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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 8 of 19)
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they confer on the land to which they are attached.

(5) The highest possible Agricultural Value should be

obtained in respect of each unit of Valuation, for
the nearer the Agricultural Value approximates to
the Site Value, the smaller the amount of Un-
developed Land Duty payable during the " ripening "
period.

(6) The separate valuation of the frontages may involve

the payment of Undeveloped Land Duty on these
particular areas, but the consequent reduction in
the average value of the back lands (as compared with
what it might be if the estate were valued as a
whole) may greatly lessen or even entirely dispose
of the liability to this Duty in respect of such
agricultural or unripe lands.

(7) As regards the value of sporting rights see page 42.

(8) If the advantages of a higher Substituted Site Value

(under Section 2 (3) of the Act as amended by
Section 2 of the Revenue Act, 1911), can be obtained,
the lower the Site Value the better, as the effect of the
Substituted Site Value is to protect the owner
against Increment Duty, while the low Site Value
obtained by the process of the Act will relieve the
land of excessive payments of Undeveloped Land
Duty.

It is not suggested that these are the only considerations
which arise on the receipt of a Provisional Valuation of
land having a future value for building or commercial
development, but it is hoped that a careful study of the



* For notes on Site Value Deductions, see Chapter IX.
For example of Valuation of purely Agricultural Land, see page 74.



70



LAND UNION HANDBOOK



Finance Ac!,
1909-10
Section 2
(8.8. 3).
Revenue Act,
Section 2.



points mentioned will be of some use in directing the
owner's attention to the difficulties with which he or his
surveyor or agent must grapple.

Building Plots.

During the last twenty years many thousands of small
investors all over the country have purchased Plots of
Laud on Building Estates developed by land companies
and private owners. Owing to a variety of causes, including
the boom in the building trades of a few years ago, which
ended in a decided " slump " — (much aggravated by the
introduction of the Land Taxing Budget of 1909 and the
persistent threats of further taxation, amounting in effect
to confiscation) — these plots of land, though in every sense
eligible for building, and only awaiting the attention of
the now shy builder, have little realisable value in the
market. This fact should not, however, render the Owner
indifferent to their valuation for the new land taxes. In
most cases, owing to depreciation through the causes pre-
viously mentioned, the present total value may be only a
very small fraction of the price paid, and looking only to
the question of assessment to Undeveloped Land Duty,
the Owner may be tempted to let the Provisional Valuation
pass without objection. Should he do so, he may depend
upon it that, if when the present gloom and want of con-
fidence is over, he is fortunate enough to sell at a price
equal to or approaching the amount of his purchase money,
he will be badly hit for Increment Value Duty to the extent
of 20 per cent, of the difference in the Site Value of the
land as fixed by the Provisional Valuation and the price
at which he subsequently sells. For a 10 per cent, profit
only above the assessable Site Value is allowed to go
free of duty. How is he to protect himself against this
seizure of what is not " unearned increment," but a recovery
in the value of his investment ?

In the first place, he should carefully consider whether
he is not entitled to a Substituted Site Value, as a protection
against Increment Value Duty, under the provisions of
Section 2, Sub-section 3 of the original Act as amended by
Section 2 of the Revenue Act of 1911. If the Plots have
come into his possession by purchase during his lifetime,
or if he can show that at any time within 20 years from the
30th day of April, 1909, the land has changed hands
at a price greater than the Total Value shown on the pro-
visional valuation, he is entitled to claim to have a higher
substituted Site Value (based on the price paid) inserted in
the Commissioners' Register as a protection against Incre-
ment Value Duty. Having ascertained whether he is
entitled to this protection, he should then proceed to
consider the Provisional Valuation.



