Be Aware of Tax on Planning Gains
In 2003 the Barker Review recommended that the uplift in property values upon the grant of a planning permission should be brought within the ‘tax umbrella’. It was suggested that the mechanism for this should be through the government levying a Planning Gain Supplement (PGS) on the granting of planning permission.
The government has accepted the proposal and it is now anticipated that this tax will be introduced sometime in 2009; this has not been confirmed as consultations have yet to finish but the government has sanctioned associated expenditure of £52 million on a new IT system and general infrastructure. This suggests they are taking the matter seriously!
The tax will be payable on the uplift in value arising from the grant of full planning permission over the site upon which the permission has been granted. This will result in a need for two valuations to be undertaken; both before (excluding hope value) and after the granting of the planning permission. In many instances the gulf between the values will be marked.
The tax is to be levied upon the commencement of development and will be payable by the developer. Should the site be sold without any development works then the liability for the PGS will pass to a third party. The rate of taxation has not yet been announced and this will dictate the significance of the new tax in the market.
A potential area of difficulty that has been identified may be in the Landlord and Tenant scenario. The basis of valuation is the Vacant Possession value of property and it also raises the question of who will be ‘the developer’.
Whilst much of the detail has yet to be confirmed, most crucially the taxation rate, it is clear that it is a matter that needs to be given due consideration, especially should one be considering development in the coming years.
For further informaton please contact Philip Hulland at Fisher German's Stafford office on 01785 273992, or by email on philip.hulland@fishergerman.co.uk
- Ashby de la Zouch
- 01530 412821
- Banbury
- 01295 271 555
- Knutsford
- 01565 757970
- Market Harborough
- 01858 410 200
- Newark
- 01949 851815
- Southampton
- 02380 883150
- Stafford
- 01785 220 044
- Worcester
- 01905 453275
