The Residential Property Developer Tax – some highlights!


On 27 October 2021, Chancellor Rishi Sunak confirmed that a 4% property developer tax, called the "Residential Property Developer Tax" (RPDT) will come into force from 1st April 2022 in respect of the largest residential property developers. The RPDT is one of two tax levies that are being introduced to help fund the government's Building Safety package, the objective of which is to bring an end to unsafe cladding, provide reassurance to homeowners and support confidence in the housing market.  

The government's intention is for the RPDT to be "time limited"; the RPDT will be repealed once it has raised £2 billion in revenue over an expected 10-year period. 

Parties subject to the RPDT  

RPDT will apply to developers undertaking residential property development activities. An activity is considered a residential property development activity for the purposes of RPDT if it is carried out by a developer on, or in connection with, land in the UK in which the developer or a member of the developer's group has an interest as well as activities for the purposes of, or in connection with, the development of residential property.

Under the RPDT scheme, the situations where a residential property developer has an interest in land applies not only to the developer itself, but where the interest is held by a related company of the developer. A related company is a company that is either in the same group of companies as the developer or is a relevant joint venture vehicle, under which the developer (or a member of the developer's group) holds at least 10% of the venture's ordinary share capital or is beneficially entitled to at least 10% of the venture's available profits.

It is important to note that the rules on RPDT apply irrespective of the tax residence of the developer company.

What constitutes residential property for the purposes of RPDT?

For the purposes of RPDT, residential property has been defined widely to cover:

  • Buildings designed or adapted for use as a dwelling (either in whole or in part);
  • Land that is intended for development where planning permission is being sought or has been granted for residential property development; and
  • Land upon which residential property is being constructed.

What constitutes a residential property development activity?

In terms of what constitutes an activity that is considered to be carried out for the purposes of, or in connection with, the development of residential property, government legislation provides a non-exhaustive list of examples including: seeking planning permission, designing, constructing, adapting, marketing, managing or dealing in residential property, as well as any activities which may be ancillary to any of these activities. 

Residential property development activities may also extend to certain activities carried out by a residential property developer even after they have disposed of the land. This may occur, for example, in instances when a developer carries on the above activities even after ceasing to have an interest in the land or where the activities were planned or anticipated at the time the residential property developer ceased to have the interest in the land.

How will Developers pay RPDT?

RPDT will be treated as  Corporation Tax rather than as a standalone tax meaning that any amount due will be included in a company's Corporation Tax returns, payable to HMRC.

However, it is important to note that RPDT will only be chargeable on profits which exceed a £25 million annual allowance. So, if a development company's yearly profits do not exceed £25 million in the relevant accounting period, then they will not be subject to any RPDT liability.

The government has also confirmed that developers will be able to use post-commencement carried-forward RPDT losses, meaning that the £25 million allowance will apply to profits after any carried-forward RPDT losses have been deducted.

What is excluded?

On 13 October 2021, the Treasury confirmed that Build to Rent (BTR) developers and investors would be excluded from the RPDT because of concerns about "the taxation of a deemed development profit introducing substantial complexity and resulting in a dry tax charge on unrealised profits".

Grainger, Greystar, Quintain and other industry leaders had lobbied against the tax throughout the consultation period. They maintained that the RPDT would have been unfair as BTR developers and investors are often fully responsible for ongoing maintenance costs, including cladding remediation works. The announcement from the government has therefore been welcome news to the BTR sector.

The following have also been excluded from RPDT:

  • Non-profit registered providers of social housing and their wholly owned subsidiary companies;
  • Student accommodation occupied by students for a sufficient proportion of the year;
  • Homes/institutions which provide residential accommodation for children;
  • Homes/institutions which provide residential accommodation for those in need of personal care; and
  • Residential accommodation for hospital workers, members of the emergency services and armed forces.


Whilst the response to the introduction of RDPT has been largely positive, campaigners have argued that the £2 billion in expected revenue simply does not go far enough to bring an end to unsafe cladding.  Campaigners have estimated that an amount upwards of £10 billion is what is really needed to make a substantial difference in this area. 


Following the Grenfell disaster in June 2017, the government undertook an inquiry which revealed that hundreds of thousands of people in the UK were living in buildings with unsafe and highly flammable cladding.  Dealing with unsafe cladding in high-rise buildings has since become a legislative priority and the introduction of the RPDT and the Building Safety package in general marks a positive step in making funds available to ensure the removal of such cladding.

This article  highlights some significant general points about the RPDT, but it is not intended to give specific legal advice and please contact your accountant or our tax department for further detailed  information.

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