I read with interest your article ‘Coalition of industry bodies to develop UK net-zero carbon building standard’. The focus on ESG credentials of new and existing buildings was front and centre of the agenda at Mipim in March and also with the respondents of the Saffery Champness Real Estate Sentiment Index, published the same month.
Tax incentives for both new-build schemes and refurbishment/retrofitting do have a role to play. The ongoing HMRC consultation on capital allowances provides an opportunity for government to provide further enhanced tax deductions or credits for businesses either developing or renovating.
At a time when demand is for high-quality ‘green’ office space, this presents an opportunity to incentivise the upgrading of office stock, where there is already embedded carbon from the original build.
While the UK has a land remediation tax credit, enhanced profit and loss deduction ‘above the line’ could be something for the government to consider. It could offer the same tax-enhanced deduction that is available for land remediation, but it would be more effective if it were to give construction/development businesses an uplift in profits before tax.
This would assist with driving the behaviours of those making decisions on which sites to buy and remediate, where corporates and individuals are judged on their pre-tax profits, as well as providing the same incentive to loss-making companies.
Developers and investors are very attuned to the environmental impact of their buildings. However, further tax incentives would be welcome, particularly given the steep rise in material and labour costs over the past two years.
The government could also consider lowering the rate of VAT on renovation projects, particularly in the residential sector, where demolition and rebuilding is incentivised under current rules.
Sean McGinness, head of the real estate group, Saffery Champness