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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 7 of 19)
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temporarily used for some other purpose shall be entitled to this


and accordingly a purchaser from the Crown must see
that the provisions of Section 4 Sub-section (3) as to
stamps on his conveyance are complied with.

By Sub-section (2) of Section 10 it is in effect provided
that notwithstanding anything to the contrary in any
Statute contained, Increment Value Duty shall be payable
by a private person or Company on the sale or grant of a
lease or a sub-lease of land to the Crown or to any Govern-
ment Department.




There can be little doubt that the Finance (1909-10)
Act, 1910, has cast a great burden on Trustees and other
persons in a fiduciary position who may be " owners " of
land within the meaning of the Act or are otherwise called
upon to exercise any of the powers or account for any of the
duties under the Act. On them falls the obligation to make
returns and to deal with the Provisional Valuations and to
consider what deductions should be claimed. They must
be taken to understand the Act and the bearings of the
several Valuations and deductions, and any negligence
on their part may render them liable to heavy claims
on the part of their beneficiaries, and it therefore behoves
them to act with great caution and, except possibly in the
very simplest cases, to seek professional assistance. A
somewhat similar burden and liability falls also upon
Solicitors and Agents in advising their Clients.

Speaking generally, it may be said that the main obliga-
tions as to making returns and payment of duties are
distributed among the several persons, corporations and
bodies unincorporate hereafter mentioned in manner
following subject to the temporary exonerations and
personal exemptions mentioned in the text above.

As regards making returns for the purposes of valuations
(Section 26).

The term " Owner " includes " the person entitled to the
rents and profits of the land in virtue of any estate of
freehold." (Section 41.)

A question arises how far a trustee, a personal repre-
sentative, a mortgagee or other person in a fiduciary
position may be an " owner " within this definition. If he
holds no freehold estate but has merely certain bare powers,
e.g., of sale, leasing, &c, he would clearly not be an " owner,"
but when a trustee holds a legal estate of freehold in
possession, he is in one sense entitled to the rents and
profits, although it may be entirely on behalf of other


persons. If, under a trust, a person is absolutely entitled
for life to the rents and profits while the freehold is held
by the trustee, it is not clear which is the " owner " — one
is entitled to the rents and profits while the other holds
the freehold estate. It is considered by some that in a
simple case like this, the tenant for life is the " owner."
either as holding an equitable estate for life or as being
entitled in possession to the rents in virtue of the legal
estate of freehold vested in the trustee, but when one
considers other cases, such as a trustee in bankruptcy,
the trustee of a deed of arrangement, a trustee to whom
land is devised on trust to sell and out of the proceeds
to pay debts and legacies and divide the balance among a
class of persons, it is a more difficult question. Unless the
trustee is the " owner," it is difficult to say who is the
" owner."

A mortgagee who has foreclosed the freehold is clearly
an " owner," but if he holds the freehold and has not
foreclosed, can it be said that the mortgagor is entitled to
the rents and profits in virtue of an estate of freehold ?
If the mortgagor is in possession, he is usually supposed
to be a tenant at will of the mortgagee, while if the mort-
gagee has taken possession, the mortgagor can only be said
to be entitled to the rents and profits after the mortgagee's
claim is discharged. The same question arises in the case
of a sale of land to a purchaser when the estate has been
conveyed, but the purchase money is being paid off by
instalments. It may be that in some cases no one will
answer to the description of " owner."

In these circumstances, it seems only prudent to assume
that a trustee or a mortgagee, may in certain circum-
stances be an " owner " and therefore not only bound
to make the returns for the purposes of valuation but
liable, under Section 19, to pay the Undeveloped Land

As to payment of Increment Value Duty in respect of land
or minerals.

Taking the following cases, the persons hereafter mentioned
are respectively liable to make the payments.

(1) On the sale of the fee simple or of any interest in

land. The Transferor (Section 4 (1) ).

(2) On the grant of a lease or underlease. The Lessor

(Section 4 (1) ).

