What Is An Equalisation Agreement

In our Spring 2018 newsletter, Robert Field looked at some of the tax considerations when landowners pool land for aatterir. This article aims to outline some of the agreements that typically occur when landowners are brought together for development, and some of the common issues that go beyond the tax. It is difficult to plan so long in advance; especially if there may not be a planning mission at the beginning. However, the parties must decide collectively and individually what is important to them and explicitly state their objectives (as well as a general commitment to act in good faith to achieve the objectives). A very simple example of a compensation agreement would be as follows: – Mrs A, Mrs B and Mrs C own the 100 hectares and conclude a compensation agreement between them with regard to the 300-hectare development area. The agreement states that they will distribute all proceeds from sales equally. Mrs A`s land was initially sold for £30 million and, under the terms of the compensation agreement, she made payments of £10 million to Mrs B and Mrs C. This agreement has the desired commercial effect, because although the land was first sold by Mrs. A, the three landowners benefited equally. Assuming that obtaining a building permit resembles a runner, the parties may also be encouraged (unless this is already addressed in a cooperation agreement) to enter into a compensation agreement.

This type of agreement between homeowners is usually required over large areas with development commitments for a new primary school, sports fields, highway improvements or sewer upgrades. A landowner may find that there is an unfair share of land losses on their land for these broader benefits, so there is an agreement to offset the proportionate costs between all landowners in a spirit of fairness. One possible solution to double taxation is for the developer to sign a compensation agreement directly with the landowners and distribute the proceeds of the sale accordingly. While this may be effective, there is concern that HMRC will try to invoke “transactions in the UK” legislation, which would result in the profit being subject to income tax (at rates of up to 45%) and not to the CGT (10% or 20%), as the amounts received represent a share of the developer`s business profits. . . .