Commercial Property News

Senior Partner Richard Hegarty

Richard Hegarty, senior Partner and Commercial Property specialist explains about Planning Gain Supplement.

Planning Gain Supplement (PGS) is a proposal for a fixed levy on the enhanced land value after it receives planning permission. It is the Government’s intention to move forward with this new land tax if, after further consultation, it continues to be deemed workable and effective and PGS will then come into force in 2009. The property industry is firmly against the implementation of PGS and there was qualified support for an extended role of S106 Agreements.

Calculating PGS
Below is how we expect PGS to be calculated with an example to illustrate.

PV – CUV = uplift

PGS liability = PGS rate (20%) x uplift

An example, 5 acre greenfield site:

Main Feature of PGS
The main features of PGS are that it would apply to residential and non-residential development, the S106 obligations would be scaled back and that the revenues would be dedicated to local communities and the provision of infrastructure.

Problems with PGS
Many people have argued about the problems with introducing PGS, and I have summarised these in the following points:

• Transitional arrangements
• Make your planning application now
• Thresholds
• S106 to continue
• Will it affect supply of land
• Allocating PGS revenues
• Added bureaucracy

Benefits of PGS
The Government are committed to PGS and say the it will improve efficiency and speed up process. It will assist the property sector as it will provide certainty, and reduce the wide variations in S106 that currently occur. Also, the revenue from PGS will help to fund infrastructure on a local and regional basis.

Conclusion
The PSG will have a major influence on the land supply available for development. I think some landowners may decide to act very quickly before PSG comes into force to avoid paying, but many landowners who have thought about selling will simply keep their land and hope for a change in policy in the future.

Richard Hegarty can be contacted on 01733 295600
or email: richard.hegarty@hegarty.co.uk