The Government “will not hesitate” to introduce a developers’ tax to hit firms responsible for dangerous cladding in residential buildings if they do not volunteer to fix safety defects, housing and communities secretary Michael Gove has said.
The new tax – known as RPDT – would apply from April 2022 onwards.
The 4% rate kicks in once a business makes £25 million in profit from UK residential property development activity and will be aligned with the corporate tax regime for simplciity in understanding and reporting.
It brings an end to a controversial scheme in which the Government covered the costs for buildings taller than 18m, but required leaseholders in small buildings to take out loans to pay for the works. The housing and communities secretary estimates an additional £4bn is needed to fund the work.
Afford Bond Tax Director, Chris Regnauld commented: “Any potential new tax would come in addition to the 4% residential property developer tax announced in the Autumn Budget 2021, which the Treasury predicted would collect almost £1.125bn over the next five years. It’s becomming very controversial as the largest UK based house builders, who only built a minority of the affected buildings, have already spent or committed approaching £1bn to remediate affected buildings.
“The residential property developer tax will raise billions more. And they believe any further solutions should involve those who actually built affected buildings and specified, certificated and provided the materials on them.”
Gove said: “We will use legal means and the tax system to ensure those who are responsible for the upkeep of these buildings pay rather than the leaseholders, the individuals, who in the past were being asked to pay with money they didn’t have for a problem that they did not cause.”