The Act contains no exhaustive definition of the word
" Transferor " but Section 41 declared that certain persons
concurring in a transfer or a lease merely for the purposes
of conveying some legal interest or estate vested in them as
trustees or incumbrancers or acknowledging the receipt


of purchase money, or giving some consent, are not to be
included in the expressions " transferor " or " lessor " and
that the powers of trustees of a settlement under the Settled
Land Act, 1882, to act on behalf of lunatic tenants for
life and infants shall extend to the powers of an " owner "
under the Finance Act. It can be assumed that a transferor
may include a person who transfers land not by virtue of any
actual estate or interest in the land vested in him, but
in exercise of a power of sale or appointment, e.g., a tenant
for life of real estate selling the fee simple under the powers
of the Settled Land Acts.

Such transferors or lessors as above contemplated may
be either (1) absolute owners of the property transferred
or leased or entitled to any power of disposition for their
own absolute benefit, or (2) they may be trustees or in a
fiduciary position.

In the former case the transferor or lessor has to pay
and bear the Increment Value Duty collectable on the
" occasion."

If, however, he is a trustee exercising a power of sale, or
a limited owner, e.g., a tenant for life selling or leasing under
the powers of the Settled Land Act, 1882, then although
he may be personally liable to the Government to pay
the Duty, yet by virtue of Section 39, Sub-sections (1)
(2) or (3) he can (by deed and notice to the trustees of
the Settlement for the purposes of the Settled Land Act)
charge the duty paid by him and incidental expenses
on the land property, and such charge may be transferred
like an ordinary mortgage. By Sub-section (3) the powers
of the trustees of a Settlement under the Settled Land Act
1882, to act on behalf of a lunatic tenant for life or an infant
are extended to this power of charging. Presumably the
land or interest in land to be charged is the property for
the time, and from time to time subject to the trusts and
powers of the Settlement, as it could not conceivably apply
to the land transferred to a purchaser. There is no reference
to interest in respect of the money charged, and it is there-
fore a qiiestion of construction for the Courts to decide
whether any and at what rate interest is secured.

It has already been mentioned that by Section 1 of the
Revenue Act, 1911, any contract between transferor and
transferee or between lessor and lessee purporting to make
the transferee or lessee pay the Increment Value Duty is
rendered void.

(3) On the death of any person competent to dispose
of the land or an interest in land. The personal
representatives are accountable but the duty shall
be payable out of the same property. (Section 5.)


(4) On the death of a person interested in settled land

(e.g. as tenant for life).

Any person to whom the property passes for any
beneficial interest in possession. (Section 5, by
reference to the Finance Act, 1894, Section 8), is
accountable for Increment Value Duty.

(5) As to the periodical occasions for the collection of

Increment Value Duty from Corporations and
Bodies unincorporate in 1914, and every subsequent
fifteenth year, provision is made in Section 6 for
the recovery of the duty or an account to be delivered
by the corporation or body unincorporate as pro-
vided in the Customs and Inland Revenue Act, 1885.

As to Undeveloped Land Duty.

This duty is imposed on the " OAvner " as defined in Section Section 19.
41. As regards the word " owner " we would refer our
readers to our remarks on page 61 as regards Trustees,
Mortgagees and others. The wording of the nineteenth
section is somewhat remarkable : it is provided that
" any such duty for the time being unpaid shall be recover-
able from the owner of the land for the time being " and
shall be borne by that owner notwithstanding any contract
to the contrary.

Presumably the intention of the words in italics were
intended to prevent landlords and tenants from contracting
that the tenant should pay the duty, although there is
nothing to prevent the parties from throwing the burden
on to the tenant by raising the rent if the circumstances
will admit of this being done — but the prohibitory words
possibly have a much wider application. Thus, on a
sale of land, the purchaser, after the completion of his
purchase, may find himself called on to pay two or even
three years' arrears of Undeveloped Land Duty. To such
a claim he would have no answer, for not only is he bound
to pay the duty, but the words in question will probably
have the effect of preventing him from claiming back the
arrears of duty from his Vendor. The same might also
happen if an owner of the fee simple granted a long building
lease to a builder, the latter having to bear arrears of the
Undeveloped Land Duty.

