planning gain supplement

The Pre-Budget report in 2005 announced that it was putting out for consultation the government’s proposals for a new property tax called the Planning Gain Supplement (PGS). The aim of the PGS is to tax a portion of the uplift in land value as a result of the planning process and use this to fund the cost of local infrastructure, e.g. schools, roads, public transport, etc.

It is proposed that the scheme will be introduced some time in 2008 and that transitional arrangements will apply. The regime will apply to both residential and commercial development land throughout the UK. The consultative document suggests that PGS will not apply where planning permission has been granted before the appointed date.

No details have yet been given of the tax rate that will apply, however, it is suggested that PGS will be charged on the planning gain, i.e. the difference between the value of the land with full planning permission and the current value of the land, assuming no development potential.

Payment of the PGS will not be due until development actually commences. The developer will be required to declare their intention to commence development and to proceed they will need a Statutory Development Start Notice which will not be issued until a Return has been made and the PGS paid over. Part of the return, which will be on a self assessment basis, will involve making valuations and HMRC will carry out risk-based assessment of the return.

Where a return has not been made, or the PGS has not been paid, a Development Stop Notice will be issued which will be enforced by court action if necessary.

It may be some time until the legislation relating to PGS is issued, however, we shall endeavour to keep you up to date on this matter.