On 1 April 2022, a new residential property developer tax (RPDT) will be introduced to raise revenue to remedy defective cladding. With effect from that date, profits of groups of companies and JV companies in excess of £25 million realised from residential property development activity will be chargeable to RPDT at the rate of 4%. The Treasury has been clear that it sees RPDT as time-limited, with the goal of raising circa £2 billion of revenue over a ten-year period.

In this article, tax specialist Michael Fluss explains what is included in the RPDT and the companies and activities it is likely to impact.

What is the RPDT?

RPDT applies, broadly speaking, to residential property development activity, which is widely defined and encompasses much of what would normally be associated with property development activity, such as seeking planning permission, marketing and design, as well as construction.

Who will it apply to?

So long as one member of the company has (or, in certain cases, had) an interest in land which is residential, profits realised by any member of the group from development activity relating to that land will potentially be subject to RPDT.

However, RPDT will apply to profits arising from the development of residential property only when the land/property is held as trading stock by the developer or a related entity. Property investors (now specifically including those using a build-to-rent model) are excluded.


Exemptions from RDPT may apply (in certain cases) to not-for-profit companies.

The implications of RPDT

While £25 million may seem a generous allowance, the impact of RPDT is more extensive than might be expected and will have implications for both property and corporate transactions:

  • Debt costs (interest and finance charges) are not deductible in computing profits chargeable to RPDT.
  • An interest in land is widely defined and may, for example, extend to the benefit of a restrictive covenant relating to land, meaning that the RPDT profit net is cast widely.
  • In certain circumstances, profits of a JV company may be attributed to the shareholders for RPDT purposes.
  • Any legacy issues may need to be addressed, where an RPDT company is sold out of a group or enters a new group.
  • An entitlement to overage linked to residential property development may need to be taken into account in computing profits potentially chargeable to RPDT.
  • Conversions are included as residential property development activity, whereas renovations are excluded – there may uncertainty at the margins.
  • Thought will need to be given to the interaction of RPDT with appropriations (both to and from trading stock) and intra-group transfers between traders and investors of residential property which is or is to be developed.

Further guidance from HMRC on RPDT is expected within the next few months. Prior to then, companies should prepare for the changes that may impact their business.

If you have any questions on the new RPDT and wish to discuss whether it applies to your business, please contact Michael Fluss.

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This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.