- Rise in corporation tax and the bill for the cladding crisis loom large
- Is the era of generous special dividends about to end?
- Some names with smart strategies look cheap versus peers
Perhaps not 15 March but 30 March 2022 is likely to prove a landmark day for the UK’s house-quoted housebuilders. This is both the deadline day for sorting out how much extra tax the sector will have to pay to fund the cladding crisis and also we will know, after the results season, how the sector plans to approach dividend policy going forwards.
The housebuilders will have to pay some additional tax, but will it be 4 or 12 per cent? That would be on top of the general rise in corporation tax of 5 per cent, so potentially sector tax bills could rise from today’s 19 to as much as 37 per cent, which would impact on dividend funding capacity. There is certainly enough cash flow left to fund core dividends, but specials and other capital returns will be much harder to fund. Bulls of the sector might view the more than 10 per cent hit to share prices arising from this as a storm in a teacup, but although the sector might look cheap, it almost always does.
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