LAND UNION HANDBOOK 71

Undeveloped Land Duty being charged upon the
Assessable Site Value, the lower this can be fixed the
better, and the owner should concentrate his efforts
on getting this " value " reduced by every legitimate
deduction allowed by Section 25, Sub-section 4 of the Act.
Assuming, for example, that he purchased a Plot of Land on
a Building Estate for £150 ten years ago, but it is valued by
the Commissioners in the Provisional Valuation at £80, as
may well be the case. This last-named sum will, if agreed to,
be the Total Value as on the 30th April, 1909, but in this
value will be included the value of the roads and sewers, the
kerbing, cost of advertising the estate, redeeming the old
Land Tax, the Tithe Rent Charge, and various other
matters incidental to the converting of what was probably
little more than agricultural land into building land. The
Value created by all these expenses is a proper subject for
Deduction under the section referred to, and the Owner
should insist on their being allowed for in settling the
Assessable Site Value, which is, in effect, the above-men-
tioned Total Value minus such portion of that value as has
been created by the expenditure and efforts of the estate
developer from whom the present Owner purchased. The
effect of claiming these Deductions will be, in many cases, to
reduce the Assessable Site Value (upon which, as we have
said before, the Undeveloped Land Duty is chargeable) to a
trifling amount. Moreover, whether the present Owner
has himself made the expenditure, or it has been made by
his predecessor in title, he is entitled to claim total exemption
from Undeveloped Land Duty under the provisions of
Section 17 (1) (b) of the original Act (as amended by the
Revenue Act, 1911), where, under a scheme of development,
roads and sewers up to the cost of £100 per acre have been
constructed within a period of 20 years from the date upon
which Undeveloped Land Duty would otherwise have
been payable. The claiming of the Site Value deductions
before mentioned is an excellent opportunity for pointing
out to the Commissioners that the exemption section will
be taken advantage of. It may be that the Owner of a
single Plot of Land on a large building estate may have little
knowledge of the actual expenditure made by the original
estate developer. This should not deter him from claiming
his deduction and a fair valuation under the Act. In such
cases he should, if possible, produce to the District Valuer
any auction or other particulars in his possession showing
when the land was offered for sale. These particulars
generally state such facts as the redemption of the Land
Tax and Tithe Rent Charge, the construction of the roads,
sewers, &c, and, combined with the physical evidence of
construction, should be sufficient to convince the official
valuer that the claim is a bona fide one. If the Owner is



72 LAND UNION HANDBOOK

not in possession of sufficient information he should refer
to the original vendor of the property to himself. And it is
suggested that the Vendors and developers of building
estates would do well, in their own interests, as well as that
of their purchasers, to assist the latter in claiming legitimate
reductions. Having reduced the assessable Site Value to a
comparatively small sum and received an amended pro-
visional valuation, the Plot Owner should then avail himself,
where possible, of his right to claim a substituted Site
Value, as previously explained, as a protection against
Increment Value Duty. In the case of a Plot of Free-
hold Building Land the substituted Site Value granted
will, in most cases, be the purchase money originally
paid minus the same deductions as are shown in the pro-
visional or amended provisional valuation, and assuming
in the example already given that the Site Value Deductions
amounted to £50, the figures for the amended Valuation
would stand as follows : —

Gross Value and Total Value (there being no fixed
charges, &c.) . . . . . . . . . . £80

Full Site Value (after deducting the added value
given to the site by any existing buildings,
fences and trees, say £10) .. .. .. 70

Difference . . . . . . . . . . . . 10

Deductions from Total Value of — £80

(a) Thedifferenceof£10shownaboveas between

the Gross Value and the Full Site Value £10
(b)* The Value of work executed in con-
struction of roads, sewers, planting of
trees in roads and any expenditure which
has improved the land for building . . 30
(c) Redemption of Tithe or Land Tax and
other matters (see Provisional Valuation
Form page 143) . . . . . . 10

Total Deductions . . . . . . 50

— 50

Original Assessable Site Value . . . . £30

Note. — If the value of the plot for agricultural purposes is different
from the assessable Site Value shown above, such value must be
shown in addition, and as Undeveloped Land Duty is payable on the
difference between the assessable Site Value and the Agricultural
Valuo the advantage of a legitimately high Agricultural Value will be
appreciated.

* In all cases it must be remembered it is not the actual expenditure
which can be deducted, but such portion of the Total Value as has
been created by the expenditure (and may greatly exceed the
expenditure)



LAND UNION HANDBOOK 73

The substituted Site Value would probably be as follows.
Consideration on Transfer (viz., purchase price paid) £150
less Deductions shown in above example, £50 — leaving a
substituted Site Value (as a protection against Increment
Value Duty only) of £100. See also Chapter VIII.
" Form 7 and Notes thereon," " Site Value Deductions,"
and "Substituted Site Value.'

Provisional Valuations : —

Example No. 1. — A Freehold or Leasehold Villa.

