RPDT canal

Residential Property Development Tax

Caroline Fleet, National Head of Real Estate
RPDT canal
Not to be applied to Build to Rent or Housing Associations

Final updates have been made to the draft legislation for the Residential Property Developer Tax (RPDT) and the associated Explanatory Memoranda.

Ministers had not previously decided on the treatment of build-to-rent schemes and the non for profit affordable housing sector when the draft legislation was published. However, those decisions have now been made:

  • Profits from build-to-rent properties will be exempt from the RPDT
  • Non-profit affordable housing providers, including their for-profit subsidiaries, will be exempt from the RPDT.

Build to rent

Non-profit affordable housing providers, including their for-profit subsidiaries.

Despite the fact that Ministers believe profits from build to rent (BTR) activity should be subject to the new tax as a form of residential property development activity, they have determined that BTR activity should not be included in the tax at this time. This is due to concerns stated during the consultation process that taxing a deemed development profit would add significant complexity and result in a dry tax charge on unrealised earnings, and there is no apparent alternative to satisfy these concerns.

Affordable housing

Developers who engage in residential property development activities that are considered charitable under the existing corporate tax exemption will not have corporate tax trading profits, and hence will not be subject to the tax. To address concerns voiced throughout the consultation about taxable subsidiaries in Housing Association business models, the legislation exempts non-profit registered providers and their wholly owned subsidiaries from the tax.

What's next?

The consultation will run until the end of this week, and will close on 15 October. This will then be legislated through this autumn’s Finance Bill including details of the rate agreed for the tax. HMRC will provide guidance on applying this legislation in due course.

No further decisions on the scope are expected prior to the Finance Bill. More information can be found here: https://www.gov.uk/government/publications/residential-property-developer-tax-draft-legislation

Contact us

Caroline Fleet
Caroline Fleet
Head of Real Estate