Farmers will not put land forward for development if they are taxed as soon as planning permission is granted, the Royal Institution of Chartered Surveyors has warned.

The Treasury is known to be considering the introduction of a windfall tax on development gains, because it wants local communities to benefit from building projects.

The issue could be included in next month’s pre-budget report.

But RICS has commissioned independent research which has concluded that the proposed tax – known as a Planning Gain Supplement – is seriously flawed.

LIFT IN VALUES

“The PGS would be a tax on the supposed lift in values at the point planning permission is granted,” said RICS senior policy adviser Oliver Foster.

“There could be many examples where farmers couldn’t afford to pay the up front tax.

The idea is also flawed because it is a tax on the predicted value of the land rather than actual sale value.”

Mr Foster said a PGS, first proposed in the Barker Review, was ultimately aimed at easing the supply of land for housing.

“In fact it could potentially do the opposite.

If the rate was set at a punitive level, then farmers would find it difficult to justify bringing land forward for development.”