Charities should be exempt from the Government's proposed planning gain supplement, according to the Charities' Tax Reform Group.
PGS, proposed in the 2004 review of housing supply by Kate Barker, former chief economic adviser to the CBI, would tax any rise in land or property value that results from planning permission.
In its response to a government consultation that closed last month, the CTRG said the proposal failed to take account of the time-honoured exemption of charities from most taxes.
It says the Government should grant 'zero-rated certificates' to charities for PGS, similar to the certificates that exempt them from VAT when they put up new buildings.
Helen Donoghue, director of the CTRG, said PGS would act as a brake on charitable activity.
"If a charity had a field and wanted to put up an old people's home, it would have to pay the levy when planning permission was granted," she said.
"Charities aren't like businesses - they haven't got the money for that kind of thing. They would have to pay it out of reserves - would that be a legitimate use of charitable funds?"
- See News Analysis, page 10.