Tax & Accounting News

Planning Gains Supplement deferred

01/03/2007

The Chancellor announced in his previous Budget another tax burden, which will be known as Planning Gains Supplement, which will seek to tax the differential between the cost of land without planning permission and the uplift which will have been achieved once that planning permission has been obtained.

Discussions and consultations have been going on for a number of months and the good news is that the tax which was originally due to come into effect in 2008 will now be deferred until 2009.

In addition, developments that are already within the planning process at the time that PGS is to be introduced will not be subject to the tax.

The fact that the Government has delayed the introduction of the tax for a further year must mean that they have some doubts or concerns over its introduction.

The main features now proposed for the new tax are as follows:

• There will be no implementation before 2009
• It will capture a “modest proportion” of the uplift in value of land upon grant of planning permission. At the moment, no rates have been indicated
• It will be collected under the Self Assessment regime, when commencement of the development takes place i.e. it is the person/developer who commences the development responsible for paying the tax. This may not be the same person who applied for the planning permission and benefited from the planning permission
• A Development Start Notice will have to be applied for to HMRC. The application will need to include a PGS Return
• After HMRC make their checks, HMRC will issue a Development Start Notice. The developer will then have 60 days from the issue of the Notice to pay the PGS due
• Failure to submit a Development Start Notice or pay the PGS on time, HMRC will issue a Development Stop Notice which means that continuing with the development will be illegal and may be backed by a Court Injunction if necessary
• HMRC are also proposing interest and penalties, Court proceedings or Insolvency proceedings for collection of unpaid PGS when PGS is not paid on time
• There will be staggered payments for PGS for large scale developments
• PGS is to apply to non-residential as well as to residential development land. However, home extensions are to be excluded
• Transitional provisions will apply but no details are yet available
• Section 106 Planning Applications could be scaled back to matters relevant to the environment of the development site and affordable housing
• It is the intention of the Government that the majority of the proceeds from the PGS will be dedicated to the local community with a view to improved local services, roads and public transport
• The implementation of PGS will clearly influence decisions by developments as to the manner in which they are to carry out their business and could have a very significant effect on the property development industry.

 

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