A Freehold* suburban villa, let on a yearly tenancy at
£30 a year, landlord doing repairs, tenant paying usual
rates and taxes, situate on a building estate developed
twenty-five years ago. A sum of £12 was paid for paving,
&c, before the 30th April, 1909, when the road was taken
over by the local authority. Tithe Is. per annum. Land
Tax redeemed at a cost of £3 15s. No other fixed charges.
Frontage 18 feet.

Gross Value (being the value of the
Fee Simple or freehold in possession
on the assumption that there are
no fixed charges and no restrictive
covenants) say . . . . . . £450

Full Site Value (being the value of
the Land or Site apart from and
assuming it to be divested of all
buildings, structures, trees, &c,
but with the road made, sewered,
and paved and taken over by the
local authority), 18 feet frontage
at say £4 per foot . . . . 72

The " difference " between these
two values (i.e., the value attribu-
table to the existence of the build
ings, &c.) is £ 378

Total Value (being the Gros> Value
after deducting the estimated cost
of redeeming the Tithe of Is. at 25
years' purchase, viz., £1 5s.) . . £448 15

* If the property is Leasehold the Valuation is the same in all
particulars ; the Ground Rent and the term of the Lease are ignored.
The Leasehold interest is not valued, and the difference between the
Gross Value and the Full Site Value is not the value of the Leasehold
interest ; it is only an arithmetical figure required in the process of
finding the Site Value. The Leaseholder can only protect himself
■by checking the Valuation of the Freehold, though he will
undoubtedly pay the greater part of the Duty.



74 LAND UNTON HANDBOOK

Deductions from Total Value to Assessable Site Value.

(a) The value attributable to
the buildings, &c, as
shown above .. ..£378

f(B) Works executed (effect of
original road making and
estate development), say 20

f(c) Capital Expenditure,

paving charges paid to
Local Authority, say

f(D) Redemption of Land Tax

Total deductions
Original Assessable Site Value

Example No. 2. — Agricultural Land.

A freehold farm of 100 acres, equipped with farmhouse,
buildings, &c, let on yearly tenancy at an inadequate
rental of £90 — but worth £125 per annum. Sporting rights
reserved and rated at £5. Two fields were formerly
Copyhold, but enfranchised at a cost of £50 in 1895. Out-
goings : Land Tax, £2. Tithe paid in 1908, £20. A
footpath crosses three meadows. No building value
exists.

Valuation :



12
3



15






413


15















£35









To find first the Total Value. Ignore the Rent


paid, as


it is inadequate.






Full Annual Value




£125


Less Outgoings, Land Tax


£2




Tithe as paid


20




Repairs, Insurance, &c, say






15 per cent, of Rent, in round






figures


19


41

84


Multiply years' purchase to pay 3|






per cent.




28
£2352


Add Value of Sporting Rights, £5 per






annum @ 15 years' purchase




75



Total (or Market) Value . . . . £2427

t Note. — These deductions are 'optional," but if claimed now, they
will also be allowed on the "occasion" of a sale or other "transfer.'



LAND UNION HANDBOOK 75

To find Gross Value add Capitalised Value of

Tithe, £20 @ 28 years' purchase . . £560

Depreciation caused by footpath, say £1

per annum @ 28 years' purchase . . 28



Gross Value £3015

To find Full Site Value assume the land to be
entirely without buildings, hedges, timber,
or shelter from plantations within its own
area, and free from the footpath; and
for the purpose of finding some practical
method of arriving at this purely hypo-
thetical value assume that the difference
between the annual value of the farm not
equipped and its value equipped is 10s. an
acre, then £50, by say 25 years' purchase 1250



Full Site Value £1765

To find Assessable Site Value, start again with

Total Value 2427

Deductions to arrive at Assessable Site Value :

(1) Deduction from Gross Value to
arrive at Full Site Value (being that
part of the Gross Value due to the
existence of buildings, trees, hedges,

&c, as previously shown) . . £1250

(2) Enfranchisement of Copyhold
portion in 1895 . . . . . . 50

1300

Assessable Site Value .. £1127

There being no value for any purpose other
than agricultural, the " Value for Agricul-
tural purposes " will presumably, but it
is by no means certain, be the Total Value
minus the Value of the Sporting Rights,
i.e., £2,472— Zess £75— equals . . . . £2352



