New residential property developer tax: FAQs


The government is currently consulting on the design of the new residential property developer tax. Residential developers with profits in excess of £25 million per year could find themselves paying additional tax from next year.

Why is the new residential property developer tax (RPDT) being introduced?

The tax is to raise revenue to help fund the costs of the remediation of unsafe cladding on high-rise residential buildings.

Will residential developers who do not develop high rise buildings have to pay RPDT?

There is no exclusion for developers who do not build or refurbish high-rise residential buildings. If an entity fits into the definition of a residential developer, and has an annual profit of more than £25 million, it will be within the scope of RPDT.

What is classed as residential development?

The consultation sets out the definition of “residential property” that it intends to adopt for RPDT as:

“a house or flat that is considered as a single residence, generally together with the grounds and garden or any other land intended for the benefit of the dwelling.”

Where land or property are under development or undergoing a change of use, residential property will include:

  • Any building that is suitable for use as a dwelling, where it is not so used at the relevant time
  • Any existing building that is being adapted, restored to, or marketed for, domestic use
  • Undeveloped land where a residential building is being or would be constructed on it
  • Undeveloped land or land undergoing a change in use, for which planning permission to construct residential property has been obtained. 

 However, it is proposed that certain communal dwellings will be excluded from the definition of residential property. These are:

  • Hotels
  • Residential homes for children or the elderly
  • Purpose-designed supported housing with communal facilities providing accommodation with care and/or support for homeless, rough sleepers, people with a disability, drug or alcohol dependency, poor mental health, people with a learning disability and/or autism and older people
  • Residential accommodation for members of any of the armed forces
  • Boarding schools
  • Monastery, nunnery or similar establishment
  • Prisons

Will student housing be included?

A decision has not yet been made on whether student accommodation will be within the scope of RPDT. Views are sought on this, and also on retirement accommodation.

What about affordable housing?

It is uncertain whether or not affordable housing will be taxed. The government has said that it does not intend to disturb the existing tax exemption for charitable activities, but seeks views on ‘the treatment of profits from homes developed by housing associations for market sale where there are cross-subsidy arrangements with affordable housing, and where profits from residential development are reinvested by or distributed to a registered provider of social housing.’

How are profits calculated?

Two models are being considered:

Model 1 uses a ‘significance test’ - If the residential property development activity is ‘insignificant’ then that company’s profits would not be included when calculating the profits liable to the RPDT. Views are sought on how ‘insignificant’ should be defined.

If the significance threshold was met, the entirety of the profits would be subject to RPDT.

Model 2 is an ‘activity-based approach’, requiring residential development activities to be identified. Only these would be subject to RPDT.

What about losses?

Again, views are sought. The government wants a solution that is fair but not administratively burdensome.

What is the rate of RPDT?

This has not yet been decided, and will be considered once the final design of RPDT is clearer.

Won’t this stifle, rather than promote, residential development?

There is a concern that the introduction of RPDT could have an impact on the supply of housing, with developers spreading profits over a number of accounting periods. The government states that increasing housing supply is a priority, and that ‘the tax would be designed in a way that minimises impact on housing supply where possible.’

The consultation is open until 22 July 2021.

Contributor: Alexandra Holsgrove Jones

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at May 2021. Specific advice should be sought for specific cases. For more information see our terms & conditions.


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