Four years on from the Grenfell Tragedy the Government is continuing to take steps to ensure that unsafe cladding on high-rise residential buildings is replaced.
The Government has committed to funding this. However, as part of its plan to ‘build back better’ after the Covid-19 measures, it is also eager to ensure that residential property developers make a ‘fair contribution to the overall costs of the remediation programme’.
To achieve this, it was announced in February that the Residential Property Developer Tax (the ‘RPDT’), colloquially known as the ‘Cladding Tax’, would be introduced in 2022. The exact scope of the tax is still unknown as the Government is yet to publish the results of its consultation which ended on 22 July 2021. However it is intended to be a time limited tax which will raise at least £2 billion towards the remediation works.
As we look towards the Autumn budget, here is what we know so far:
Will it affect you?
The RPDT is intended to affect the largest corporate residential property developers and the Government has suggested this will be developers who:
- undertake ‘UK residential property development activities’; and
- make an annual profit of over £25 million.
Which properties will be affected?
We are awaiting further guidance from HMRC about what falls within the scope of the RPDT, but the consultation proposal document suggests that its scope will be broad, applying to:
- a house or flat that is considered as a single residence, generally together with the grounds and garden or any other land intended for the benefit of the dwelling;
- any building that is suitable for use as a dwelling, where it is not so used at the relevant time;
- any existing building that is being adapted, restored to, or marketed for, domestic use;
- undeveloped land where a residential building is being or would be constructed on it; and
- any undeveloped land or land undergoing a change of use, for which planning permission to construct residential property has been obtained.
How much will it cost?
The rate of tax is currently unknown. This, along with the short timescale for implementation has raised concerns from institutions such as the Chartered Institute of Taxation. It also remains unknown whether firms who have already undertaken and completed all remediation works by 2023 will be exempt from the RPDT.
It appears that the Government’s initial announcement has raised concerns for residential developers who await answers about the exact scope and rate of tax. As we look towards the Autumn budget, the hope of many residential developers will be for clarity so that they can plan and continue to deliver affordable quality new homes.
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