A similar result might occur in the case of trustees in
whom the fee simple of land is vested and who in the
circumstances may be held to be " owners." and therefore
liable as such to pay the Undeveloped Land Duty ; if the
prohibitory words are read strictly it would seem that the
trustees could not deduct this duty from the rents payable
to their beneficiaries,


As Regards Reversion Duty.
Section 15. The duty is recoverable from the lessor to whom benefit

accrues from the determination of a lease. In the case of
determination of a lease by effluxion of time or of a merger
on a surrender of a lease no question can arise as to the
person to bear the duty, but in the case of a merger of a
lease by a conveyance of the reversion to the person in
whom the lease is vested it is by no means clear whether
the latter or the grantor of the reversion is the lessor
for the purposes of the Act. An attempt to elucidate the
matter was made in Section 3 of the Revenue Act, 1911,
but even if it be the intention of the parties that the lease
shall merge immediately on the conveyance of the reversion,
it is still open to question whether the transferor is the lessor
for the purposes of Section 15 of the principal Act.

As to Mineral Rights Duty.

Section 20, By Section 20, Sub-section 4 this duty, when the mines

9 - 9 - 4 - are being worked by the " Proprietor," is imposed on the

" Proprietor," which term in Section 24 (see below, page 103),
is denned as the person for the time being entitled in
possession to the minerals or the rents and profits thereof
or any part of those rents and profits, but does not include
persons entitled as lessees (except in the case of certain
long leases originally created for not less than 300 years,
of which at least 200 years remain unexpired and free from
all rents, trusts, and conditions).

If, however, the mines are being worked under a lease
the same sub-section provides that the duty shall be paid
and borne by the immediate lessor of the working lessee
notwithstanding any contract to the contrary whether made
before or after the passing of the Act, and it is further provided
by Section 21 that if such immediate lessor is himself a
lessee he may deduct a proportion of the duty from his own
lessor, who under a penalty is bound to allow the same.

The Act contains no clauses of a nature similar to those
to which we have already* referred in an earlier part
of this Chapter in connection with Increment Value Duty,
but as the prohibitory words apply only as between lessor
and lessee, the difficulties to which we have alluded under
the heading of Undeveloped Land Dutyf as regards
trustees and mortgagees and vendors and purchasers, will
not arise at all or, at any rate, in such an acute form.

See above, page 62.
t See above, page 63.


Hints on Checking Valuations.


Even a casual study of the " values " to be fouud under
the Act (see Chapter VIII.) will indicate the hypothetical
character of most, if not all of them. It cannot therefore
be too clearly stated at the outset of these hints that in
considering a Provisional Valuation, the Owner must dis-
regard altogether the conditions upon which his property
is held or leased at the date of the valuation. The
values throughout are based on the assumption (1) That the
property valued is Freehold (Fee Simple) and in possession as
on the 30th April, 1909. (2) That, if the Owner is a Lease*
holder, it is the fee simple and not his leasehold interest
which is valued under the Act, although, as already
explained, he is liable to the duties. (3) That if
he is a Freeholder, but with a limited interest pending
the expiration of a building or similar lease, with an
ultimate reversion to the full Rack Rent of the property, no
valuation of his present saleable interest is made. (4) That
the deduction from gross value to full site value
bears no relationship to the value of the Lease-
hold interest or the cost or value of the buildings.
Therefore, as the separate or limited interests of Freeholders
and Leaseholders are not the subject of separate valuation
under the Act, the only method by which any person having
an interest in land or property can protect his interests is
to make sure that the figures set out in the Provisional
Valuation do properly represent the several ' ; values : ' of the
Freehold in possession as on the date of the valuation, viz.,
30th April, 1909. (5) That in the case of Copyholds, the
" Gross Value " is estimated as if the property were freehold
subject to a special deduction of the estimated cost of
enfranchisement to arrive at " Total Value." (Section 40.)

