Will the proposed Residential Property Developer Tax work?
Earlier this year Robert Jenrick, the Secretary of State for Housing, Communities and Local Government set out a five-point plan to bring an end to unsafe cladding, provide reassurance to homeowners and support confidence in the housing market:
- The government will pay for the removal of unsafe cladding for leaseholders in all residential buildings 18 metres (6 storeys) and over in England.
- A generous finance scheme for leaseholders in lower rise, lower risk buildings – those between 11 and 18 metres (4 to 6 storeys) – to help pay for cladding removal where it is needed and ensure leaseholders never pay more than £50 a month towards the costs.
- An industry levy and a new tax on residential developers, to ensure developers play their part and make a fair contribution.
- A new building safety regime to ensure a tragedy like Grenfell never happens again.
- Providing confidence to this part of the housing market including lenders and surveyors.
To help pay for all this the government is now consulting on its proposals to introduce two revenue raising measures.
£2 billion
In bringing an end to unsafe cladding it was always the expectation of the government that building owners and developers should step up to meet the cost of this work, without passing on costs to leaseholders. Where they have not, or where they no longer exist, the government has stepped in, providing over £5 billion to date for remediation of unsafe cladding on high-rise residential buildings, alongside wider support.
According to the government’s announcement, “The introduction of these measures is not intended to imply responsibility on behalf of the payers for historic construction defects in relation to cladding.
“The government recognises that many developers have had limited involvement in the development of high-rise buildings that require remediation and that many have taken independent steps to cover the costs of remediation where applicable.
“However, the largest residential developers are operating in a market that will benefit from the substantial amount of funding the government is providing to address building safety defects. The government has also helped support confidence and liquidity in the residential property market with its recent interventions on Stamp Duty Land Tax and the mortgage guarantee scheme.
“Therefore, given the significant costs associated with the removal of unsafe cladding, the government believes it is right to seek a fair contribution from the largest developers in the residential property development sector to help fund it.”
The consultation is focused on only one of the two revenue raising measures: the new tax on the residential property development sector.
The Residential Property Developer Tax (“RPDT”) would be time-limited and apply to the largest residential property developers in relation to the money they make from UK residential development.
The new tax would be introduced in 2022 and seek to raise at least £2 billion over a decade. The consultation, runs until 22 July, seeking views on the design, implementation and administration of the new tax.
If you would like to discuss something related to a property valuation please contact Zah Azeem, Partner, direct via email at zah@scrivenertibbatts.co.uk or call 020 8947 7040.
