no pain - no gain

Consultation is in full swing on the proposal to tax land on the increase in its value after it is given planning permission.

The local planning gain supplement (PGS), as it is called, is intended to come into force in 2008 to provide additional funds to boost housing supply.

PGS is to apply not only on the granting of residential planning permission (as suggested by the Barker review) but on all development, excluding only home improvements and possibly small scale improvements to non-residential development. However the Government is considering whether a lower levy rate should be applied to brownfield land.

The revenues generated by PGS would be dedicated to local communities to manage the impacts of growth and to fund local and strategic infrastructure to support and stimulate new development.

The granting of full planning permission is the key to fixing the amount of tax, although PGS would not become payable until development commences.

Valuations for planning and current use value, as well as returns to the Revenue, will be self-assessed but are to include relevant supporting information and payment.

A developer will be required to give notice of the intention to commence development on site by notifying the Revenue with a further PGS return to be within a specified time period. Any failure to pay PGS will result in a development stop notice until payment.

PGS will be designed to minimise loopholes for avoidance particularly those relating to complex ownership and offshore arrangements.

Developers will need to plan ahead as it is anticipated that planning authorities will be swamped with pre-PGS applications to avoid the tax.

A particular concern is where developers have options over land which do not deal with the impact of PGS and it is hoped that transitional arrangements will be put in place to cover such a scenario.

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