Taxing times for small builders


How does a Government that seeks to champion small business and enterprise currently treat a small developer?

A small developer from Kent gave me a rough outline of why a project for three modest 3/4 bed houses which I had introduced him to was no longer worthwhile. He was particularly scornful of the local Council’s Affordable Housing Levy which has just been introduced or “another stealth tax” as he put it, “I just cannot see how they ever expect us to build enough homes when they keep increasing taxes and regulation it is a nonsense. I take all the risk, work bloody hard and what do I get in return? Tons of red tape, no profit and I have to pay through the nose to keep a squad of bureaucrats in well paid jobs.”

Here is a rough outline of why he is so angry:

Land Purchase: £300,000
Stamp Duty Land Tax: £9,000
Demolition & Site Clearance: £40,000
Architects & Planning: £15,000
Build costs: £407,000
Local Authority Affordable Housing Levy (TAX): £38,000
Professional Fees (exc. architect): £6,500

Total: £815,500

Local agents have suggested that current open market value for the three houses would be £830,000 so it is not worth our man proceeding. In better times he would have expected a value of £910,000 making him around £94,500 profit less agents fees plus VAT of £21,840 giving a pre tax profit of £72,660.

How much then could the state have extracted from the deal assuming it sold for £960,000?

SDLT on purchase £9,000
VAT on agents fees for site purchase £1,200
Fees associated with Planning, Land Registry etc. c. £5,000
Affordable Housing Levy c. £38,000
SDLT on Sales £28,800
VAT on agent fees for sale of three houses £3,840
Tax and NI on £72,660 £23,479.45

Total for the state £109,319.45

The developer’s share £49,180.55

If he was to proceed with the project in current circumstances he would suffer a loss of £2,260 after agent’s fees + VAT and the state would still extract over £73,000.

If the Government is looking to the private sector to lead our economy into growth, it doesn’t look like small developers will be rushing to play their part.

Chris Neal is Executive Director of GB Job Clubs, a charity with the aim of helping people find work. A job club is a group of individuals that meet on a regular basis to support each other through the job hunting process.