Scottish Court of Session Decisions

By the Succession Duty Act 1853 (16 and 17 Vict. c. 41) it is enacted, sec. 23, that “where timber, trees, or wood, not being coppice or underwood, shall be comprised in any succession, the successor shall be chargeable with duty upon his interest in the net moneys, after deducting all necessary outgoings for the year which shall from time to time be received from any sales of such timber, trees, or wood, and shall account for and pay the same yearly; provided that no duty shall be payable on the net moneys received from the sale of timber, trees, or wood in any one year unless such net moneys shall exceed the sum of £10; provided that if the successor shall be desirous of commuting the duty, and shall deliver to the commissioners an estimate of the net moneys obtainable by him from the sale of such timber, trees, and wood as may in a prudent course of management of the property be felled by such successor during his life, the commissioners if satisfied with such estimate shall accept the same, and assess the duty accordingly.”

On 20th March 1870 the present Marquis of Ailsa succeeded, on his father's death, to the entailed estates of Cassillis and Culzean, in the county of Ayr. At that date the estates comprised a large quantity of growing timber, which was not of the nature of coppice or underwood. In the schedule appended to the succession duty account given up by the present Marquis at his succession, a sum of £503 was entered as the annual value of the woodlands on the estate, as entered in the valuation roll, and duty at 1 per cent. on £8620, 18s. 5d., the amount of this sum when capitalised, in terms of the tables annexed to the Succession Duty Act 1853, was paid by him thereon.

Since his succession the present Marquis yearly cut down and sold large quantities of the said growing timber.

The present action was brought against him by H. M. Advocate for the Inland Revenue, the conclusions being to have the defender ordained to produce a correct account showing the net moneys in each year, after deducting all necessary outgoings for the year, received by him from the year of his succession down to 1877 from all sales of timber, trees, or wood (not being coppice or underwood) comprised in his said entailed lands and estate; and further, to pay the Inland Revenue such a sum as should be found to be chargeable by way of duty under the Succession Duty Act 1853 on his interest in said net moneys so derived and received by him within the said period.

It was admitted that the defender drew no rent or profit whatever for the land in question other than that which he derived from the sale of the timber as it was cut.

The Lord Ordinary (Curriehill) pronounced this interlocutor:—“Finds (1) that the defender is chargeable with succession duty on his interest in the net moneys, after deducting all necessary outgoings for the year, which he has from time to time received during each of the years from 1870 and 1877, both inclusive, from the sales of timber, trees, or wood, other than coppice or underwood, on the estate of Culzean, to which he succeeded in 1870, except where such sales may not have exceeded £10 in any one year, and that he is bound to account for and pay the same to the pursuer: Finds (2) that in said accounting the defender is entitled to credit for the amount paid by him in name of succession duty on the woodlands on said estate, in so far as these at the time of his succession did not yield, or were not capable of yielding, income not of a fluctuating character, and that he is entitled to deduction of all necessary outgoings: And appoints the cause to be enrolled that the amount of duty now payable in accordance with these findings may be ascertained: Reserves all questions of expenses, and grants leave to both parties to reclaim.”

His Lordship added the following note:—“In this action the Lord Advocate, on behalf of the Board of Inland Revenue, claims from the defender the Marquis of Ailsa payment of various sums, in name of succession duty, on sales of timber from the estate of Culzean, in Ayrshire, made by him in the year of his succession to that estate (1870), and in 1877 and the intervening years. The claim of the pursuer is rested entirely on the ‘Succession Duty Act 1853;’ while the defender in asking absolvitor founds not only on the statute, but also on the ‘Valuation of Lands (Scotland) Act 1854’ and the ‘Valuation of Lands (Scotland) Amendment Act 1857.’ The main defence is that the defender has already paid on the basis of the valuation roll (which in Ayrshire is made up by the officer of Inland Revenue as assessor) the full amount of succession duty exigible from him in respect of the woods of Culzean, and that the special provisions of the Succession Duty Act regarding sales of timber are not applicable to this case.

“As the whole question turns upon the effect, if any, that the Valuation Acts of 1854 and 1857 have upon the Succession Duty Act of 1853, in the way of modifying or altering the mode of assessing the duties on woods, it is necessary to have clearly in view the precise words of these statutes relating to this matter.

Section 21 of the Succession Duty Act provides that ‘the interest of every successor, except as herein provided, in real property, shall be considered to be of the value of the annuity equal to the annual value of such property, after making such allowances as are hereinafter directed, and payable from the date of his becoming entitled thereto in possession, or to the receipt of the income or profits thereof during the residue

Page: 29↓

of his life, or for any less period during which he shall be entitled thereto;' and tables are given for valuing the annuity, and the duty may be paid either in one sum or in instalments.

By the interpretation clause, sec. 1, it is declared that ‘real property shall include all freehold, copyhold, customary, leasehold, and other hereditaments and heritable property, whether corporeal or incorporeal, in Great Britain and Ireland, except money secured on heritable property in Scotland, and all estates in any such hereditaments.’

