Planning Gain Supplement

Legislation has been tabled in Parliament to prepare for the new regime, which is expected to start in Spring 2008. Around £50m is to be spent by Customs and Excise preparing for the launch date.

The changes relate to the increase in value that land gains when permission is granted for new development, for example for housing, and the extra investment needed to build necessary road improvements, a new school and so on to support the development.

Previously this has been worked out locally between developers or land owners and local authorities and is known as “planning gain”.

The general opinion is that the system works well, with liabilities determined and spent locally. The view, certainly in this part of region is, ‘if it ain’t broke, don’t fix it’. 

The new system, known as planning gain supplement (PGS), is likely to see developers or the owners of land having to pay a proportion of the uplift in its value once developed directly to the government.

Since the Second World War successive governments have looked at the issue. Most came to the conclusion that it was too complex to administer. The current government seems to be determined to press ahead. It has already been through two rounds of consultation so it is now a matter of when it will happen, not if.

We do not yet know what the rate of tax will be or how it will be worked out but potentially it could have far reaching, significant consequences with, in theory, large sums of money being owned to the Revenue.

The fear for those behind current developments is that the new system will have begun by the time they move onto site and they could be hit with bills later that they were not anticipating.

It is important that land owners and developers seek professional advice early so they can be informed as soon as the new system is announced and can make decisions accordingly.

The government says communities will still benefit from the new system with “most of” the money being ploughed back into improvements in local areas. They say it will support the need for improvements to our major public infrastructures by providing necessary investment. Sceptics fear that not enough of the tax will be retained locally.

The motivation seems to be to alleviate, in particular, the desperate problems in the South East, but the system will nevertheless be applied nationally.

Current proposals suggest that 70 per cent of money raised will be used locally with the remainder kept by the government.

It remains to be seen whether this money might help to solve our critical highway problems which still seem to be preventing the Tees Valley from achieving its full growth potential at this time.