The importance of checking these valuations cannot be
exaggerated, havrhg regard to the fact that in all future
cases of sale, the granting of leases, or underleases for more
than 14 years or on the death of the Owner, an " Occasion "
for imposing Increment Value Duty will arise, whether the
interest dealt with or passing is freehold or leasehold, a sale or
lease of building land or of houses or business premises.
Nothing is likely to escape the net. Nothing but a fair
valuation at the outset, or else a substituted Site Value
can protect the Owner, and even then he may sell at less
than the original cost and still be taxed if, by the peculiar


methods of finding " site value " on the " occasion " the
portion of the " total value " attributable to the existence
of buildings, trees, &c, is written down — with a consequent
automatic rise in the " site value."

The question is frequently asked : Is it advantageous to
the Owner that his property should be valued high or low ?
A careful consideration of the Act and the purposes for which
the " valuation " may be used, or can directly or indirectly be
brought now or ultimately to bear on the Owner's interests,
convinces us of the continued soundness of the old adage
that " Honesty is the best policy." For instance, the over-
clever man may bethink him that a low total or market
value may best suit him, having regard to his age and the
increased Death Duties, but seeing that his death will be
an " occasion " for the re- valuation of his property, not
only for Estate Duty, but also for Increment Value Duty,
he should consider whether the studied depreciation of his
property may not result in a levy of 20 per cent, in the form
of Increment Tax, while in no way lessening the amount of
Death Duties imposed. This argument would not, of
course, apply to purely agricultural estates, as such are
free from Increment Value Duty, but it certainly would
apply to all other forms of business and residential
property, and particularly to land having a potential building
value. Even in the case of purely agricultural properties it
must be borne in mind that land can now be compulsorily
hired or purchased by County Councils for the purposes of
small holdings, and that although the valuations are at
present not available for use in connection with such
matters, the time may come when these valuations will
become common property. Let us set out, therefore, on
the assumption that a fair valuation is to be arrived at
so far as possible under the Act, regard being had to the
peculiarities and conditions attaching to each case and
to each class of property. We take first the case of :

Agricultural Land.

No Increment Value Duty is payable on the sale, leasing
or devolution on death of any Agricultural Land so long
as it has no higher value than its value for agricultural
purposes, and no liability attaches to it in respect of
Undeveloped Land Duty until two important conditions
apply (a) the Site Value exceeds £50 an acre, and (b) the
Agricultural Value is exceeded by the Site Value as ascer-
tained under the Act (see Chapter VIII.). Assuming,
therefore, that the land is of a purely agricultural character
with no immediate or potential building or other value,
the Owner need consider the " Total Value" only from two
points of view: (1) Its prospective liability to Death
Duties ; (2) The chances of it being compulsorily acquired
for Small Holdings or similar purposes in the future.


As regards the first of these considerations, it must be
borne in mind that Section 60 (1) of the Finance (1909-10)
Act, 1910, repealed the proviso to Sub-section (3) of Section 7
of the Finance Act of 1894, under which Agricultural Estates
were valued at a sum not exceeding 25 years' purchase of
the Schedule A Assessment, after making such further
deductions as are allowed under the Succession Duty Act,
1853, and also a deduction of 5 per cent, for management.
The system of valuation now adopted is to take the estimated
value in the market at the date of death, regardless of any
particular number of years' purchase, and no reduction is
to be made in the estimate in consequence of the whole
property being (in theory) in the market at one and the
same time. The maximum number of years' purchase has
disappeared, and the future value for Estate Duty will
be the " market price " at the date of the death. Section 60.

Nothing, therefore, would appear to be gained by either
a " high " or a " low " Total Value under the Act as regards
Agricultural Land so far as the future imposition of the New
Taxes or of Death Duties is concerned, except that, as these
latter were greatly increased by the same Act, it cannot be to
the owner's advantage to inflate the principal value, particu-
larly as there is a present tendency for Agricultural Land to
rise in price. For if the value is placed too high, as on 30th
April, 1909, there would presumably be considerable
difficulty in getting a lower estimate accepted at a future
date, with a rising market.

