UK Planning Gain Supplement Explained

Richard Hegarty , senior Partner and Commercial Property
specialist at Hegarty LLP 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. 

Current Use Value (CUV) Planning Value (PV)

PV – CUV = uplift

PGS liability = PGS rate (20%) x uplift

An example, 5 acre greenfield site:

CUV = £20,000
PV = £4,020,000
Uplift = £4m PGS = 20 % of £4m = £80,000 

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 these are summarised 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

Richard Hegarty concludes, "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." 

Article Ends

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Richard Hegarty founded the firm of Hegarty LLP in Peterborough