9th June 2021

Residential Property Developer Tax (RPDT)

Residential Property Developer Tax (RPDT)

The Treasury published a consultation in April 2021 on the new Residential Property Developer Tax (RPDT). The consultation proposes that the tax be time-limited and introduced in April 2022 with the intention to raise at least £2 billion over a decade, with a potential extension if they are unable to raise a sufficient amount. The tax is intended to go toward the £5 billion cladding remediation package introduced in February 2021 in order to prevent another Grenfell disaster.

Who will be affected?

The RPDT will apply to companies or corporate groups, including companies developing through partnerships and supporting companies if they undertake significant UK residential property developments and generate relevant profits that exceed the £25 million annual allowance available to them.

Development is held in the consultation to include conversion of existing buildings as well as new construction. The tax would apply if a development site or part of a site was sold, as well as when the developer sells the individual dwellings.

Consultation

The consultation is running from the 29 April to the 22 July 2021. The RPDT is intended to raise the necessary finances in conjunction with the proposed Gateway 2 Levy. The proposed Gateway Levy is directed at developers seeking planning permission to develop high-rise buildings in England. The consultation proposes two models for the RPDT as detailed below.

Model 1- Company-based approach

Companies, groups of companies and supporting companies undertaking a significant UK residential property development are liable to pay RPDT.

The RPDT would be calculated on the total profits of the company, regardless of whether the company carries out other non-residential development work.   

Model 2- Activity-based approach

Like model 1 companies, groups of companies and supporting companies undertaking a significant UK residential property development are liable to pay RPDT.

Unlike model 1 the RPDT would be calculated on the profits made on the residential property development activities only.

If you would like advice as to whether this tax will affect you or wish to engage in the consultation please contact the Blackadders Commercial Property teams working in Aberdeen, Dundee, Edinburgh, Glasgow, Perth and across Scotland.

by Annie McNamara, Trainee
Commercial Property

www.blackadders.co.uk

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