150 an acre or
even more in the case of market gardens.

II. — Value on Occasion for Assessment of

Increment Value Duty.

This value is not one to be dealt with on receipt of

the Provisional Valuation, and its consideration does not

arise until the " occasion " for payment of Increment Value

Duty arises either by death of the present Owner, transfer


on sale or the leasing of the property for a term of more
than 14 years, or else upon the re-valuation every fifteen
years of land held by bodies corporate or unincorporated.
It is, however, thought desirable to explain its incidence now,
as naturally the Owner will, in considering the value placed
on his property, wish to know something of the ultimate
effect of these values upon his interests.

We will assume, therefore, that the Provisional Valuation,
having been duly served, and finally agreed with the
Commissioner by negotiation or appeal, an " occasion "
has arisen when the property becomes liable to assessment
for Increment Value Duty. As before explained, the
taxable " quantity " on the occasion is the difference between
the Assessable Site Value as originally fixed on the 30th
April, 1909, and the Site Value on one of the " occasions "
previously referred to. The method of fixing this latter value
differs according to the nature of the " occasion " on which the
assessment is made, but, as in the case of the Original Site
Value, it is always the residue of an initial value (equivalent
or corresponding to the Total Value on the " occasion ")
after making certain deductions, defined as " the like
deductions as are made under the general provisions of this
part of this Act as to Valuation [i.e. under Section 25],
for the purpose of arriving at the Site Value from the
Total Value." In fact this initial value in the case of a
Corporation in respect of the Fee Simple of any land on a
periodic " occasion " is the Total Value. "We deal with the
other classes of " occasions " under the separate headings
which follow, but we mention in passing the paramount
question how the "like deductions" are to be estimated,
and refer the reader to the " Notes on the Government's
Mode of Assessing Increment Value Duty," printed in Appen-
dix II., p. 159, for details and further observations. Having
regard to the explanations given by the Chancellor of the
Exchequer on the introduction of his Budget in 1909
and his statements to the Building trade, it was generally
understood by the public and certainly assumed by the
Land Union that Increment Value Duty could only be
claimed when it was proved that the value of land — apart
from any buildings standing on it — had risen at the time
of an " occasion," and although the wording of Section 2
may be somewhat obscure, it is the view of the Land Union
that these " like deductions " can be interpreted so as to
ensure this result, in fact that it is the simplest and most
natural interpretation of the language. In their view a
new Gross Value and a new Full Site Value have to be made
as at the time of the " occasion." The former can easily
be obtained by adding to the total value or the consideration
for the transfer of the Fee Simple, &c, as the case may be.
an amount corresponding to the depreciating effect of the


actual fixed charges, rights of way, easements and other
incidents (if any) affecting the property, while the new
Full Site Value should be arrived at by an independent
Valuation of the property at the time of the " occasion,"
strictly in accordance with Sub-section 2 of Section 25 of
the Act, that is to say, on a sale by a willing seller. The
difference between the two gives the first " deduction " to be
made, and the other deductions in accordance with Section 25,
Sub-section 4, and (subject to Section 12) can be estimated
and made in the same way. By this method no Increment
Value Duty would be payable unless the site had actually
risen in value.

As will appear from our " Notes on the Government's
Mode of Assessing Increment Value Duty," printed in
Appendix II., p. 159, the Commissioners put forward an en-
tirely different interpretation of Section 2, under which they
claim to assess the duty on casual profits on buildings.
This question has been brought to an issue in the several
cases mentioned in the Appendix which have already been
heard by the Referees, and the Government are appealing
to the Courts against the decisions of the Referees which
so far, have uniformly been against the contentions of
the Commissioners.

Site Value on Sale.

The Site Value on the Occasion of a Transfer on Sale
of the Fee Simple of the Land is to be the value of the con-
sideration (generally the purchase money paid although
an exchange of land might be a " sale " within the meaning
of Section 2) subject to the " like deductions " as were made
for the purpose of arriving at the " Original Assessable
Site Value " from " Total Value." (See page 38.) It is con-
tended that the expression " like deductions "* does not mean
deductions of the same amount, but deductions in respect
of the same items of deduction, or the same subjects of
deduction. Therefore, presuming that in fixing the
" Original Site Value " as on 30th April, 1909, deductions
were made in respect of buildings, timber, fruit trees, and
value attributable to any expenditure of a capital
nature or for works executed, cost of enfranchise-
ment of copyholds, &c. (as explained on page 40), then
similar though not necessarily equal, but greater or less
deductions of a like nature, may be made in fixing the

* It must bo borne in mind that the " like deductions " on an
occasion include so much of the value as is due to buildings, trees, &c,
in existence at the date of the occasion, and as regards other
deductions, so much as is due to the works executed and capital
expended on the land prior to the " occasion." But as to works
executed and capital expended before 30th April. 1909, no deduction
can be claimed on the " occasion " unless it was claimed and allowed
in the valuation for " Original Assessable Site Value,"


