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.