Residential Property Developer Tax – Legislation April 2022

The Government proposes to announce in the autumn budget (27th October 2022) the rate of the new Residential Property Developer Tax (to be known as “RPDT”).

The RPDT will be charged on the profits made by companies carrying out residential development/activities in the UK from 1 April 2022. The initial draft legislation was published on 20th September 2021 and the Government are currently hold a further consultation on the details, which is open until 15th October 2021.

There are still areas which need ironing out, such as how the profits should be calculated and how developments for the purpose of renting (not sale) should be dealt with. Unfortunately, the opportunity to join in any consultation is unusually short and the proposed date of 1st April 2022 for full implementation is very close, therefore, there may be further extensions soon.

The activities of development, are clarified as being activities carried out on or in connection with land in the UK in which a developer has an interest in.

Part of the consultation involved various models of calculations and computations of how the RPDT profits would be considered. The legislation has been drafted to state that the profits are calculated based on the activities carried out by a “developer” rather than activities carried out by a “company”. This is with the intention to avoid any potential loopholes where companies employ separate developers, who are in fact connected with the company or vice versa. This would mean that companies within the scope of the RPDT would have to identify, declare, and apportion profits from their residential property development activities and they would not be permitted to offset any finance costs from their profits.

With respect to collection and management, the RPDT will be applying similar rules to the Corporation Tax rules and will use many of the same definitions. This is with the intention of keeping the new tax simple to follow for those who are already familiar with the Corporation Tax rules.

We will need to await the Autumn Budget Statement for a more comprehensive explanation of the RPDT and how this will impact new developments, developers, builders, and affordable housing incentives.

For more details on the report and consultation please see link

A full report will be available after the Autumn Budget and we would always suggest any developers obtain independent tax advice also.
For further information on the legal points in relation to this or any other property matters, please contact Kathryn Frisby or Mohammed Rahman.