" Site Value " on the occasion. For instance, the value
of the buildings may have increased owing to their now
being usable for a purpose for which there was no demand
at the time of the original valuation, e.g., a skating rink
can have little value when roller skating is not fashionable,
but on a return of that pastime to popularity, it at once
becomes a valuable property and would be worth a much
higher annual and consequently Total Value. This argu-
ment might also be applied to factory buildings greatly
increased in value owing to a revival in the particular trade
for which they were erected, their suitability for carrying
on new manufactures, &c. On the other hand, the buildings
may have gone out of repair and depreciated accordingly.
It is clear, therefore, that the value attributable to the
presence of buildings, &c, cannot and does not remain
stationary. Consequently an Owner may find that although
the Total Value of the property may be the same or even
less at the date of transfer than the Total Value fixed on
30th April, 1909, there will be a claim for Increment Duty
to pay owing to the depreciation of the buildings and
appreciation in the value of the site. He may in fact be
taxed on an actual loss, or on a purchase and re-sale at
the same price.

Site Value on Death.

In addition to the ordinary Death Duties, the Estate g ec ti n 2.
of an Owner of land or property is also liable to the payment B .s. 2 (c).
of Increment Value Duty on the occasion of his decease.
(See conditional exemption of purely Agricultural Land,
page 9).

If the property passing is the Fee Simple or Freehold
in possession the Site Value on this " occasion " will
(subject to the " like deductions " as were made on the
Provisional Valuation at 30th April, 1909) be the principal
value of the land or property as ascertained for the
purpose of the Finance Act of 1894 (except that the
concession made in that Act as regards the capital
value of any agricultural land being valued at a sum not
greater than twenty-five years' purchase of the net annual
value for Schedule A tax plus an allowance for management,
&c, has been swept away by Sections 60 and 61 of the
present Act, save as regards any agricultural land let on
yearly tenancies).

The " like deductions " (explained in the notes on
"Site Value on Sale") are to be made from the principal
value as ascertained for Estate Duty and the sum then
remaining is the Site Value on this " occasion." In many
cases the value for death duties should be much less than
it would have been before the commencement of the Finance
Act, owing to the depreciation of the value of property
directly caused by this Act.


Site Value on Grant of Lease or Sale of any " Interest "
in Land.

lection 2, As already explained, Increment Value Duty has to be

is. 2 (b). p a id on the granting of a Lease for more than fourteen years

if there has been any increase in the " Site Value " of the

land between the 30th of April, 1909, and the date of the


The Site Value on this occasion is to be the value of the
Fee Simple, calculated on the basis of the consideration
for the grant of the lease, subject to the " like deductions,"
as in the case of fixing the Original Site Value as previously
explained. Presumably the same method is to be adopted
on the sale of any " interest " in land, including the transfer
of Leaseholds. Therefore Leaseholders are not exempt
from the taxation clauses of the Finance Act, and will
be liable to all the duties in the proportion that the value
of their " interest " bears to the value of the Fee Simple

This seems only fair and proper (if the economic sound-
ness of this new form of taxation is admitted), because
in many cases where sites rapidly increase in value the
Leaseholder, with many years of his original term to run,
would otherwise wholly escape taxation, while enjoying
practically the whole of the so-called " unearned incre-

The consideration for the grant of the Lease will
presumably include, in addition to the rent reserved, any
premium or other cash payment made by the Lessee, and
also the capitalised benefit of any covenant for expendi-
ture on improvements, &c.

It will be noticed that the method of arriving at " Site
Value " on this " occasion " is in every way different from
the methods to be pursued on the valuation for fixing the
Original Site Value, and it is anticipated that great difficulty
will arise out of this. It is difficult to understand the
necessity for this further complication, as if it is possible
to fix a true Site Value in the first instance it should be
equally possible and more fair to fix it by the same methods
at a future date without bringing in a multitude of other

Site Values on Periodical Occasions.

Section 2, Where land or property is owned by a Limited Company,

8.3. 2 (d). a c or p 0ra tion, or a Body Unincorporate (see Definition,

page 2) (which are legally said to never die), Incre-
ment Value Duty becomes payable once in every fifteen


years, the first occasion for its assessment and payment
being in 1914* For Personal Exemptions, see page 11
and Chapter X.

The Site Value for this purpose shall be the Total Value
on the " occasion " estimated in accordance with the
general provisions of Part T. of the Act (Sections 25 to 32)
subject to the " like deductions."

The application of this additional taxation is likely to
be severely felt in London and the large manufacturing
centres, and ma} 7 have a very serious effect and eventually
result in still further emigration of big works to the country
districts where the ever increasing burden of rates and
taxes in the large towns is not felt. If this proves to be
the case urban ratepayers are likely to find that the antici-
pated relief of rates by " a fair contribution from Land
Values " is more than equalled by the loss of revenue by
the removal of rate-contributing industries beyond the
urban zone.

* The effect of this on land developing companies is very
inequitable. Their object is to sell land as quickly as possible. When
obliged to keep land for 15 years, it usually means that the land is

1 2 3 5 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 5 of 19)