Planning Gain Supplement

The Government is consulting about the introduction of a new Planning Gain Supplement (PGS). It is important to stress that the detail is not settled and some of the main features or principles may change as a result of the consultation.

Background

HM Treasury commissioned a report into the supply of housing land. In 2004 it received the Barker Report which interlinked the following recommendations:

• A new tax should be introduced to ‘extract some of the windfall gain’ on the sale of land with residential planning permission;
• and  The planning obligations regime (S106 agreements/undertakings) should restrict the matters now routinely covered by them.

The rate of this tax would be higher than ‘…the estimated local authority gain from S106 developer contributions.’

The Government has accepted the recommendations but proposes to extend the tax to cover all types of development (other than home improvements).

Since 2004, two things have happened:

• The consultation paper ‘Planning-gain Supplement: A Consultation’ was issued in December 2005. It seeks responses by 27th February 2006.
• The Treasury and the Office of the Deputy Prime Minister have asked Kate Barker to conduct an independent review of the land use planning system in England. One of the four principle objectives is to consider ‘…ways of increasing the flexibility, transparency and predictability that enterprise requires.’ Within that remit is a requirement to look at the way in which S106 obligations are sought and the matters they should cover.

The consequence is that the decision to introduce the PGS has been made: the consultation is, in effect, only about the detail.

The consultation paper makes clear that PGS will not be implemented before 2008 (i.e. 6th April 2008).