Responding to the consultation on the draft Finance Bill clauses which will introduce the residential property developer tax (RPDT) charge for accounting periods ending on or after 1 April 2022, the CIOT makes a number of recommendations, including:
introducing a sunset clause or review mechanism, given the UK government’s intention for the tax to raise £2bn over ten years, rather than becoming a permanent feature of the tax system.
clarifying the scope of the charge (including making the definition of ‘company’ tighter and dealing with LLPs);
addressing the position where a building is only partly residential property;
clarifying the position on allowable deductions for costs (including worked examples set out in guidance to accompany the legislation); for example, developers incurring ‘section 106’ local development costs as part of planning consent for the development would need to know if those costs are deductible in computing RPDT adjusted profits; and
clarification on the position where an accounting period straddles the 1 April 2022 date. In that case, profits will need to be time-apportioned regardless of when the development was completed; this would potentially bring profits into charge that would have escaped the regime completely if the developer’s accounting period ended on, say, 31 March 2022. The CIOT requests further clarity on the underlying intention.
Updated draft clauses on the RDPT published on 8 October confirm that build to rent activity and affordable housing provided by non-profit companies will be excluded from the scope of RPDT. The final design of RPDT, including the tax rate and the level of allowance below which profits fall out of scope, is expected to be set out in the Autumn Budget on 27 October 2021.
Responding to the consultation on the draft Finance Bill clauses which will introduce the residential property developer tax (RPDT) charge for accounting periods ending on or after 1 April 2022, the CIOT makes a number of recommendations, including:
introducing a sunset clause or review mechanism, given the UK government’s intention for the tax to raise £2bn over ten years, rather than becoming a permanent feature of the tax system.
clarifying the scope of the charge (including making the definition of ‘company’ tighter and dealing with LLPs);
addressing the position where a building is only partly residential property;
clarifying the position on allowable deductions for costs (including worked examples set out in guidance to accompany the legislation); for example, developers incurring ‘section 106’ local development costs as part of planning consent for the development would need to know if those costs are deductible in computing RPDT adjusted profits; and
clarification on the position where an accounting period straddles the 1 April 2022 date. In that case, profits will need to be time-apportioned regardless of when the development was completed; this would potentially bring profits into charge that would have escaped the regime completely if the developer’s accounting period ended on, say, 31 March 2022. The CIOT requests further clarity on the underlying intention.
Updated draft clauses on the RDPT published on 8 October confirm that build to rent activity and affordable housing provided by non-profit companies will be excluded from the scope of RPDT. The final design of RPDT, including the tax rate and the level of allowance below which profits fall out of scope, is expected to be set out in the Autumn Budget on 27 October 2021.
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