Grants in lieu of Taxes on Crown Property in the United Kingdom: An Historical Note

The rating, that is, the taxing, of property in England by local government is based on the Act of 49 Elizabeth. While this statute did not specifically declare Crown property exempt from rating, it did provide that for property to be ratable there must be an occupier and that his occupation must be “beneficial.” By “beneficial occupation” the law means “an occupation from which the occupier derives either a pecuniary profit, or some personal advantage or convenience.” All buildings such as post-offices, customs-houses, barracks, prisons, belonging to the Crown and occupied for public purposes are therefore exempt from rating. Crown property in the possession of an occupier who has a beneficial occupation is ratable, and hence tenants of Crown property are required to pay property taxes. Occupation of property by nationalized industries does not amount to occupation by the Crown and these premises are also ratable. Lands occupied by the royal family are exempt for different reasons arising from the prerogatives of the Sovereign. In 1874 the Parliament of the United Kingdom approved a system of grants in lieu of property tax which are known as “contributions in lieu of rates.” Under this system the United Kingdom makes ex gratia payments, generally equivalent to full taxes, to all county boroughs, boroughs, urban districts, and rural districts containing Crown property beneficially occupied. Other local government units do not receive these grants since they are not taxing authorities. The United Kingdom was quite certainly the first country in the world to make such payments. It may therefore be of interest to record the events leading up to this historic decision and to trace briefly the growth of these contributions.