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The Residential Property Developer Tax (RPDT) is a new tax on large residential property developers that came into effect on 1 April 2022.
The new tax was first announced in February 2021 as part of a package of measures to contribute towards the Government’s cost of dealing with defective cladding in the UK’s high-rise housing stock discovered following the Grenfell Tower fire tragedy in June 2017.
This is a profits-based tax levied on the largest residential property developers. The tax is payable by developers with annual profits over £25 million. For companies within the scope of the tax, RPDT is charged at 4% on residential property development profits that exceed their annual allowance of £25 million.
The RPDT applies to profits arising from residential property development in accounting periods ending on or after 1 April 2022, with profits from periods straddling that date being apportioned. The tax applies to all qualifying businesses not just those who were directly involved with defective cladding matters.
HMRC’s internal manuals list the following four key concepts that need to be considered when determining whether a company is an RP developer with the effect that the activities of the company (or other members of its group) fall within the scope of RPDT: