Taxing times

Tuesday, April 2, 2013

As if building a home extension didn’t cost enough already, there’s a new tax in town. On top of construction costs, VAT and section 106 agreements, homeowners must now also pay the Community Infrastructure Levy on any extension of more than 100 square metres.

If that wasn’t bad enough, it’s even worse if you live in London. Depending on which zone you live in, the mayor wants an additional £20 to £50 per square metre of development. The money will be used to pay for Crossrail – whether you like it or not!

It’s up to local authorities how much they want to charge – the rate will depend on how much infrastructure they need and whether they want development to take place at all. Some have chosen not to bother charging a levy, while others have been dying for such an opportunity to put a dampener on developers’ enthusiasm. The amount also varies within boroughs, adding to the potential confusion.

At the top end of the scale, this new charge could represent a major barrier to your home improvement aspirations. In some areas of Kensington & Chelsea, homeowners face a total levy of £700 per square metre, adding £70,000 to the cost of a 100 square metre extension. Astonishingly, the borough described this eye-watering amount as “modest”.

It will come as little comfort to learn that this tax was never intended to hit homeowners. The Community Infrastructure Levy is the latest inadequate attempt to force major developers to mitigate the impact of their projects. That the 100 square metre threshold will affect those working on their own homes is merely an unfortunate side effect.

While this might all sound very dispiriting, don’t go scrapping those home improvement plans just yet. Just as the legislation has its unintended consequences, we’ve identified various loopholes and strategies to mitigate its effect on those who were never supposed to be caught in the first place.

Call us for a chat to find out how you can proceed with your plans, without compromises, while avoiding an extra bill running into tens of thousands of pounds. We’re expecting the legislation to be tinkered with in the coming months but, rest assured, we’ll be on top of any changes and our extensive research has given us a detailed picture of how the levy is being applied across London and the South East.