Government confirms Residential Property Developer Tax to apply from April 2022

12/11/2021

Residential Property Developer Tax (RPDT) will apply from April 2022 at a rate of 4% on profits above £25m from residential developments carried out by companies in the UK.

In a recent article, we set out details of the draft RPDT legislation proposed by the government to raise £2bn over 10 years to fund measures to end unsafe cladding following the Grenfell Tower disaster.

RPDT was confirmed by chancellor Rishi Sunak in the autumn Budget last month, and he filled in details missing from the draft legislation as follows:

  1. Companies in the UK will pay RPDT at a rate of 4% on residential property development profits that exceed the annual allowance of £25m per year. The £25m allowance is group-wide, not per company.
  2. The new tax will form part of the corporation tax process with details included in a company’s corporation tax return.
  3. No deduction will be permitted for financing costs, and the use of losses will be restricted.
  4. RPDT will not apply to companies that develop residential property for build-to-rent (BTR). However, the government has said it will keep this under review.
  5. The legislation will apply from April 2022 and does not allow companies relief where a development was started before RPDT was announced but will be completed after April 2022.
  6. Non-profit registered providers of affordable housing will be exempt from RPDT. Care homes, hotels and specialist purpose-built communal housing will also be exempt.
  7. The tax will not end on a fixed date but will be repealed once sufficient revenue has been raised to deal with the cladding problem.

If you have any queries about Residential Property Developer Tax, please contact Daniel Broughton at dbr@portner.co.uk.