1. THE FINANCIAL IMPLICATIONS OF PLANNING GAIN SUPPLEMENT
Sue Bridge
Director of Planning and Development
Bellway Homes Ltd
Bellway

2. The policy may change as a result of consultation
PGS introduction 2009/10
Discussion based on the assumption that PGS will be introduced in 2009/2010 as set out in the current consultation papers
Health warning :
These are my own views
The policy may change as a result of consultation
Bellway

3. Why worry about something that may not happen?
The introduction of PGS already has significant potential implications for your business
You should be putting safeguards in place now:
Transitional arrangements
Valuing PGS
Paying PGS
Scaled back Section 106
The law of unintended consequences
Bellway

4. PGS – a synopsis
Intended to be a claw-back on the increase in the value of land as a result of gaining a beneficial planning permission
PGS is:
Hypothecated for infrastructure
Direct replacement for or supplement to section 106 obligations
Not referred to as a tax
Paid by the developer but intended as a deduction from the increase in land value. Not related to the price paid for the land
Bellway

5. PGS – Transitional Arrangements
There will be transitional arrangements which are liable to be introduced with very little warning and there are very few clues as to what these may cover
Likely to be time limited - may be only five years
Long term phased sites could be hit with double whammy of PGS plus 106 obligations
Will apply only to sites with an extant consent or consents
Will lose ability to take unimplemented consents into account when valuing CUV once they expire this could be as little as three years
Will not cover sites under contract without a consent
Contractual implications for e.g. MLV or tax break clauses. Long term land under option at risk
Will apply to sites in for planning permission only if determined before PGS comes into force
Bellway

6. Valuing PGS – is it a tax or a levy?
PGS liability = PV – CUV
CUV – the market value of the land the moment before pp is granted
PV – the market value of the land the moment after full pp is granted
Definition of market value for PGS purposes is that used for CGT, inheritance tax and SDLT
Not the definition of Market Value as set out in Chapter 3 of the Red Book
Bellway

7. Does that matter?
Para 3.3 of Chapter 3 of the Red Book states:
‘Market value is understood as the value of a property estimated without regard to costs of sale or purchase, and without offset for any associated taxes’
Unless your contract makes PGS a specific deductible item, then yes it could matter, if the definition of market value for PGS is the definition used for tax purposes
Bellway

8. Paying PGS
PGS is payable on commencement of development and is payable by the developer within 60 days once HMRC issues a start notice.
There is no provision for withdrawing a start notice or for amending the PGS liability once the start notice has been issued.
There is no mechanism for pre-clearance of PGS valuations
Bellway

9. Grant of implementable planning permission
Decision to proceed to develop
PGS valuation submitted to HMRC
HMRC issue Start Notice
PGS payable within 60 days
Bellway

10. Paying PGS cont. Implications of payment mechanism:
No facility for staggered payments, it’s all up front
It is unlawful to start without an HMRC Start Notice
You cannot get a Start Notice before you have an implementable consent
Phased sites with outline consent valued at commencement of each phase
Phased sites with full pp valued as a whole and PGS for whole site payable up-front
Bellway

11. Scaled-Back Sec 106 Obligations
Most incomplete element makes this more difficult to assess so this is a bit more speculative
‘Development Site Environment approach’ means new Sec 106s’ will not be significantly different
Will only exclude contributions to wider off-site infrastructure
Will still include affordable housing but concept of a common starting point should help
Sec 278 remains unchanged
More use of conditions a possibility
Will be legislative prescription on scope of 106 obligations
Bellway

12. The laws of unintended consequences
The landowners’ reaction to PGS has largely been ignored. Will it lead to less land coming to the market?
Grampian conditions – will their use be increased to limit development until necessary infrastructure is in place?
Will PGS really capture the increase in value of the land or will it become another tax on the developer?
Bellway