A new tax and levy on residential property developers in 2022

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07 May, 2021

Matthew Jones

On the 10 February, the Government announced its strategy to improve nationwide building safety, following the continuing fallout from the Grenfell disaster. A pivotal part of the strategy was the announcement of a further £3.5 billion funding to help facilitate the removal of unsafe cladding. It appears the Government intends secure the additional funding by placing a new levy on residential property developers.

Cladding removal

The beneficiaries of this initiative will potentially be leaseholders in residential buildings more than six storeys, as the Government will pay for the removal of any unsafe cladding in such residential buildings. However leaseholders in residential buildings with four to six storeys (less than 18 meters) will potentially have to contribute towards the removal

How will it impact developers?

The Government has announced its intention to publish a consultation on a new tax on the 'largest' residential property developers, with the aim of raising a minimum of £2 billion over the next ten years. Currently, this is planned to be introduced in 2022. It is anticipated that the consultation paper will be released in the coming months and the proposed levy will apply where developers obtain planning permission to build certain types of high-rise properties (which are yet to be defined). There are to be measures proposed to protect SME's from this charge.

For now, there is much in the way of detail to be added to the proposal and how levy will materialise, but it is clear the government and set to push forward with these proposals, and are looking to the industry to contribute significantly to its proposals . The way forward could have an impact on developers' decisions to focus their plans in certain areas. Some of the larger developers have already spoken of the measures needing to be proportional in terms of the building work itself for it to be a viable solution. It is very much a case of "watch this space".

For more information contact Matthew Jones in our Commercial Property department via email or phone on 01254 222316. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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