Government shares proposed design of developer cladding tax

The government is seeking views on the new UK-wide tax, which would apply to residential developers with profits over £25 million.

The government has announced its proposed design of a new tax on developers to help contribute to the cost of cladding remediation work.

The Residential Property Developer Tax aims to raise at least £2 billion over the next decade towards remediating unsafe cladding on high-rise residential buildings.

The UK-wide tax, set to apply from 2022, would cover the conversion of existing buildings as well as new construction and would only apply to residential developers with profits over £25 million.

The new tax was first proposed by the government in February as part of its new £3.5 billion building safety package, which included its much-criticised leaseholder loan scheme.

The announcement raised the government’s promised spending on cladding remediation to over £5 billion since the 2017 Grenfell Tower fire.

The housing secretary Robert Jenrick MP said: “We’re making the biggest improvements to building safety standards in a generation, investing over £5 billion 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.”

In the consultation on the proposed tax, published late last week, the government said that housing associations that focus wholly or mainly on developing affordable housing should be exempt from the tax due to their being charitable organisations.

However, the Treasury-produced paper said the government “would welcome views on the treatment of profits from homes developed by housing associations for market sale where there are cross-subsidy arrangements with affordable housing, and where profits from residential development are reinvested by or distributed to a registered provider of social housing.”

The document admitted that the tax’s impact on housing supply is “uncertain” and would depend on its final design and how developers and landowners respond to it.

However, it added that maintaining an “adequate supply” of affordable housing is a priority for the government, and it is therefore particularly seeking views on how the tax will potentially affect affordable housing supply.

Jesse Norman, financial secretary to the Treasury, added: “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.”

Image credit: Pixabay

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