The twenty-second and five following sections contain directions as to the mode of ascertaining the annual value of ‘real property.’ Section 22 directs that ‘in estimating the annual value of lands used for agricultural purposes, houses, buildings, tithes, teinds, rent-charges, yielding or capable of yielding income not of a fluctuating character, an allowance shall be made of all necessary outgoings.’ I apprehend that the real annual value of heritable property falling under any of the above descriptions was intended to be ascertained by a valuation made by the officers of Inland Revenue.

The next five sections deal with real property the income of which is of a fluctuating character, such as woodlands, advowsons, leaseholds, manors, mines, and the like; and with reference to woodlands sec. 23 directs that ‘where any timber, trees, or wood, not being coppice or underwood, shall be comprised in any succession, the successor shall be chargeable with duty upon his interest in the net monies, after deducting all necessary outgoings for the year which shall from time to time be received from any sales of such timber, trees, or wood, and shall account for the same and pay the same yearly,’ unless the net produce of the sales is under £10; and provision is made for the successor having the duty assessed on an estimate of the annual produce of the sales in a prudent course of management. On this clause I would observe that the words ‘timber, trees, or wood’ clearly mean growing timber—in other words, woods, woodlands, or land under wood, whether growing wood as contradistinguished from underwood or coppice, which are capable of being regularly cut and of yielding an income not necessarily fluctuating. If the timber, &c., had been cut at the date of the succession, though not removed from the ground, it would have passed as moveable property to the executors of the predecessor, and would not have belonged to the ‘successor’ in heritage. And I think that, according to the fair and sound construction of this section and sec. 22, land under growing timber is not to be assessed for succession duty under sec. 22, but only under sec. 23, unless, of course, it shall be, as is often the case, available for grazing or similar purposes besides bearing a crop of timber. But where the land yields or is capable of yielding no revenue except from occasional sales of timber, no succession duty is to be demand-able from or in respect of woodlands unless and until the timber should be felled and converted into cash. On the one hand, the Inland Revenue might never get any succession duty in respect of land so occupied, or, at all events, several successions might occur while the wood was maturing without producing any succession duty; while, on the other hand, the successor, after several generations had escaped, might become liable (by cutting and selling the timber) to large but fluctuating and uncertain claims for duty. And if the present question had depended solely on the Succession Duty Act, the defender could not have resisted the pursuer's claim.

But it is said that the Valuation Acts have—not indeed expressly, but by necessary implication—materially modified the rule by which under the earlier statutes the annual value of woodlands is to be ascertained. The interpretation clause of the Valuation Act of 1854 (passed in the year subsequent to the Succession Duty Act) defines ‘lands and heritages’ to mean and include ‘all lands, houses, shootings, and deer forests, where such shootings or deer forests are actually let, fishings, woods, copse and underwood from which revenue is actually derived,’ &c. The preamble of the statute sets forth that it is expedient ‘that one uniform valuation be established of lands and heritages in Scotland, according to which all public assessments leviable or that may be levied according to the real rent of such lands and heritages may be assessed and collected, and that provision be made for such valuation being annually revised.’ The roll is then directed to be made up by assessors to be appointed by the commissioners of supply in counties, and by the magistrates in burghs; and when finally adjusted, after appeals to the commissioners or magistrates, as the case may be, the completed roll is to be the roll in force for the year. Sec. 6 provides that ‘in estimating the yearly value of lands and heritages under this Act, the same shall be taken to be the rent at which one year with another such lands and heritages might in their actual state be reasonably expected to let from year to year; and where such lands and heritages consist of woods, copse, or underwood, the yearly value of the same shall be taken to be the rent at which such lands and heritages might in their natural state be reasonably expected to let from year to year as pasture or grazing lands.’

Now, after the case of Menzies, 5 R. 531, it is impossible for the defender to maintain that if this Act had stood alone the succession duty is to be imposed according to the annual value of lands and heritages as ascertained by the valuation roll; as it was there decided that the provisions of that Act are applicable to purposes of local taxation only, and did not repeal or alter the rules laid down by Parliament in the Income Tax Act (and by parity of reasoning the Succession Duty Act) for ascertaining the value of land for the purposes of imperial taxation. And unless the valuation roll is by some subsequent statute made the rule for assessing the succession duty payable in respect of succession to heritable property, the defender's interest in the timber cut by him and sold must be ascertained and assessed according to the rules laid down in sec. 23 of the Succession Duty Act.

