The UK Government is proposing to introduce a new tax for companies in the UK carrying out residential property development. The tax, currently known as the Residential Property Developer Tax (RPDT), is intended to help fund the package of measures designed to bring an end to unsafe cladding. The aim is to raise at least £2bn over a ten-year period but this period may be extended if the target amount is not reached.

The RPDT will apply as a UK wide tax from 1 April 2022 and will be in addition to corporation tax. It will also be in addition to the new Gateway 2 levy which will apply to new high-rise developments in England. There is no proposed equivalent of the Gateway 2 levy for Scotland.

The proposals

The properties

Residential property will include houses, flats and buildings used or "suitable for use as dwellings", undeveloped land with planning permission for construction of residential property and existing buildings being adapted for residential use.

Some student accommodation and certain types of retirement living accommodation may also be included. Other communal dwellings such as residential homes for children or the elderly and supported accommodation with care and support will be specifically excluded.

The payers

RPDT will be payable by "the largest residential property developers" i.e., companies and corporate groups including joint ventures involved in residential property development activities in the UK with profits over £25m per annum.

"Residential property development activities" will be widely defined to cover all stages of the process, not only building properties for sale or rent, but also sale of partially completed dwellings for example at "golden brick", conversion of property to residential use, and sale of land with planning permission.

RPDT will apply to both trading and investment business models, i.e., Build to Rent (BTR) as well as Build to Sell (BTS).

Property development outside the UK will not be caught, but development carried out by a non-UK company will be caught where profits are within the charge to UK tax.

The profits

RPDT will only apply where profits from residential property development activities exceed £25m per annum, and for groups of companies this allowance will apply on a group wide basis. The taxing of joint ventures is being further considered to avoid double taxation.

The profits to be taxed will be calculated by using either:

  • a company-based approach, taking account of all profits of a company or group which had "significant" profits from residential property development (i.e. above a de minimis level); or
  • an activity-based approach, taking account of only profits actually arising from residential property development.

Unused annual allowance cannot be carried forward and there is to be no deduction for interest charges or losses carried forward in arriving at the RPDT profits.

There are to be anti-forestalling measures to counter attempts to accelerate profits so that they arise before the tax is introduced and measures to counter fragmentation (i.e. splitting activities between group companies to avoid the incidence of RPDT).

The consultation

The above proposals and more are set out in the Government's consultation on the new tax. The consultation contains many questions on design, implementation and administration but also asks about the potential impact of the new tax. It asks whether developers would adjust their development plans and land acquisition and build out strategies in response to the new tax, what the potential impacts on housing supply may be and if the Government can do anything to minimise the impact on housing supply.

It is to be welcomed that the Government is consulting at the "policy design" stage of RPDT, though the consultation paper does leave many questions unanswered. The biggest question left unanswered is what the rate of RPDT will be. The proposed rate will be made public at a later date, probably in the Autumn Budget.


The design of the RPDT could change as a result of the consultation process, however housebuilders should bear the introduction of RPDT in mind when negotiating new land deals and in modelling for current development projects. They should also consider how existing group structures and joint venture arrangements may be affected by the new tax.

If RPDT may apply to you and you would like assistance with a response to the consultation or to discuss in more detail, please contact your usual Brodies contact. The consultation is open until July 22, 2021: consultation paper.


Isobel d'Inverno

Director of Corporate Tax