This is a freeview 'At a glance' guide to Residential Property Developer Tax.

What is the Residential Property Developer Tax (RPDT)? What is residential property and who is a developer? Are there any allowances or exemptions?

What is the tax?

With effect from 1 April 2022, the RPDT will be levied on the profits of a company where they arise from residential property development.

  • Part of Finance Bill 2022 (Pt 2).
  • The tax is charged at a rate of 4%.
  • The tax will be charged on those profits to the extent that they exceed the available annual allowance of £25 million (pro-rata for short accounting periods).
  • Non-profit housing companies are specifically exempt. An exit charge will apply if the company ceases to be a non-profit housing company.
  • Profits are post adjustments for tax purposes but exclude amongst other things, loss or group relief and loan relationship debits/credits.
  • Anti-forestalling provisions prevent the acceleration of profits to an accounting period ending before 1 April 2022, as a result of arrangements entered into on or after 29 April 2021.

What is Residential Property Development?

The activities that are caught within this category are quite wide-ranging. They must be carried out by a developer:

  • On, or in connection with, land that the developer has (or has had) an interest in (including through related Group companies and joint ventures).
  • For the purposes of development of residential property.
  • The property or land must be held as trading stock (Property development as opposed to Property investment).
  • Activities include:
    • Dealing in residential property
    • Designing
    • Seeking planning permission
    • Construction or adaptation
    • Marketing
    • Managing
    • Any other ancillary activity

What is residential property?

A residential property is any building used as a dwelling. This includes buildings in the process of being constructed or adapted for such use and the accompanying gardens and grounds. Land with planning permission, or where it is being sought, will also fall within the definition if this would cause the land or buildings to meet the criteria.

Exclusions include:

  • Residential accommodation provided for children, individuals requiring personal care (elderly, disabled or those with dependency issues).
  • Residential accommodation for the armed or emergency services and hospital workers.
  • Hospitals or hospices.
  • Temporary sheltered accommodation.
  • Prisons
  • Hotels or similar.
  • Monasteries/Nunneries etc.
  • Student accommodation.

Groups

  • The annual allowance is divided by the number of companies in the group unless an “allocating member” is nominated, when the allowance can be allocated as directed.
  • Group companies may only claim an allowance when there is an allocating member if an allowance allocation statement is submitted to HMRC.

Administration

The relevant profits and tax within the scope of RPDT will be reported on the company’s tax return and the tax due will payable alongside any other Corporation Tax liability.

Useful guides on this topic

Residential Property Developer Tax draft legislation published
The government has published draft legislation for the Residential Property Developer Tax. The legislation will be open for technical consultation until 15 October 2021.

Profits from dealing in or developing UK land
A guide to the rules which replaced the old transactions in land provisions and extended UK taxation to all profits from trading in and developing UK land, regardless of residence.

External link

Finance Bill 2022


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