PBR Part 4 - Development Land Tax

In my previous set of posts on the subject of the PBR I have been touching on the Government’s proposals to speed up planning and thus the delivery of new houses. You may have gathered that I am somewhat sceptical of the effectiveness of these measures.

However the final idea produced by the Chancellor is sure to reduce the delivery of new properties - Development Land Tax.

This has been imposed in various forms before and on each occasion it has led to less land coming up for sale as land and property owners are naturally disinclined to pay more tax when they are already paying Capital Gains Tax on any increase in value when a disposal takes place.

However this time the Chancellor says it will be different, this tax will be a Local Development Land Tax.

At the moment development gain is taxed locally by way of S.106 contributions imposed by your Local Planning Authority. The new tax is proposed to simplify this by a flat rate sum imposed on the grant of planning permission.

Some Councils already operate a similar system with contributions of around £2,000 - £3,000 per new property. Some even have sliding scale dependent on the size of the new property. However this is not supposed to be a Tax, it is supposed to relate to the cost of local infrastructure requirements.

You can be sure that a Tax will be levied at a far higher rate. This will either slow down the release of Land or stop a number of developments altogether.

Stay tuned to Property Fortunes...