New Residential Property Developer Tax comes into force
In the four and a half years since the Grenfell tragedy, building safety has been at the top of the Government agenda. Out of the enquiry came a push for legislative change and measures to ensure accountability.
One of the most significant of these, first announced in the 2021 Autumn Budget, is the new Residential Property Developer Tax (RPDT) which comes in to force today. It has been introduced with the aim of ensuring that large residential developers make a ‘fair’ contribution to building safety remediation work.
The tax is set at 4% and applies to profits from residential property development activities which exceed the annual allowance of £25 million. Affecting companies, the tax applies if the developer (or a company to which the developer is related) has a current or previous interest in the land. Implemented to raise funds to help meet cladding remediation costs, the tax applies in addition to the Building Safety Levy and any costs necessary to replace unsafe cladding on buildings between 11 and 18 metres tall. Build-to-let developments are excluded. The RPDT is expected to raise £3 billion over the next 10 years.
Together with the increase in corporation tax rates from 1 April 2023, this new tax will be keenly felt by some of the larger developers.
Although unpopular, housebuilders have largely been accepting of the new tax; however it remains to be seen whether some developers will be forced out of the marketplace by the increased costs of business.