These remarks apply, of course, to Total Value, and not
to the other " values " to be found under the Act.

When we come to Full Site Value and Assessable Site
Value other considerations arise. For what purposes are
these to be used ? So far as the present taxes are concerned,
they apparently serve no useful purpose in the cases of
purely agricultural land, with which we are now dealing ;
but the vital question is : for what ultimate ends are they
required ? It hardly seems reasonable to suggest that this
enormous work of Valuation, involving a tremendous
burden on the Exchequer, has been undertaken without
some ulterior motive. For the new Valuation Department
of the Estate Duty Office was in existence prior to the
introduction of the Land Tax Budget, and there must
be a re-valuation at death if all improvements effected
after 1909 and increases in value are not to escape the
payment of Estate Duty. Opinions differ on the point.
To some the " nationalisation " of land is the expected
sequel ; but the more generally accepted view is that
these values may be intended to be utilised for rating
purposes — the Full Site Value (viz., the value of the land
divested of all buildings, &c.) being accepted as the basis,


subject to certain further deductions in respect of easements,
restrictions, &c, and possibly for capital expenditure.
Assuming this to be the ultimate goal, it becomes of the
greatest importance to owners of purely agricultural land
that, while the Total Value should truly represent the value
in the market, the " Full Site " and " Assessable Site "
Values should be legitimately reduced by all the deductions
allowed under the Act. Particular attention should be
given to any " matter which is personal to the owner
occupier, etc." Section 25 (4) (d). See below, page 151. Apart
from any question of future rating, it should be
borne in mind that, owing to increased facilities of loco-
motion, and other unforeseen changes, land which at one
time may seem to possess no potential building value
does acquire this and other unexpected qualities. And
inasmuch as the quinquennial re-valuation will disclose this,
but no Undeveloped Land Duty is chargeable until the
Assessable Site Value exceeds £50 an acre, the import-
ance of getting a low Site Value, as distinct from a low
Total Value, is apparent.

Agricultural Land with Potential Building Value.

Large areas of land exist in many parts of the country,
which although not in demand at present or in any sense
" ripe for building," still possess a future building value.
Probably no more difficult subject for valuation under the
Act exists than land of this character. Its value must,
in the first place, be almost purely a matter of opinion
based on local knowledge as to the probable future require-
ments of the population, its rate of expansion, its changing
tastes, and the future possibilities of new or enlarging
industries being set up in its vicinity. In the second place,
the rate of probable expansion must in these days be even
more difficult to gauge than in the past. As the present
value must be dependent upon these factors, the difficulty
of the subject must be at once admitted, and likewise the
impossibility and also the undesirability of laying down
any general rules will be acknowledged. Every case must
consequently be treated on its merits, but the following
general considerations will mostly arise in dealing with the
Provisional Valuation : —

(1) If any portions of the land have frontages to existing

roads, it will in most cases be found best to have
these frontages marked off and separately valued —
the full market values of such frontage lands being
insisted on.

(2) If there is likely to be a market for more than the

existing frontages within, say, the next ten to fifteen
years, then additional zones should be set out and


be made the subject of separate valuation, regard
being had in all cases to the probable cost of
development, and means of access.

(3) If roads or sewers have been made for the develop-

ment of the land within twenty years before 30th
April, 1909, a high Site Value (to prevent undue
claims for Increment Duty) should be obtained —
the land being also free of Undeveloped Land Duty by
reason of this expenditure to the extent of one acre
for every £100 thus expended.

(4) If there are good farmhouses on the land, which may

be convertible into private residences or business
premises, when the remainder of the land has been
sold, these should have a suitable area of land allotted
to them, and full regard should be had, in fixing
the value attributable to buildings, &c. (i.e., the
deduction* from Gross to Full Site Value) to the value

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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 7 of 19)