Planning Gain Supplement - The Government’s Proposals On How It Will Work

As referred to in our Law-Now item last week, the Government has now issued three further consultation papers in respect of Planning Gain Supplement. In this item (and the further following two items which will follow over the next week or so) we comment in more detail on the proposals which have now been published and the rules which will apply if and when PGS is actually implemented in 2009.

The consultation paper entitled "Paying PGS: a Planning Gain Supplement technical consultation" provides details of the proposed framework for the administration of PGS.

In terms of the detail of the proposals:-

• The developer will need to request from HMRC a "PGS Start Notice" before implementing the relevant planning permission. Starting work without such a notice will be unlawful.

• When applying for a PGS Start Notice a PGS return will also need to be made setting out the developer’s self assessment of the PGS liability.

• The PGS will actually be payable within 60 days of the issue by HMRC of a "PGS Start Notice" (whether the developer has implemented the permission or not at this time). There will be a number of penalties for non payment including interest and potentially service by HMRC of a notice requiring works to stop on site.

• On-line applications for a PGS Start Notice are to be encouraged and the Government has indicated that it will try to process on-line applications the next working day.

• In terms of what will trigger PGS, this will either be a full planning permission or the issue of the last reserved matters approval where there has been an outline permission. The date of this "permission" would be the valuation date for the purposes of calculating PGS.

• There are a number of detailed proposals in respect of "phased developments". Where there is an outline planning permission for an overall development and then individual reserved matters applications for each phase, each individual phase will have a separate planning permission for PGS purposes and will require a separate "PSG Start Notice". There would then be separate PSG liability for each phase - which from the developer’s point of view means that any increase in land values between the outline planning permission and the reserved matters approvals on the subsequent phases will lead to a higher PGS liability.

• There are also detailed proposals in respect of "re-planning" (i.e. changes to the works which require a new planning permission after implementation of the first planning permission). A new "PGS Start Notice" is needed in respect of the further planning permission and the PGS liability needs to be recalculated although credit will be given for the PGS paid in respect of the consent which has already been implemented.

• There is some suggestions that in certain limited circumstances PGS liability may be transferred from the original developer to a third party. There is no great detail in the consultation paper but events which may trigger third party liability are stated to include the sale of the development site, and where a "Stop Notice" has been issued and the developer is unable to pay the PGS - this second limb in particular may cause problems.

• It is also proposed that where a development is actually completed where no PGS Start Notice was applied for, then liability for paying the PGS should pass to the owners of the completed scheme.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

The original publication date for this article was 15/12/2006.