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Residential Property Developers Tax – The full picture

The Autumn Budget provided much-needed clarity on the final shape of a new Residential Property Developers Tax (RPDT), set to come into force from 1 April 2022. This briefing continues from our previous article on RPDT which you can access here.

Why is the tax being introduced?

In February 2021, the government set out its plan to remove unsafe cladding from high-rise buildings following the Grenfell Disaster. The introduction of RPDT is one way in which HM Treasury aims to fund these efforts, and this tax alone is expected to raise at least £2 billion over the next decade. It is the Government’s intention for RPDT to be a time-limited tax and be repealed once sufficient revenue has been raised.

For further information on which companies will be affected by the new tax, and how the tax will be calculated, please see our previous briefing.

What did the Budget reveal?

Rishi Sunak’s Autumn Budget clarified that the tax will be charged at 4% on any taxable profits arising from 1 April 2022, which exceed a £25 million annual allowance.

Profits from accounting periods which straddle this date will need to be apportioned accordingly. If a Residential Property Developer’s company profits do not exceed the annual allowance, then there will be no RPDT liability.

The Budget also indicated that the scope of the tax ‘at this present time’ does not include build-to-rent properties. Caution should be taken if relying upon this proposal however, as HM Treasury has made clear that the build-to-rent position remains under strict review.

How will companies pay the tax?

RPDT is to be treated as an extension of Corporation Tax, as opposed to operating as a standalone tax. Any amounts due are therefore to be included in Corporation Tax returns. As a transitional measure, the initial RPDT payment will be due with the first quarterly Corporation Tax payment after 1 April 2022.

What’s next?

The details released so far have given us clarity in terms of the scope of the tax itself, but we still await many compliance details. Consequently, in the months leading up to April, we can expect a raft of anti-avoidance and anti-forestalling measures to be announced.

The final legislation will be published in the Finance Bill 2021-2022. A detailed response to the consultation, which ended on 15 October 2021, can be found here.

If you have any questions about the Residential Property Developers Tax, please contact Karen Mayne or Jon Shankland.


Disclaimer

This briefing is for guidance purposes only. RadcliffesLeBrasseur LLP accepts no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommends that appropriate legal advice be taken having regard to a client's own particular circumstances.

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