Residential Property Developer Tax payments

Privilege Saungweme, Senior Manager, Corporate Tax

From 1 April 2022, large residential property developers became subject to Residential Property Developer Tax. It is levied at the rate of 4% and should be paid in quarterly instalments or as a single payment at year end, depending on the payment regime the company follows for corporation tax.

Residential property developers with profits in excess of £25 million should be aware that Residential Property Developer Tax (RPDT) is also subject to the Quarterly Payment regime. The calculation of RPDT is based on corporate tax principles but with adjustments in particular no deduction for any interest or financing costs. This means that the exact timing of the payment for RPDT for each company is in line with its corporation tax liability which can include small, large and very large company payment regimes.

RPDT applies to profits generated from residential property development activities only. It is important that companies consider their potential liability on a quarterly basis, to minimise the risk of late payment interest accruing.

If you need any assistance estimating this year's tax liability, please let us know. Despite RPDT being implemented in 2022, we understand the computational aspects of RPDT can be complex. As a reminder, in its simplistic form, the tax is calculated by applying tax at the rate of 4% to the calculated RPDT profits above the group annual allowance of £25 million.

The following administration points should be considered when making a payment.

Reporting notifications

Where a group’s profits are below the £25 million threshold, there is no requirement to file CT600N alongside the company tax returns. However, this exemption does not apply where residential property developer (RPD) group relief or brought forward RPD group relief is claimed in order to fall beneath the threshold. In those circumstances, a CT600N must still be completed and submitted.

Losses

There may be instances where a group has RPD profits below the £25 million threshold without the need to claim any form of loss relief. However, where the group is profitable, but remains below the threshold, RPDT losses cannot be carried forward. As a result, it is important to consider the impact this may have on brought forward RPD losses available for future periods, and whether these losses should exist at all.

Quantification notice

HMRC have an additional requirement for companies making a payment of RPDT and that is to submit a quantification notice. This notice informs HMRC of the amount of RPDT made by the company or group in each period. HMRC provided the template for the quantification notice as well as the quantification notice schedule which should be completed when making payments for multiple companies. These forms should be sent here: [email protected].

The forms should be sent to HMRC on or before the date the payment is made. Failure to submit the notice forms on time could result in penalties being issued by HMRC.

If you have any queries or require assistance with Residential Property Developer Tax, please speak to your usual Crowe UK contact.