212: Consultation announced on the Residential Property Developer Tax
A consultation was published last week requesting views on the new Residential Property Developer Tax (RPDT). This proposed tax is being introduced as part of the fallout from the Grenfell Tower disaster of 2017 and is designed to raise revenue of at least £2 billion for remediation work to unsafe cladding on high-rise residential buildings.
The three month consultation requests views on the RPDT which looks like a complex tax, relative to the amount of revenue expected to be generated. The Treasury is seeking views on the impact the RPDT may have on housing supply, and assessment of the impact on investment appetite, build out rates and overall housing delivery.
The Government is not yet consulting on specific proposals as the detail is likely to laid out in the Autumn Budget 2021.
The key takeaway points about RPDT are that it should:
- raise ‘at least £2 billion over a ten-year period’;
- apply to the largest residential property developers where annual profits exceed £25 million;
- apply to developers that are UK resident or have a UK permanent establishment;
- apply in addition to the proposed ‘Gateway 2’ levy due to be implemented in relation to permission for new high rise developments
- not have a disproportionate impact on housing supply or other housing objectives;
- remain stable and not fluctuate year-to-year; and
- potentially extend beyond the ten-year duration if it fails to raise sufficient revenue.
This is a tax which is designed to hit the largest corporate undertakings that make money from UK residential property activities, but it will still impact a significant number of developers where annual profits exceed £25 million. The tax will apply to developer’s group profits whether individual dwellings are sold or bulk chunks of sites are sold.
It is due to come into effect from April 2022 and apply to profits recognised in accounting periods after that date.
The Treasury is seeking views on the consultation by 21 July 2021. It can be accessed here.