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Planning Gain Supplement: Back from the dead?

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12th Dec 2007
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Like a "drowned canoeist", the Planning Gain Suppliment may yet resurface...

In the Pre-Budget Report Chancellor Darling announced that planning gain supplement (PGS) would not go ahead but that local authorities would be given the power to apply new planning charges, to be known as the Community Infrastructure Levy (CIL) alongside other site-specific requirements.

It seems that the Planning Bill could allow the Government to go much further according to George Bull, Head of Tax at accountants Baker Tilly. He raises a word of caution:
"The stated intention is that local authorities should be enabled to apply CIL as a planning condition but the wording of the Planning Bill opens up the possibility that CIL might be turned into a more general tax on developments - a planning gain supplement by other means."

Clause 163 of the Bill enables the Communities Secretary to make regulations imposing CIL. Those regulations could allow it to be applied by any planning authority up to and including the Secretary of State. Those regulations would be made in consultation with the Treasury.

Therefore CIL would have the potential to be expanded from a local planning tool into a national tax by the government passing regulations, rather than requiring Parliament to pass a new Act.

This will not be the first time that legislation has been passed whose potential scope goes far beyond the stated intention. Similar concerns were raised when the Finance Act 2007 gave HM Revenue and Customs the power to change the definition of an unquoted company for tax purposes. That change created the possibility that AIM companies could have their potentially favoured status as Business Property for inheritance tax purposes withdrawn by administrative action, not by legislation.

George Bull warns that "whatever the present intention of the Government, the way the Planning Bill is drafted opens the way to legislation by the back door. Government should only impose new taxes under the full scrutiny of Parliament. What is needed is unambiguous legislation which clearly sets the boundaries of taxation."

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