Updated draft legislation has clarified many issues but there are still areas of uncertainty.
As explained in our article in June 2021, the Government’s policy objective for Residential Property Developer Tax (RPDT) is to collect additional tax from residential property developers to fund the cost of remediating cladding issues which has been/will be borne by the Government. HM Treasury has been clear throughout the consultation process that it sees RPDT as ‘time limited’, with the goal of raising c £2b of revenue over a 10-year period.
Based on the draft legislation released in September 2021, RPDT will apply to profits arising from the development of residential property and predominately applies when the land/property is held as trading stock by the developer or a related entity. Accordingly, under the current version of the draft legislation, property investment activity is excluded from RPDT – welcome news for businesses originally facing the prospect of a ‘dry’ tax charge.
Importantly, the definition of residential property is such that property dealing activities, even in the absence of breaking land, will be within the scope.
On 12 October, further updates to the draft legislation have confirmed that RPDT will not apply to ‘build to rent’ profits. There is also to be a specific exemption for entities that qualify as ‘non-profit affordable housing providers’ (this will include their for-profit subsidiaries).