It is estimated that the Residential Property Developer’s Tax (RPDT) could contribute around £205m to support efforts to deal with unsafe cladding.
In yesterday’s budget, Chancellor Rishi Sunak confirmed further details of the tax which was announced back in February. The RPDT will be introduced in April 2022 and will be levied on housebuilder’s whose profits are above £25m at a rate of 4%.
An analysis of pre-tax profits for 11 of the biggest housebuilders in 2019 showed that between them the potential taxable value of housebuilder profits was £5.2bn. At a 4% rate of tax on this figure Britain’s biggest housebuilders would contribute £205m in tax per year.
Persimmon alone could be in line to pay an additional £41 million per year in RPD Tax based on their pre-pandemic performance, with Barratt, Taylor Wimpey and Berkley also paying more than £30 million.
Even during 2020 when the pandemic saw housebuilder profits more than half (-52%), £2.6 billion in taxable value above the new £25 million threshold would have resulted in an RPD Tax bill of almost £103m.
The work was conducted by real estate debt advisory specialists, Sirius Property Finance. Managing Director Nicholas Christofi, commented:
“Yesterday’s confirmation of the Residential Property Developer Tax will come as a significant blow to Britain’s biggest housebuilders who have fought hard to overcome pandemic uncertainty, a decline in profits and a sharp spike in the cost of labour and materials.”
“It’s clear that having promised £5 billion to address the cladding crisis, the government is now reliant on the nation’s housebuilders to pay the bill and it’s a little unfair, to say the least, to expect the entire sector to compensate for the poor practices of a few.”
“It’s also likely that this latest move could inadvertently stifle housing delivery. The outcome of which is less stock reaching the market to address the current housing crisis, while high demand for those new homes that are delivered will push house prices ever higher to the detriment of the nation’s homebuyers.”
3 Responses
I am stuck in a badly built block of flats – missing fire breaks, badly fitted fire doors, the lot. All signed off as fire safe when I bought it, now rendered worthless and likely to bankrupt me.
As far as I am concerned, these big housebuilders are corrupt to the core and not fit for purpose. In a just world, the government would tax them into oblivion. Better no new houses than the death traps they currently throw up.
Misleading and incomplete article. Oh the poor builders and their Billions of profit and millions in donations to the Tory Party. What you fail to explain is the link between RPDT and the Building Safety Crisis – which the Developers are more than partially responsible for. Costs of fixing this currently fall on Leaseholders (who have done precisely nothing except buy a property), and the RPDT (something the industry apparently volunteered) goes a tiny fraction of the way to covering that. The building industry isn’t suffering because of the RPDT – they just want to move on as if their contribution is complete. Of course, you forget that remediation work goes back to them, so they make more money fixing issues that shouldn’t be there in the first place.
Oh pity the poor builders who – in the case of Bellway – make approx £47k profit per house sold. Perhaps you’d like to explain why the RPDT exists? And how the Developers have contributed in very large part to the current Building Safety Crisis. How the RPDT is their attempt to look benevolent (they suggested it to the Treasury) and in doing so walk away from their responsibilities to a situation that has Leaseholders (who have no part in reg, design, or build) on the hook for costs anywhere up to £200k+ to make their properties fire safe. Many of these properties have been shown to fail the Building Regs in place at the time of build. This is not a “woe is me” moment for the builders, it is a shame for the Industry and betrayal of the consumer base they have failed. A 4% tax on profits above £25million, which is being angled as penance for their part, is estimated to pull in £2bn over 10yrs – is a drop in the ocean considering some estimates to fix the Building Safety Crisis at £50bn. The 2bn forms part of a package the Government claims will fix the crisis without Leaseholders “who aren’t responsible” (quote from Johnson, Jenrick, Pincher, Greenhalgh) having to pay – when basic maths shows clearly it won’t. In this situation the work goes back to the building Industry who made the errors in the first place, and VAT goes to the Government so they actually make a profit out of this situation. People’s lives are stalled effectively hostage in their worthless properties. Maybe you ought to write about that instead?