Save content
Have you found this content useful? Use the button above to save it to your profile.
AIA

TAX NEWS: Industry brands Planning Gain Supplement complex and ineffective. By Nichola Ross Martin

by
19th Sep 2006
Save content
Have you found this content useful? Use the button above to save it to your profile.

A research paper commissioned by a consortium of property developers and published today has found, unsurprisingly, that the forthcoming Planning Gain Supplement (PGS) will be complicated and may fail to deliver the investment benefits intended.

The PGS, which is not expected to be implemented until 2008, is expected to be in the form of a self assessed flat levy payable on the uplift in land value on a non-domestic site once full planning permission has been granted. It is part of the government's program of planning reforms and is supposed to be a local measure with revenue raised being directed toward expanding and improving local development and infrastructure.

The Treasury issued a consultation paper on the PGS in December 2005, following which it has said very little on the subject. Although the industry has responded en-mass, the findings of the consultation have not been put in the public domain.

Timed for the Labour Party conference (followed closely by the 2007 Pre-Budget Report), the research paper is based on the results of applying the proposed PGC to 18 case studies. It suggests that some 300,000 planning applications per year could be affected by the new tax.

The government hope it will raise an extra £500 million per year, in addition to local planning agreements, which raise approximately £2.5 billion

In summary the report found:

  • The PGS levied at the rates used in the research seems unlikely to deliver the increased funding for investment in infrastructure to support housing growth.
  • The PGS is likely to reduce the supply of smaller development sites as it would render some of these financially unviable.
  • Under the proposed system, the large-scale developments analysed in the study are likely to contribute significantly less planning gain value than under the current system. These developments however generate the largest community infrastructure requirements.
  • There is great concern that the community infrastructure required for these large scale developments, which under PGS would be supplied by local authorities or other government agencies, would not be adequately funded or
    provided in time to serve new developments.
  • Under the PGS, the levy liability of the developer is sensitive to the calculation of a project's planning value, creating considerable scope for debate and interpretation over individual valuations. This potentially adds a further level of complexity and delay to the planning system, when taken together with the ongoing need to settle scaled back section 106 agreements with local authorities.
  • The PGS seems likely to change the way some sites are developed as developers seek to minimise their PGS liabilities.
  • The current system allows for discretion on the part of local planning authorities to let land owner-developers cross subsidise development in certain situations. For example developments which seek to conserve heritage assets and development by charities or in regeneration areas may frequently be treated benignly. As PGS is not discretionary, it would be levied on such developments, which could affect their viability.
  • The research was undertaken by property consultancy Knight Frank LLP and commissioned by a consortium comprising the British Property Federation (BPF), the Confederation of British Industry (CBI), the Home Builders Federation (HBF) and the Royal Institution of Chartered Surveyors (RICS). The research has been sent to the Treasury, recommending further detailed research be urgently conducted.

    Tags:

    Replies (0)

    Please login or register to join the discussion.

    There are currently no replies, be the first to post a reply.