Residential Property Developer Tax consultation responses

HM Treasury (HMT) has released its response to its consultation 'Residential Property Developer Tax' (RPDT) which is to be introduced from April 2022. The tax is aimed at raising funds for building safety remediation works.

Following their Consultation on Residential Property Developer Tax and the subsequent publication of Draft Legislation for technical consultation, HMRC have released stakeholder responses and further Treasury comment.

The proposed tax included a 4% levy on the residential development profits of developers over a £25 million allowance.

Stakeholder responses and HMRC’s follow up comments include:

• The majority of stakeholders believed the tax should be levied on Corporate Tax profits with some adjustments. This approach will be adopted in the legislation with some adjustments including:
  • Excluding deductions for interest in calculating profits subject to the RPDT, which was not positively received by stakeholders.
  • Providing separate definitions of developer, residential property, group, despite feedback that this will complicate.
  • A requirement to apportion profits relating to residential development on a just and reasonable basis was seen by stakeholders as a sensible approach.
  • Separate loss relieving principles; brought forward losses will not be available to offset against profits subject to the RPDT and there will be no loss carry-back. This had a mixed response.
  • The taxation of joint ventures to avoid double taxation.
  • Transitional provisions will be introduced to align payments of RPDT under the Quarterly Instalment Payment regime.
• Concerns were raised about the effect on providers of affordable homes, communal houses, student accommodation and care homes. As a result, certain exemptions or reliefs will be introduced.
• The government recognised concerns about the tax applying to ‘build-to-let investors’ and does not propose such profits are within the RPDT.
• There were a number of comments about the level of the annual allowance above which the tax applies, however, the government was happy with the £25m group level.
• Respondents highlighted the impact of both the RPDTand Building Safety Levy in terms of additional taxation and compliance for property businesses. The government pointed out that the provisions were targeted separately and had different scopes despite the similarities and crossover between the taxpayers.
• Stakeholders raised concerns the tax may limit the supply of accommodation. HMT responded that at a rate of 4% the tax should have a marginal impact. HMT confirmed that its intention is to repeal the tax once sufficient revenue has been raised, the target being £2bn over ten years.

Following the consultation, the final legislation will be published in Finance Bill 2022.

Useful guides on this topic

Consultation on Residential Property Developer Tax
HM Treasury has published 'Residential Property Developer Tax (RPDT): Consultation on policy design', a new tax that forms part of its Building Safety Package ahead of its inclusion in the 2021-22 Finance Bill. This measure targets only the largest developers.

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.

Corporation Tax instalment payments
When does Corporation Tax (CT) have to be paid by instalments? What are the rules and deadlines?

External Links

Residential Property Developer Tax: consultation