There may be no place like home, but there could be a tax charge

BERNARD CRITCHLEY TAX MANAGER, ASPEN WAITE

There may be no place like home, but there could be a tax charge.

Although announced in the 2021 Autumn Statement a new tax, Residential Property Development Tax (RPDT), to be applied from 1 April 2022 has slipped through almost unnoticed.

Its introduction is meant to defray some of the costs of remediating cladding issues that has been or will be borne by the Government. Whilst announced as time limited it is expected to be in place for at least ten years. RPDT will be charged on company profits in addition to its Corporation Tax at 4% on residential property development profits that exceed the annual allowance of £25 million.

Whilst unincorporated businesses and small and medium sized companies may be excluded from the charge, splitting the development through a number of companies in the same group would not have any benefit as the £25 million allowance would be applied to the group as a whole and not each individual company.

To get in touch with Bernard to learn more about our Tax services, please email

Bernard.Critchley@aspen-waite.co.uk

RPDT does not apply to Property Investment Companies but all aspects of property development such as the dealing in residential property and also the construction, adaptation, design and seeking planning permission are included within the new tax charge.

As with any tax there are exemptions and the definition of residential property is adapted so as not to include (amongst others) the accommodation for children or those requiring personal care of some sort nor for residential accommodation for either the armed forces, emergency services and hospital workers.

Despite RPDT being considered a temporary measure, history has shown us that temporary taxes have a habit of staying, after all Robert Peel introduced Income Tax as a temporary tax in 1842. We may, therefore, have to come to terms with this new addition to the UK tax family for the foreseeable future.