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The value of development land

Friday 14 February 2020

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There’s a common misconception that where land has the prospect of planning gain, some or all of that gain may be sheltered by a transfer to a third party, even towards the end of the process. However, under tax law, most such disposals (which are almost always made to a connected party) are taxed at market value. In many cases, ‘market value’ is well above agricultural value, even if planning consent hasn’t yet been obtained.

Residential development land

This principle was tested recently in the case of Foster v R&C Commissioners. For probate purposes, the executor valued 6.39 acres of agricultural land at £191,700. The land was outside the local development plan, hadn’t been granted planning permission and didn’t have proper access. The taxpayer therefore looked at amenity value and then added a premium for ‘hope’.

Correct valuation approach

The Valuation Office Agency (VOA) felt that in assessing the value between a willing buyer and willing seller, the correct approach was to consider the value of the site, assuming such difficulties could be removed, and then to discount that value to reflect the risks in the eyes of a buyer. Accordingly, it determined a value of £850,000. This valuation was based on the development land being large enough for 50 houses, but discounted the full development value by 70% because of the uncertainty. The taxpayer appealed the decision.

Final valuation

The tribunal concluded that this was an opportunity which a developer would take, notwithstanding the risks. The price would no doubt reflect the uncertainties, but would take into account successful planning applications which had been made for other similar sites in the area. Thus, in the absence of direct comparables, the VOA’s ‘top down’ approach was the correct model.

However, the calculations were revised. The development density suggested by the VOA was somewhat excessive, and the discount for lack of access was undoubtedly inadequate. Therefore, based on 45 plots and an 80% discount, the valuation was reduced to £590,000.


There are, of course, numerous other matters to be taken into account where planning issues and development are concerned. A major risk is that the whole venture could be deemed a trading venture, meaning that profits are taxed at income tax rates rather than the advantageous capital gains tax rates.

In any event, the argument in support of ‘top down’ valuation methods has now received further support. We recommend you always seek professional advice.

Need help?

If you’re considering a valuation of development land for probate or other purposes, please get in touch with our Farms and Rural Business team or our Probate Services team.

Call 0330 024 0888 or email

Steven Rudd


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Larking Gowen


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