Note. — For the purposes of avoiding complication in this
illustration, and for no other reason, the Tithe — both in arriving at
Total Value and Gross Value — has been taken for the purposes of
capitalisation at the amount paid, and not the Commuted Charge.
The Land Tax for the same reason has not been treated as a " fixed
charge," although the point is doubtful, and as a matter of fact it is,
under the Act, dealt with as if it were a fixed charge when it has
been redeemed. (See Form 36 Land, page 143. ) Again, no deduction
from Total to Assessable Site Value has been made in respect of
" goodwill and matters personal to the owner," although it may
reasonably be inferred that he or his predecessors originally created
muoh of the value by reclaiming the land, protecting ft and draining



76 LAND UNION HANDBOOK

it, &c. As to these matters, see " Points at Issue," page 150 ; and
owners will be well advised not to finally agree their Valuations
until these questions have been decided by the Referees or the
Courts.

It cannot be too clearly stated that the number of years' purchase
applied in obtaining the several Values given in the illustration are
not intended for adoption as a matter of course. In some cases
twenty-eight or even thirty years' purchase would not be too high
a multiplier, while in other." anything from twenty to twenty-five
years would indicate the market value of agricultural land, so much
being dependent upon the demand, its character, situation and
likelihood to maintain its income. The decision on this point should
clearly be left to the owner's Agent or Surveyor, who will be con-
versant with the current market prices and fluctuation? which govern
Values.



land union handbook 77

Notes and Memoranda.



APPENDIX I.
STATUTES AND FORMS.



LAND UNION HANDBOOK 81



THE FINANCE (1909-10) ACT, 1910.

ARRANGEMENT OF SECTIONS.

Part I.

Duties on Land Values.

Increment Yalue Duty.

Sect.

1. Duty on increment value.

2. Definition of increment value.

3. General provisions as to collection of increment value

duty.

4. Collection and recovery of duty in cases of transfers

and leases.

5. Collection and recovery of duty in case of death.

6. Collection and recovery of duty in case of property field

by bodies corporate or unincorporate.

7. Exemption for agricultural land.

8. Exemption of small houses and properties in owner's

occupation.

9. Special provision for increment value duty in tfie case

of land used for games and recreation.

10. Provision as to Crown lands, &c.

11. Special provision as to flats.

12. Provision as to claims for deductions.



Reversion Duty.

13. Reversion duty.

14. Exemptions from reversion duty, and allowances.

15. Recovery of reversion dutv.



Undeveloped Land Duty.

16. Duty on site value of undeveloped land.

17. Exemptions from undeveloped land duty, and allow-

ances.

18. Exemption of small holdings from undeveloped land

duty.

19. Recovery of undeveloped land duty.

p



82 LAND UNION HANDBOOK



Mineral Rights Duty and Provisions as to Minerals.

Sect..

20. Mineral rights duty.

21. Deduction of duty in case of intermediate leases of

minerals.

22. Special provisions as to increment value duty and

reversion duty in the case of minerals worked or
leased.

23. Application of provisions as to total and site value to

minerals.

24. Definitions for purpose of mineral provisions.



Valuation for Purposes of Duties on Land Values.

25. Definition of value of lands.

26. Valuation of land for purposes of Act.

27. Ascertainment of the original site value of land.

28. Periodical valuation of undeveloped land.

29. Assessment of duty on separate parcels of land and
apportionment of valuation.

30. Duties of Commissioners as to keeping records and

giving information.

31. Information as to names of owners of land.

32. Determination of value of consideration.



Appeals.

33. Appeals to referees.

34. Appointment of referees to hear appeals.



Supplemental.

35. Exemption for land held by rating authorities.

36. Deduction from increment value of sum paid to rating

authority in respect of increase in value.

37. Special provision for land held for charitable purposes,

&c.

38. Special provision for statutory companies.

39. Power to charge duty on land in certain cases.

40. Application of Part I. to copyholds.

41. Definitions.

42. Application of Part I. to Scotland.



LAND UNION HANDBOOK 83

Part III.

Death Duties.

Sect.

60. Amendment as to value of property.

62. Deduction of amount paid for increment value duty

from value of estate for purposes of estate duty.
64. Protection of purchasers and mortgagees of interests in

expectancy.



Part VIII.

General.

