§ 82. Mr. LEACH
asked what amount is tax on his profit a builder will pay who erects a number of houses on leasehold land and immediately sells them at a profit of £1,200, but retains the lease of the land; and what amount of tax must the same builder pay if he sells the ground rent of the houses at an improved annual rent of £50?
§ Mr. MASTERMAN
The sale of a building in situ, apart from the land or any interest in the land upon which the building stands, is a transaction unknown to English law. I assume that the transactions to which he refers consist of (a) subleases of the land and the buildings erected by the builder for practically the same 895 term as the original lease for a consideration consisting of a capital sum and an improved ground rent; and (b) a sale of the improved ground rent, including the nominal reversion, for a capital sum. On this hypothesis no duty would be payable in respect of the first transaction, unless either the market value of the bare site had increased or the consideration covenanted to be paid were demonstrably in excess of the fair market value of the leasehold interest. As regards the second transaction, no duty would be payable, the statutory interest in the land being ex hypothesi merely a nominal reversion.
§ Mr. MASTERMAN
The data furnished by the hon. Member are quite insufficient to enable me to give a definite reply to his question, but on the assumption that there has been no increase in the market value of the land since the date of the builder's purchase and that the price he realises does not demonstrably exceed the fair market value of the land and buildings, no duty would be payable.