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A consultation document has been published for a new tax, known as residential property developer tax ("RPDT").

You can view the consultation document here. RPDT will take effect from 1 April 2022 and apply to residential property development profits exceeding £25 million.  The government intends to impose RPDT for a limited period of time and is aiming to raise at least £2 billion over a decade.


The new tax forms part of a package of measures to bring to an end unsafe cladding and restore confidence in the housing market.  The government considers it appropriate for the largest developers to contribute to the cost of these measures.

Residential property development

For the purposes of RPDT, residential property will include the following:

  • single residence houses and flats
  • buildings being adapted or marketed for domestic use
  • non-residential land with residential planning permission
  • retirement dwellings where the occupants are not reliant on care
  • purpose-built student accommodation where the units are self-contained e.g. studio or cluster flats (although the government is considering this category further)

The following will not be residential property:

  • communal dwellings e.g. care homes, hospices and boarding schools
  • student halls of residence where the facilities are not for the exclusive use of particular occupants

Activities of third party contractors, commercial developments and non-UK residential development will be outside the scope of RPDT.

Tax base

A bespoke method will be used to calculate the profit subject to RPDT.  Whilst the registration, reporting and payment mechanisms may well be aligned with corporation tax, this is a completely new tax and the calculation of taxable profit will be different.  For example:

  • In order to bring build-to-rent developments within RPDT, profit will be deemed to arise based on the fair value of the completed development less the costs of development where the development is not held as trading stock.  This could lead to a "dry" tax charge.
  • No deduction will be available for finance costs.  This could mean that a development which has given rise to an economic loss is profitable for RPDT purposes
  • It will not be possible to surrender corporation tax losses to a group member to reduce profits for RPDT purposes. 

Two different models are under consideration:

  • An entity-based approach - where all entities within a residential developer group are subject to the tax unless an entity's residential development activity is insignificant.  This could result in non-residential development profits (e.g. from mixed use development) being subject to RPDT.
  • An activity-based approach - where only the profit from residential property development activities within a group is subject to RPDT.  This would involve filtering out all profits from non-residential development.

Annual allowance

As the intention is for RPDT to be paid by only the largest residential developers, the government proposes a £25 million annual allowance.  For example, if £30 million of profit is made (as calculated for the purposes of the tax) then only £5 million would be subject to RPDT.

The annual allowance will be split across companies under common ownership e.g. a corporate group.

For joint ventures, it seems that the government favours attributing profits from joint venture vehicles to the joint venture participants that hold a significant economic interest in the joint venture.  If the joint venture vehicle pays RPDT then, to avoid double taxation, the participants in the joint venture would obtain a credit against their own RPDT liability. 


The rate of RPDT is still being considered and will be announced after the tax base is finalised.  

In setting the rate, the government says it will take into account that it is aiming to raise £2 billion over a decade (i.e. around £200 million a year), that the corporation tax rate is soon increasing to 25% and that the tax should not have a disproportionate impact on housing supply or other housing policies.  While the rate may be amended once RPDT is in force, it is not intended to fluctuate from year to year.


The government is not intending to subject charities (e.g. charitable registered providers of social housing) to the new tax and it seems open to the idea of exempting profits from non-charitable entities within a registered provider group where the profits are repatriated to a registered provider.

Gateway 2 levy

In addition to RPDT, the government also intends to introduce a levy to be applied when developers seek permission to develop high rise residential buildings (those above 18 metres) in England.  A separate consultation process will be led by the Ministry of Housing, Communities and Local Government in due course.  The government recognises that a developer could be within scope of the levy and RPDT for certain projects and is considering the impact of this.


There are no provisions for excluding profits from existing projects that will span 1 April 2022 but there will be anti-avoidance measures to counteract planning undertaken to obtain a tax advantage in respect of RPDT, including steps taken since the publication of the consultation document.

Next steps

Comments on the consultation should be submitted by 22 July 2021 and sent to Draft legislation will be published in advance of 1 April 2022 when RPDT comes into force.