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Last updated: 10 Jun 2021
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What is the new Residential Property Developer Tax (RPDT)?

The government has proposed a new tax, Residential Property Developer Tax, to help fund remediation work for unsafe cladding, which will be applicable to both build to sell and build to hold developments. We look at what is being proposed and the timeline for its introduction.
Why is the Residential Property Developer Tax being introduced?

Why is the Residential Property Developer Tax being introduced?

In February 2021, the government announced that it would introduce a new Residential Property Developer Tax (RPDT) as part of its Building Safety Package. The tax is one of the government’s measures to bring an end to unsafe cladding, provide reassurance to homeowners and support confidence in the housing market. The government is consulting on the design of that tax ahead of its inclusion in the 2021-22 Finance Bill. The consultation runs until 22 July 2021 with the tax being introduced in 2022 seeking to raise £2 billion over a decade. 

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Shriya Dheir

+44 (0)20 7710 3126
DheirS@buzzacott.co.uk

Why is the Residential Property Developer Tax being introduced?

In February 2021, the government announced that it would introduce a new Residential Property Developer Tax (RPDT) as part of its Building Safety Package. The tax is one of the government’s measures to bring an end to unsafe cladding, provide reassurance to homeowners and support confidence in the housing market. The government is consulting on the design of that tax ahead of its inclusion in the 2021-22 Finance Bill. The consultation runs until 22 July 2021 with the tax being introduced in 2022 seeking to raise £2 billion over a decade. 

Which developments will be taxable?

What developments will be taxable under RPDT?

The new tax would be time-limited and apply to the largest residential property developers (companies or corporate groups) in relation to the money they make from UK residential development. 

The RPDT will be applied to the profits of companies and corporate groups that undertake residential property development on their own behalf. The tax is intended to apply to the developer group’s profits from residential property development, irrespective of whether development is carried out solely ‘inhouse’ or whether it utilises the services of third-party contractors to undertake that development.

The primary focus of the tax is on the development of residential properties located in the UK for either sale or rental as individual dwellings. Development is taken to include conversion of existing buildings as well as new construction. The tax would therefore apply regardless of whether residential property is being developed with a view to disposing of leasehold or freehold interests, including commonhold interests. The tax would apply where a site, or part of a site, in development is sold as well as when the original developer sells the individual dwellings.

Companies that develop UK residential property intended to be retained as a long-term investment (the ‘build-to-rent’ model), whether they’re within a group or through a joint venture with other partners and/or investors, would also be within scope of the RPDT. Profits derived from the development of build-to-rent properties may be taxed. 

What's next?

What’s next?

The consultation will run until 22 July 2021, after which we will provide an update on HMRC’s response. If you would like to receive this straight to your inbox, sign up to our mailing list below. 

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View the full consultation here

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