UK Government Mulls New Land Tax Initiative

by Robert Lee, Tax-News.com, London

31 August 2005

The UK government is considering a new tax on land sold for development, with revenues to be ploughed back into local authorities to revive local communities, according to a report in the Independent newspaper.

The move is designed to share out some of the huge windfalls made by some landowners when tracts of land are sold for housing, and could potentially raise millions in new revenues. The proposal could feature in the pre-Budget report, to be announced by Chancellor of the Exchequer Gordon Brown in November, and a consultation would then follow before a final decision is taken.

It is reported that the tax would apply to individuals as well as developers and will be paid once planning permission has been granted to build on the land. A recent study for the government found that the value of land earmarked for development increased substantially when planning permission had been obtained. For example, land in the South East of England rose in value to £2.7 million per hectare from £9,122 after it became possible to build on it.

However, it is thought that there will be tax concessions for the development of so-called brownfield sites in a bid to discourage building on green belt land.

The land tax idea was proposed in a review of Britain's housing needs by the former Bank of England Monetary Policy Committee member, Kate Barker in a report published in March last year, and, according to the Independent, is supported by both Chancellor Brown and Deputy Prime Minister John Prescott, whose ministerial portfolio covers housing and planning.

People with longer memories will recall Development Land Tax, which was abandoned in the 1980s after giving rise to a vast tax avoidance industry and largely failing to achieve its aims. Isn't it said that those who fail to learn from history are condemned to repeat it?

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