Residential property developer tax (RPDT)

Produced by Tolley
  • (Updated for Autumn Budget 2021)

The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Residential property developer tax (RPDT)
  • Scope of RPDT
  • What are RPD activities?
  • Development of residential property
  • Meaning of interest in UK land
  • Meaning of residential property
  • Calculating the RPD profit or loss
  • Meaning of ‘adjusted trading profit or loss’ for RPDT
  • Attributable joint venture profits and losses
  • Carried forward loss relief and group relief under RPDT
  • More...

Residential property developer tax (RPDT)

On 10 February 2021, the Government announced that it would seek to introduce a Residential Property Developer Tax (RPDT), on certain profits from UK residential development activity, as part of its Building Safety Programme. The tax is one part of the Government’s five-point plan to fund the removal of unsafe cladding from high-rise buildings following the Grenfell tragedy and is meant to provide reassurance to homeowners and support confidence in the housing market.

RPDT applies to UK resident companies and non-resident companies within the charge to UK corporation tax (such as those that have a UK permanent establishment).

Companies will be within the scope of the rules where they undertake residential property development activities in respect of UK land in which they, or a related company, have, or have had, an interest, provided that interest forms, or formed, part of trading stock. Property investment companies (including those using a build-to-rent model) are therefore excluded from the remit of the regime.

Broadly, trading profits for RPDT are calculated as for corporation tax, but with some significant adjustments. For example, loan relationship debits and credits are left out of the calculation entirely, which will be particularly relevant to highly leveraged residential developers and will increase the number of companies and group within the scope of RPDT. The tax applies at a rate of 4% to RPD profits in excess of the company’s RPDT allowance, which is £25 million (on the basis of a 12-month accounting period) for standalone companies. Groups are entitled to a single RPDT annual allowance of £25m.

RPDT is treated as if it were an amount of corporation tax and is arguably more of a corporation tax surcharge on the trading profits of residential developments than a new tax (in a similar way to the tax on loans to participators). As a result of this, a large part of the administration of the tax mirrors the existing rules for corporation tax. The administrative

Popular documents