The government has announced that it has launched a consultation on its previously announced residential property developer tax, aiming to raise at least £2bn to help towards the cost of cladding remediation work.
The Treasury is seeking views on the proposed design of the tax and intends to apply the tax to the largest residential property developers - to profits above £25m - and to a measure of profit from UK residential development.
It is also proposed that the tax should apply to conversions as well as new development.
The consultation does not cover the rate of the tax; this is likely to be announced at a “future fiscal event” once the design of it is determined.
However, the government has set out some principles to guide the final rate, including that the tax burden should be proportionate and viewed in the context of the planned Corporation Tax rise to 25% in 2023.
It also must not disproportionately impact on housing supply “or other government objectives on housing”. The government also intends to keep the tax rate stable without yearly fluctuations.
The consultation states that if the residential property developer tax does not raise “sufficient” revenue over ten years, the government would consider extending it beyond this time.
The consultation also considers how the tax may interact with the “Gateway 2” levy, to be implemented when developers seek permission to develop certain high rise buildings in England.
And within the consultation, the government has acknowledged retirement schemes that offer different levels of care.
Accordingly, profits from those retirement schemes “where care and allied service functions such as catering and cleaning are provided as an integral part of a communal dwelling” would be “out of scope” of the tax, the government said. But profits from developments without reliance on care functions would fall under it.
The residential property developer tax is due to apply from 2022, with the aim to raise at least £2 billion over a decade.
Robert Jenrick, Housing secretary, 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 the 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.”