93. Laying of rules and regulations before Parliament.

94. Penalty for making false statement or representation.
96. Repeal, construction, and short title.



84 LAND UNION HANDBOOK



10 EDWARD VII., CAP. 8.

An Act to grant certain Duties of Customs and Inland
Revenue (including Excise), to alter other Duties, and
to amend the Law relating to Customs and Inland
Revenue (including Excise), and to make other financial
provisions. [29th April 1910.]

Most Gracious Sovereign,
WE, Your Majesty's most dutiful and loyal subjects the
Commons of the United Kingdom of Great Britain
and Ireland in Parliament assembled, towards raising the
necessary supplies to defray Your Majesty's Public Expenses
and making an addition to the public revenue, have freely
and voluntarily resolved to give and grant unto Your
Majesty the several duties herein-after mentioned ; and
do therefore most humbly beseech Your Majesty that it
may be enacted, and be it enacted by the King's most
Excellent Majesty, by and with the advice and consent of the
Lords Spiritual and Temporal, and Commons, in this present
Parliament assembled, and by the authority of the same, as
follows : —

Part I.

Duties on Land Values.

Increment Value Duty.

Duty on 1. Subject to the provisions of this Part of this Act, there

increment shall be charged, levied, and paid on the increment value of

value. an y \ an( { a duty, called increment value duty, at the rate of

one pound for every complete five pounds of that value

accruing after the thirtieth day of April nineteen hundred

and nine, and —

(a) on the occasion of any transfer on sale of the fee simple

of the land or of any interest in the land, in pursu-
ance of any contract made after the commencement of
this Act, or the grant in pursuance of any contract
made after the commencement of this Act, of any
lease (not being a lease for a term of years not
exceeding fourteen years) of the land ; and

(b) on the occasion of the death of any person dying after

the commencement of this Act, where the fee simple
of the land or any interest in the land is comprised
in the property passing on the death of the deceased



LAND UNION HANDBOOK



85



57 & 58 Vic.
c. 30.



48 & 49 Vict,
c. 51.



Definition of

increment

value.



within the meaning of sections one and two, sub-
section (1) (a), (b), and (c), and subsection three of
the Finance Act, 1894, as amended by any subsequent
enactment ; and
(c) where the fee simple of the land or any interest in the
land is held by any body corporate or by any body
unincorporate as defined by section twelve of the
Customs and Inland Revenue Act, 1885, in such a
manner or on such permanent trusts that the land or
interest is not liable to death duties, on such periodical
occasions as are provided in this Act,
the duty, or proportionate part of the duty, so far as it has
not been paid on any previous occasion, shall be collected
in accordance with the provisions of this Act.

2. (1) For the purposes of this part of this Act the
increment value of any land shall be deemed to be the
amount (if any) by which the site value of the land, on the
occasion on which increment value duty is to be collected
as ascertained in accordance with this section, exceeds the
original site value of the land as ascertained in accordance
with the general provisions of this Part of this Act as to
valuation.

(2) The site value of the land on the occasion on which
increment value duty is to be collected shall be taken to be —

(a) where the occasion is a transfer on sale of the fee

simple of the land, the value of the consideration for
the transfer ; and

(b) where the occasion is the grant of any lease of the land,

or the transfer on sale of any interest in the land, the
value of the fee simple of the land, calculated on the
basis of the value of the consideration for the grant
of the lease or the transfer of the interest ; and

(c) where the occasion is the death of any person, and the

fee simple of the land is property passing on that

death, the principal value of the land as ascertained

for the purposes of Part I. of the Finance Act, 1894,

and where any interest in the land is property passing -57 & 58 Vi ct >

on that death the value of the fee simple of the land c *

calculated on the basis of the principal value of the

interest as so ascertained ; and

(d) where the occasion is a periodical occasion on which the

duty is to be collected in respect of the fee simple
of any land or of any interest in any land held by
a body corporate or unincorporate, the total value
of the land on that occasion to be estimated in accord-
ance with the general provisions of this Part of this
Act as to valuation ;
subject in each case to the like deductions as are made,
under the general provisions of this Part of this Act as to



86



LAND UNION HANDBOOK



General pro-
visions as to
collection of
increment
value duty.



valuation, for the purpose of arriving at the site value of
land front the total value.

(3) Where it is proved to the Commissioners on an applica-
tion made for the purpose within the time fixed by this


1 2 3 4 5 6 8 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 8 of 19)