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PR 9 - Government's land tax proposals will not work say planners and tax experts

01 March 2007

In a joint response to Government both the Royal Town Planning Institute, the national body for planners, and tax specialists at national law firm Halliwells LLP have declared the Planning Gain Supplement (PGS) unworkable as currently proposed. The response paper details nine concerns with the current proposals. It goes on to suggest practical steps to maintaining the principle of PGS but in a form that will work. The deadline for submissions was the 28 February 2007.

Rynd Smith, RTPI head of policy said: \"The principle of the PGS is sound, that society should benefit from the huge uplift in value gained when land is granted planning permission – sometimes up to1000 per cent. This cash gain can be used to fund the infrastructure necessary to make the development work. But the current proposals for PGS are unworkable.\"

Elizabeth Small, corporate tax partner at national law firm Halliwells LLP said: \"The proposed method of tax assessment which is based upon pre-development values will lead to uncertainty and disputes. Furthermore the PGS will be seen as an unfair tax as it requires developers to pay tax (based on a hypothetical value) on an unrealised gain.  This tax will be difficult to quantify and is already attracting the interest of the tax avoidance industry.

\"Halliwells and the RTPI believe that the PGS should be directly linked to the provision of infrastructure needs of a particular development and should not be identified as being a tax which is collected and administered by HM Revenue and Customs.  However, if the PGS is introduced as a tax then a tax credit regime should also be included.\"

The nine concerns are:

  •     The current PGS proposals are expected to be UK wide, however they need much more thought before they can be applied to devolved nations.
  •     Land release by land owners is already slow and is inflating land costs. A PGS without the support of property owners will exacerbate the problem. A stronger link is needed between development and infrastructure delivery.
  •     The current proposals are bureaucratic, centralised, likely to be unduly slow, uncertain in timing and effect, and have high administrative costs. Such failings will impact negatively on business confidence and the capacity of local government to deliver necessary infrastructure.
  •     Developers are asked in the proposals to provide a self-assessment of the value of the land and pay the tax accordingly, subject to an audit. If Government go ahead with this proposal we recommend the tax levy relates to either current market value or to the recent sale of the land and should be levied after the gain due to development is known.
  •     The PGS as currently proposed will expose developers to undue risk and uncertainty in the financing and delivery of their proposals as they may have to borrow money to pay for infrastructure up front. This will also have a negative effect on business confidence.
  •     The proposals for PGS will make the integrated delivery of infrastructure and development more complicated and less transparent than it is now. Breaking the link between the two can result in situations such as a failure to invest in sufficient public transport encouraging people to use cars more – an unsustainable lifestyle decision which is hard to reverse.
  •     Current proposals are unclear about how funds will be distributed between local government, regional bodies and/or directly to infrastructure providers. A problem might also exist if the infrastructures that receive PGS funds might themselves be liable to PGS. Classes of PGS exemption have not been properly thought through.
  •     PGS in this form may act as a cost disincentive to otherwise desirable development due to a failure to take into account regional land market variations. It is just not flexible enough.
  •     The PGS as currently proposed is not based in emerging good practice in infrastructure planning, such as contributions policies, tariffs and roof taxes. Instead we should be looking to develop and promote the excellent tariff based schemes currently being used in Milton Keynes and Ashford. Good practice is also being developed overseas and should be studied.



For further information please contact:

Andrew Kliman, Communications Manager, 0207 929 9479, mob. 07870 672 020

Rynd Smith, RTPI Head of Policy, 0207 929 9478

Elizabeth Small, Halliwells LLP, Corporate Tax Partner, 0870 365 8584

Notes to Editors

1. The RTPI response to the consultation paper on Planning Gain Supplement can be seen at

2.  The RoyalTown Planning Institute (RTPI)

The RTPI is a dynamic organisation leading the way in the creation of places that work now and in the future. We understand that just as people develop places, so places develop people.  We are committed to the enhancement of our natural and human environment, using spatial planning to manage competing pressures on our built environments and the very real effects on our space.  Through our members, we constantly seek to create areas and places in which people want to live and work.

As well as promoting spatial planning, RTPI develops and shapes policy affecting the built environment, works to raise professional standards and supports members through continuous education, training and development. The RTPI is the largest professional institute for planners

worldwide, with over 20,000 members.

For further general information, visit the RTPI website at:

41 Botolph Lane, London, EC3R 8DL, charity no. 262865

3. Halliwells LLP

Halliwells LLP is a commercial law firm, with offices in Manchester, Liverpool, London and Sheffield. Halliwells has specialist departments which deal with commercial property, planning and corporate tax matters. The corporate tax department of Halliwells provides all necessary support and advice in the area of corporate tax. This involves advising on the taxation of issues relating to the wide variety of commercial transactions undertaken by the firm including property taxation and VAT. The corporate tax department has provided initial evaluations of concept feasibility in taxation law terms, together with commercial judgements based on experience derived from the provision of taxation legal advice.