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Planning Permission: Taxation

Communities and Local Government written question – answered on 29th November 2011.

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Photo of Zac Goldsmith Zac Goldsmith Conservative, Richmond Park

To ask the Secretary of State for Communities and Local Government what recent research his Department has conducted into the merits of tax on the land value uplift created by the granting of planning permission.

Photo of Bob Neill Bob Neill The Parliamentary Under-Secretary of State for Communities and Local Government

The Department has conducted no recent research into the merits of a tax on the land value uplift created by the granting of planning permissions.

The last Government planned the introduction of a planning gain supplement (including introducing preparatory legislation), but abandoned the policy, no doubt because of the likelihood of uncertainty, lengthy negotiations and legal disputes arising from the complex calculations of the value of the uplift.

Attempts by previous Governments to introduce land development taxes resulting from planning permission (the 1947 development charge, the 1967 betterment levy, the development gains tax introduced in 1973 and the development land tax in 1976) were similarly ineffective or unsuccessful.

The community infrastructure levy came into force in April 2010 (amended in April 2011) and allows local authorities in England and Wales to raise funds from developers undertaking new building projects in their area. Where it is charged the incidence of the levy will fall to land-owners whose land typically rises in value upon the granting of planning permission ('uplift'); the Department published an impact assessment to accompany the introduction of the community infrastructure levy:

http://www.communities.gov.uk/publications/planningandbuilding/infrastructurelevyfinal

Similarly, planning agreements (‘section 106 agreements'), between local authorities and developers, allow local authorities to access the development value that arises through the granting of planning permissions to ensure that the development is acceptable in planning terms. The Department has conducted a number of research projects on such agreements:

http://www.communities.gov.uk/planningandbuilding/planningbuilding/planningresearch/researchreports/planningobligationsresearch/

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