CAPITAL TAXES
Planning Gain Supplement (PGS)
Following last year’s Pre-Budget Report the
government issued a consultation paper on the introduction of a PGS. Following
that paper further consultation is now being undertaken on valuing and paying a
PGS. Legislation may be introduced to tax some of the windfall gain accruing to
landowners from the sale of their land for residential development to capture
some of the uplift in value arising when full planning permission is
granted.
The following are some of the principles that may be
considered:
- a system for gathering information as to the value
of land proposed for development
- the government would then set a tax rate on these
values, to be paid by the developer
- the granting of residential planning permission
would be contingent on the payment of the PGS
- there may be a lower rate for developments on
brownfield sites
- consideration may be given to allowing developers
to pay their contributions in instalments over a period of time.
The government recognises that the introduction of a
PGS would need to be accompanied by transitional measures. These would
help developers already engaged in land sales where contracts had been drawn up
before the charge was introduced or those who held large amounts of land where
planning permission had yet to be secured.
Stamp Duty Land Tax (SDLT) anti-avoidance
An anti-avoidance measure has been announced to tackle
a number of SDLT schemes. The measure takes effect on or after 6 December 2006
but there are transitional provisions to protect those who entered into
contractual commitments before 2pm on 6 December 2006.
The first
change provides that where one person disposes of a chargeable interest and
another person acquires that interest, or one derived from it, and:
- a number of transactions are involved in the
disposal and acquisition, and
- the SDLT on all these transactions is less than
that which would have been chargeable on a single land transaction
then the transactions are disregarded and there is a
notional land transaction on which the chargeable consideration is the total
consideration given or received.
The second change is to make a number
of alterations to transfers into and out of partnerships and transfers of
partnership interests.
Capital loss anti-avoidance measure
In Finance Act 2006, specific rules were introduced to
target ‘contrived’ capital losses created by companies. A loss
accruing to a company is not an allowable loss if it arises as part of
arrangements which have a tax advantage as their main purpose or one of the
main purposes.
HMRC have become concerned that persons other than
companies were involved in the creation of ‘contrived’ capital
losses to secure a tax advantage. Therefore for capital losses arising on
disposals on or after 6 December 2006 the anti-avoidance rule for companies is
extended to all persons liable to capital gains tax including individuals,
trustees and personal representatives.
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