By Andrew Watts

 THE GOVERNMENT is considering introducing a tax on land values which rise significantly once planning permission has been granted. The tax would then be used to fund facilities within new building developments.

Brian Castle, taxation adviser at the Country Land & Business Association, said the government, and in particular the Treasury, were searching for a method in which to recoup some of this inflated value.

This rise in value was considered by government to be “unearned”, he said, and so it was keen for the community to benefit from the extra wealth.

 “Under section 106 of local planning regulations, once planning permission is granted, the developer makes a contribution towards local facilities, either in cash or in kind, to support a community project such as a playground or extra school places,” said Mr Castle.

“But under this proposal the tax would be gathered immediately after the land received planning permission, collected by the Treasury and then allocated by central government.”

 The idea of a land tax was first mooted last year when Kate Barker (a member of the Bank of England”s monetary policy committee) recommended the tax, known as a “planning gain supplement”, in her review of the UK”s future housing needs.

Ms Barker”s review said: “The government should actively pursue measures to share in these windfall gains which accrue to landowners so that these rises in land values can benefit the community more widely.

“The value captured can then be used as a funding stream for a number of other policies. The planning gain supplement would fall mainly on landowners, with little impact on house prices,” it said.

 It is not yet known how the tax would be calculated, but Mr Castle said he expected the government to either launch a consultation on the proposals – probably in December – or scrap it as unworkable allowing it to consider other measures.

andrew.watts@rbi.co.uk