In the bleak mid winter frosty winds made moan – and there is a chill wind blowing from the Treasury and the ODPM on their Planning Gain Supplement announcements that came with the December Pre-Budget Statement.

With the Treasury facing further budgetary constraints resulting from the loss of the European rebate there will be increased pressure to implement the supplement, which will mark the fifth attempt by a Labour Government in the last 60 years to tax development gains.

Obviously, the Planning Gain Supplement will be of interest to our clients with strategic development land, but what has been less widely reported is the impact it could have on barn conversions. At present the consultation draft refers to a potential tax levy triggered on the commencement of development for residential or commercial uses and the only exemptions referred to so far relate to householders constructing extensions and home improvements. There will be a minimum threshold below which the tax will not bite, although there has been no indication as to what this threshold is likely to be.

In addition, there is much discussion within the industry about whether Business Asset Taper Relief and Roll-Over Relief for windfall gains arising on planning consent will be withdrawn and furthermore whilst the Treasury have been careful not to publicly put a figure on Planning Gain Supplement, it is presumably more than coincidence that all the papers at the weekend before the Pre-Budget Statement referred to a figure of 20%.

For the conversion of a barn to a single dwelling, which might have an unconverted value with planning consent of say £300,000, this may currently (with Business Asset Taper Relief) create a tax bill on disposal of a maximum of £30,000 – with further ability to reduce this by arguing a high base value and use of £7,500 per annum Capital Gains Tax allowance.

Contrast this with a possible scenario within 3 years where that £300,000 barn could produce a Planning Gain Supplement Tax of £60,000 and with the corresponding loss of Business Asset Taper Relief the remaining £240,000 might be taxed at 40%, leaving £144,000.

Therefore the Government's take could equate to more than half of the overall value and for those that still have unconverted barns either with or without planning consent, now may be a good time to give careful thought as to how best to maximise not only overall value but your share of the cake!