No one disputes that much cladding on old residential developments should be improved, repaired or replaced. This remediation has been and will continue to be costly and the government wants "to ensure that the largest developers make a fair contribution to help fund the government's cladding remediation costs".
A new form of corporation tax, at a yet unspecified rate, above a yet unspecified allowance, originally mooted to be £25m, is being designed by the government. This new tax, "residential property developer tax" (RPDT), is currently subject to consultation and will be effective from 1 April 2022. You have until 15 October 2021 to make your comments to the Treasury.
The British Property Federation (BPF) has already made initial comments, stating:
"The build to rent sector has not contributed to the building safety problems and the attributed financial disputes between freeholders and leaseholders which this residential property developer tax is intended to fund."
The BPF argues that BTR developers/investors remain fully liable for remediation work and the costs are not passed on to renters. Thus, long term investors such as pension funds are being asked, in effect to subsidise property traders.
Subject to any announcements in the meantime, property developers will nervously await 27 October 2021 (the Autumn Budget date) and publication of the details of the new tax, including the applicable rate and allowance.
The British Property Federation has written to new housing secretary Michael Gove calling for a change in legislation to exempt build-to-rent from a new developer tax. The BPF and industry experts have requested a meeting to explain their opposition to the residential property developer tax and the challenges alongside the building safety levy. The RPDT is a tax on developer profits that aims to generate £2bn for cladding remediation. When announced earlier this year, former housing secretary Robert Jenrick said the tax would “make the industry pay for the faults of the past”. However, the BTR industry argues the tax would be a “dry tax” targeting a profit that does not exist – as landlords retain assets to rent and do not sell properties. Any tax would therefore “create huge complexities” and distort competition in the sector.