A new residential property tax could be levied on the profits of developers from April 2022, it has been revealed.
The proposed levy, known as the Residential Property Developer Tax, comes as part of the £5 billion cladding remediation package following the Grenfell Tower disaster.
Here’s what we know so far.
According to HM Treasury, the new tax would help to pay for the removal of unsafe cladding on high-rise residential buildings across the country.
The levy would apply to both stand-alone companies and groups that undertake residential development activities and generate profits “in excess of £25 million”.
While the exact rate of tax has yet to be confirmed, it is estimated that the Residential Property Developer Tax could raise as much as £2 billion over 10 years. HM Treasury has also yet to confirm if the tax will be applied to a company’s profits as a whole, or only those relating to the development of residential structures.
Commenting on the levy, HM Treasury said: “The rate of the tax will be considered once the final design of the tax is clearer.
“The rate is expected to be announced at a future fiscal event. That is because the government does not want to pre-empt the final design of the tax without stakeholder consultation, and this consultation covers multiple options in terms of the tax’s design, including the tax base.
“The government recognises that stakeholders would appreciate further clarity on the rate, in the context of the headline Corporation Tax rate increase to 25 per cent in 2023. The government also recognises that certainty on the rate is helpful for business planning purposes.”
A proposed second tax, known as the Gateway 2 developer levy, could also be applied when developers seek permission to develop certain high-rise buildings in England, the consultation document reveals.
To learn more about the proposed new levies, please click here.
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