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England and Wales






The principle of the Reversion Duty seems to be justified in a country like England, where long leases of urban lands are so common; since in many cases the landlords receive in their reversions much greater values than they have either expected or deserved. It has been suggested, however, that taxing the lessor on his reversion should involve also freeing the lessee from his present burden of income tax on wasting assets,1 for as the end of the lease approaches the lessee is now taxed on capital which is passing from his control. But I suspect that most shrewd business men run their business with the conditions of the lease in mind, and what they lose here they make up by paying less rent or spending less on repairs.

As the law now stands there are several ways in which this duty may be evaded. The simplest is by arranging for a series of twenty-year leases instead of one longer one. Another way is to demise the reversion, for a period of less than twenty-one years, to a third party who will then cede it back to the lessor. It is also possible to minimize the taxable benefit by stating in the lease that the expenditure of the tenant on repairs is part of the consideration.2

Other methods of evasion not so dependent on legal jugglery are to build more cheaply or to spend less on maintenance, so that the value of the reversion will be less, while a higher annual rent is paid. Or else a very long lease can be granted which will postpone the payment, and only in a very few cases will the increase in site value be great enough to offset depreciation and the

1 J. C. Stamp, in Economic Review, July, 1911.

2 Cf. article by W. J. L. Ambrose in Law Quarterly Review, April and July, 1914.

saving in interest. Probably this duty will have no effect on occupier's rent, as the total payments, actual and anticipated, by the builder will not be appreciably increased. There will be a slight tendency for landowners to demand more, and their demand may be effective, since by building for themselves they might escape the duty. But as few landowners would actually be willing or able to build, and as the duty is a future one and uncertain in amount, frequently being no more than a tax on windfall, little increase in ground rents need be anticipated on this account. The duty may, however, be expected to check leasehold enfranchisement, since it is payable on the purchase of a reversion by a head lessee, or on the purchase of a lease by the reversioner, and again when a sub-lease determines.

(3) The total area of undeveloped land included in valuations made up to March 31, 1914, was 942,115 acres, of which some 800,000 acres have been assessed to the Undeveloped Land Duty. Its assessable site value, before making allowances, was £182,612,826.1 The bulk of the land liable to this duty has now been valued, tho with what precise conformity to law remains to be


The Finance Act required that undeveloped land duty for any year be assessed within three years of its close. This has hitherto proved impossible, and in consequence a certain amount of duty has been lost for both 1909-10 and 1910-11. The exact figures cannot be given, because in any case there would have been a large exemption of land that was restricted by agreements in force April 30,1909. The proportion of land so restricted has naturally declined, being 31% in the year 1913–14. The assessment and collection of this duty have been

1 In Ireland there were 26,410 acres, with a site value of £4,178,630.

suspended from the end of February, 1914, because of the judgment in Commissioners v. Smyth, which upset the practice of the department in making valuations of agricultural land.

The duty assessed before March 31, 1914, for each year was:

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The first two years' figures are now complete.

The budget estimates and actual net receipts are as follows:

1910-11 1911-12

1912-13 1913-14 1914-15

Budget estimates £280,0001 £200,000 £100,000 £325,000* £230,000❜
Net receipt
2,351 28,947 97,852 274,916
Total net receipt, 1910-1914: £404,066

The object of this tax is to force unused land into the market, in the hope of reducing rents or improving housing accommodations. But there is little reason to believe that land capable of being used has been held out of the market to any significant extent. Estate agents and others who have practical experience with land are nearly unanimous in declaring that such is not the case. In fact there is good reason to believe that owners as a rule are only too anxious to sell, and that unless terrified by hostile legislation or threats of legislation builders are able and inclined to build even more than is required. Every year an allowance of seven or eight million pounds must be made from gross income assessable to income tax, in respect of empty property.

1 Includes £140,000 arrears. Includes £240,000 arrears.

Includes £150,000 arrears.

It is difficult to believe that more than a very small proportion of this can be simply due to arbitrariness on the part of the owner. It is merely an indication that building is continually carried up to the margin of profit, and that it is not the cost of land that determines the profit; for obviously, after a building is erected, the cost of land cannot affect the tenant's rent. On the contrary it is the rent anticipated that determines the value of land. Wherever the value so determined is reasonably large, the landowner is under a constant pressure to sell, in order to realize his income. If he does not, his reasons are as likely to be good as bad. If he awaits a further rise in value, is it not to the public advantage that all land should be devoted to its best use? If he wishes to keep the land as a garden, that, too, frequently benefits the public. Moreover all the land fit to build on cannot be built on at once, for there would not be enough people to occupy the buildings.

This duty is equivalent to a tax of about 4% on the use of potential building land for any purpose other than those specifically exempted in the law. For the reasons just mentioned it cannot be avoided to any great extent by building, except perhaps by building cheap or temporary structures, and the main burden must fall on the owners. Since, however, it is not a permanent burden, it will not be capitalized in the usual manner of land taxes, altho it will temporarily reduce the selling price. And in fact it seems to have had that effect.

(4) The Mineral Rights Duty has nothing whatever to do with the land valuation. The Reversion Duty, tho not directly dependent on the Domesday valuation, is probably made easier to administer by it; and at all events it depends on the activity of the Valuation De

partment. But the Mineral Rights Duty is simply an additional income tax of one shilling in the pound on the rental value of all rights to work minerals and of all mineral wayleaves. On this point Mr. Lloyd George stated in the House of Commons: 1 "I agree that the Mineral Rights Duty is not a subject of valuation. It would not be fair to use that for the purpose of proving that land valuation costs less than the yield of the land taxes."


The Mineral Rights Duty is assessed on the proprietor or on the immediate lessor; the latter may make a proportionate deduction from the rent. It is not charged on common clay, earth, sand, chalk, limestone, or gravel. Minerals are not subject to Undeveloped Land Duty, nor to Reversion Duty so long as they are being worked. Increment Duty is much modified in its application to minerals, being based on the excess of actual rental value over 8% of the capital value of the minerals on April 30, 1909.

As a tax this duty is fairly satisfactory, both in principle and in results. There is much to be said in favor of the state's sharing in the profits of exploiting natural deposits, provided enough is left to stimulate private enterprise. The tax was easily administered, and soon reached a normal condition. The net receipt has been:

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The estimate for 1914-15 was £310,000.

This duty resembles the others in one respect: it has suffered in the courts. The cases of the Duke of Beau

1 H. C. Debates, May 14, 1914, column 1354.

2 Includes duty for 1909-10.

Reduction was due to (a) delay in assessment, (b) coal strike, (c) judicial decisions.

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