Large Developers Warned About Increasing Government Scrutiny
In an article for Scottish Construction Now, Derek Gemmell, Partner and Head of Construction and Property at Anderson Anderson & Brown (AAB), has criticised the lack of clarity around the proposed new Residential Property Developer Tax (RPDT) on large developers to raise funds to address unsafe cladding on existing buildings, while warning developers that they need to remain vigilant as new taxes, penalties and restrictions are introduced by the Government.
The problem, Gemmell claims, is that key information regarding the tax has not yet been confirmed, including rate, payment timing and how profits that are subject to the tax will be determined. This leaves developers compromised, as those currently negotiating for residential sites “face an unacceptable uncertainty” regarding return on investment. This, in turn, could lead to projects being delayed until further clarity is available.
At a time when the Government is stressing their commitment to building more homes, delays such as this could slow progress – ironic, given Gemmell’s suggestion that the Government is also targeting large residential developers with legislation that could hinder their accumulation of land with planning permission, due to the fact that “residential developments are not progressing as quickly as expected given no progress on developing land that would deliver over 1 million new homes.”
It has even been suggested that this is a deliberate ploy by developers to keep house prices on the up.
One of the suggested solutions is to introduce a levy in cases where development on approved land does not progress in alignment with a timeframe shared when planning permission was granted. There are obviously a number of factors that could affect this, such as the current materials shortage, which makes such an approach tricky.
Although these Government measures may seem like an agenda against large developers, restrictions that prevent large developers sitting on numerous parcels of land could be welcome news for smaller developers, who won’t be outmuscled at planning stages.
There is a lot to unpack here and, with the RPDT expected to come into play in April 2022, not a great deal of time for developers to plan for it, which is why Gemmell recommends developers speak to their accountants or business advisors for further information.