But the defender maintains that by the Valuation of Lands Amendment Act 1857 the valuation roll is in certain cases made the rule for ascertaining the value of all heritable property for the purposes of imperial taxation, including the succession duty. By that statute commissioners of supply in counties, and magistrates of burghs, are empowered to employ as assessor under the Valuation Act the officer or

Page: 30↓

officers of Inland Revenue having the survey of the income-tax and assessed tax in their respective counties and burghs. Increased facilities for appeals against valuations are given, an appeal being in certain cases allowed to two of the Lords Ordinary of this Court; and then follows sec. 3, upon which the defender mainly relies—‘Provided always, that if in any county or burgh the said commissioners or magistrates shall not appoint the officers of Inland Revenue to be such assessors as aforesaid, then no valuation made under the said Act by any other assessor or assessors shall be conclusive against or for the purpose of reducing on appeal or otherwise any assessment, rate, or charge under any Act of Parliament relating to the duties of Excise or the land-tax, or assessed taxes, or income-tax, or any other duties, rates, or taxes under the care or management of the Commissioners of Inland Revenue. This section does not indeed expressly declare that the valuation roll made up by the officer of Inland Revenue shall be conclusive as the rule for assessing to imperial taxation; but I think it would be difficult to hold that it does not by necessary implication make the rule conclusive against the Inland Revenue Commissioners in questions of succession duty involving the annual value of lands, houses, coppice, and underwood, and similar subjects ‘capable of yielding income not of a fluctuating character,’ seeing that the succession duties are by the Succession Duty Act (sec. 9) placed under ‘the care and management’ of these ‘commissioners.’

But it does not follow that although for the purposes of local taxation an ‘uniform annual value’ is attached by the valuation roll to all lands and heritages, whether capable of yielding an income ‘not of a fluctuating charater,’ or only an uncertain and occasional income, that value is in all cases, and particularly where the income is either non-existent or fluctuating, to be the rule for assessing to imperial taxation. It appears to me that in regard to subjects of the latter character, and particularly in regard to growing timber, trees, and wood, the value of the succession is to be ascertained and the duty assessed in terms of the special directions of the Succession Duty Act. The opening language of sec. 21 is here most important. It declares that ‘the interest of every successor, except as herein provided, in real property shall be considered to be of the value of annuity equal to the annual value of such property.’ Now, among the exceptions here referred to must clearly be embraced timber, trees, and wood which have no annual value, and in which the successor's ‘interest’ is by sec. 23 declared to be not ‘an annuity equal to the annual value of the property,’ but ‘his interest in the net monies’ produced by each periodical sale, the duty being ascertained and paid in each year, and only in each year in which a sale takes place; and I do not think that a general annual valuation of woodlands on the footing of their being grazing or pasture lands, quite irrespective of the timber which they may bear—a valuation, moreover, made primarily for the purposes of local taxation,—can be held to have been intended by sec. 3 of the Valuation Act of 1857 to be substituted in questions under the Succession Duty Act for the actual net returns received by the successor for the growing timber comprised within his succession, whether such returns are received by him annually or at intervals or once for all.

I am therefore of opinion that the defendant is bound to account for the net monies received by him for his periodical sales of timber since his succession, and to pay duty thereon in the manner pointed out by sec. 23 of the statute. But while this is my opinion, I am equally clear that in settling the amount of duty he is entitled to credit for the amount of succession duty already paid by him in respect of the woodlands on his estate, in so far as these are productive of no annual value to him apart from their occupation as woods. If, for instance, they are, as is often the case, let or occupied for grazing, then they are of some annual value, and succession duty is payable upon them according to that value, which may be ascertained either by the valuation roll or by some separate valuation of the grazing. And if the payment already made by him fairly represents the duty on that part of his succession, no deduction will be made on that ground from the present claim. But, on the other hand, if the woodlands are of no annual value, i.e., are not capable of yielding any income to the defendant not of a fluctuating character, then I am clearly of opinion that the payment made by him at the succession on the footing that the woodlands were liable to ordinary succession duty according to the value appearing in the valuation roll was a payment which the officers of the Inland Revenue had no power to demand, and for which they must now give credit in the present accounting. Such subjects as I have already pointed out were by sec. 23 placed on a different footing as to succession duty from heritable property having a fixed annual return, and could not, prior to the Valuation Act, have been assessed at all for the duty. The lands and their annual value were virtually exempted from the duty, and in lieu thereof the duty was imposed on what is quite a different thing, viz., the net produce of the timber when sold. It was not the intention, and I think it was not the meaning, of the Valuation Acts, on the one hand, to render liable to duty lands which were not liable under the Succession Duty Act, or, on the other hand, to exempt from duty the sales of timber which were expressly made liable by the Succession Duty Acts.

The defendant further maintains that the ‘outgoings’ from the sales which the pursuer proposes to allow in fixing the ‘net monies’ received by him are not sufficient. This is a matter of fact which must be ascertained either by a proof or by a remit to an accountant, or in some other similar manner. The case is ordered to the rolls to have these points disposed of.”

The Inland Revenue reclaimed.

Authorities— Menzies v. Inland Revenue, Jan. 18, 1878, 5 R. 531; Attorney-General v. Lord Sefton, July 6, 1863, 2 Hurlston and Coltman, 362, and Mar. 3, 1865, 11 Clark. H. of L. Ca. 257.

At advising—