The future residential property development tax could put many investors out of the market.

Investors will be in danger if this new tax is approved.

Tax and advisory firm Blick Rothenberg says the government’s proposed residential property development tax may lead some investors to pull out of the market.

The tax designs, on which the government invited comment last week, are expected to raise £ 2bn over a decade to help contribute to the cost of remediation work on the liner. The government said last week that the tax would apply to UK residential development proceeds and cover the conversion of existing buildings rather than the construction of new ones.

Heather Powell, partner and director of ownership at Blick Rothenberg, said: “Governments plan to raise £ 2bn from residential developers to pay for the cladding crisis through a tax on their profits and it will make many investors think again.”

“A tax of this magnitude would be a serious blow to many investors and force them to withdraw from the market because they cannot pay these taxes. I think that the UK government has to find an alternative that does not affect investors so much, although the coating crisis is a very serious problem, this is not the right way to deal with it.”

“The tax has not yet been approved, so the UK government still has time to rectify and find a better solution to obtain the funds to combat the cladding crisis without affecting investors.”

She added: “Residential property development tax will be paid on earnings generated by residential development in excess of £ 25 million, but no deduction for interest and finance charges will be allowed when calculating profit to be taxed. Since interest is a significant cost for many developers, the tax could turn a profitable development into a loss.”

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