Government seeks views on new residential developer tax

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The government has revealed further details of its new residential developer tax, as it seeks views on the proposed design features of the tax

The government believes it is right that residential developers, who will benefit from the restoration of confidence in the housing market, should help fund the significant costs associated with the removal of unsafe cladding.

It has now launched a consultation on the design of new residential property developer tax.

Housing secretary Robert Jenrick, said: “We’re making the biggest improvements to building safety standards in a generation, investing over £5bn helping to protect leaseholders from the cost of replacing unsafe cladding on their homes and ensuring industry is held to account for the wrongs of the past.

“This tax will strike the right balance between developers making a contribution and ensuring fairness for the taxpayer.”

‘Right to seek a fair contribution from the largest developers’

Financial secretary to the Treasury, Jesse Norman, commented: “Ending the use of unsafe cladding is a priority for the government, as it builds back better from the pandemic.

“Given the significant costs associated with the removal of unsafe cladding, it is right to seek a fair contribution from the largest developers in the residential property development sector to help fund it.

“The government wants to ensure this tax is proportionate and works as intended, which is why it is launching this consultation today.”

The government is calling for views on proposed design features of the tax including proposals that:

  • It would apply to a measure of developers’ profit from UK residential development
  • It would only apply to in-scope profits over £25m
  • It would apply to conversion of existing buildings as well as new construction

Ministers intend to set out the rate of the developer tax at a future fiscal event. The time-limited tax is due to apply from 2022 and is intended to raise at least £2bn over a decade.

The new tax will be UK-wide, reflecting the benefit that housing developers will derive from restoring confidence to the housing market across the UK.

The residential property developer tax and a new Gateway 2 levy will be applied when developers seek permission to develop certain high-rise buildings in England.

3 COMMENTS

  1. Tax residential land sales and use it for social housing provision and other topics such as cladding. This is where the excess profits are made as windfalls. Taxing big companies profits is a form of rewarding failure, ie, not taxing companies who aren’t successful. This is not a good capitalist economy model and smacks of communism.

  2. I agree with David Lees: the people making the biggest profits on the golden goose of new-build and renovation development are not housebuilders, but windfall landowners and the Government itself, in the form of CGT, VAT, corporation tax, CIL, S106 cash and social housing obligations, and stamp duty.

    The organisation that should be paying the vast majority of cladding remediation is central and local Government, for failing to deliver adequate testing regimes and for authorising building control services that permitted the installation of dangerous materials and often shoddy workmanship in the first place.

    Even before this new tax, the requirement for developers to provide new social housing at far below market rates to housing associations and councils is deeply iniquitous. Builders get barely the construction cost back from the HAs, so all the cost of the land, planning and development overheads falls on the builder (hence reduced profits and capacity to build, and lower rates of housebuilding) and the private homeowners, as much of the cost of the social housing land etc falls on them. With 40% social housing obligation, 3 private homebuyers are having to pay more than 50% of the GDV so that housing associations get properties at unbelievably low prices and their 2 lucky, lucky neighbouring social tenants get to live in clover with cheap rents and effective lifetime tenancies. Why should the cost of social housing fall on homeowners and their housebuilder, rather than taxpayers in general? The same goes for “infrastructure improvements”. Why are a relatively few new private homebuyers and their builders having to pay for facilities like new schools, roads, parks and so on that are available for use by the whole general population? The result is reduced build capacity for developers, who are having to bear the whole cost of the country’s new social provision, as well as the cost of new private housing, and it makes life incredibly difficult for SMEs in particular. How is a small builder meant ever to get bigger and challenge the established companies, when councils are demanding 40% social housing on sites as small as 2 houses?

    I say reinstate CGT on all house price inflation: it will restrain house price rises, help stop UK citizens from seeing residential property as their cash cow, and provide an income so Government can pay for social housing and cladding remediation rather than burdening most of the cost on housebuilders and buyers of new homes.

  3. Developers should pay the full cost of remediation of apartment blocks which have not been built to the standards of Approved Document B. These buildings have been built on the cheap therefore increasing developers profits.
    Going forward all developers should be licensed. Failure to build in accordance with building regs should result in loss of license.

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