Land Values likely to drop by 20%
The government has insisted that it remains committed to introducing a Planning Gain Supplement (PGS) likely to come into force during 2008 which will effectively mean owners of land passed for development will be subjected to 20% tax on the uplift in value.
James Scollard from CLIFFTONS comments “The new stealth tax will certainly hit the housing market if introduced. The landowners will want to pass the cost of the tax to the developer, but the developer can only offer a set price to make a scheme work and the PGS will not replace the Section 106 agreements that developers are already burdened with.
Affluent landowners, and there are plenty of them, will be inclined to leave their asset for the foreseeable future. If less development land comes on to the market, it will place further pressure on the lack of new homes being built and in turn result in possible house prices increases.
Also there is no inter relationship between Planning-Gain Supplement and other taxes such as Capital Gains Tax, which would still be levied at the current rate. The introduction of the Supplement is going to cause a great deal of work for land related professions.”
A significant majority of PGS revenues would go back to the local level to help local communities share the benefits of growth and manage its impacts, with the remainder used to finance regional and strategic infrastructure to promote growth.
PGS would apply UK-wide, on both residential and non-residential developments and would not become payable until development started on the site.
The PGS will not apply to home improvements, such as minor extensions or loft conversions and to sites where there is no increase in value once planning permission is granted.
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Posted: 8th April 2006