Rishi answered two key questions about the new Residential Property Developer Tax (RPDT) (which will be introduced in April 2022 with an aim to raising at least £2 billion in the next 10 years to help pay for remediation of high-rise residential buildings):
- The rate 4%; and
- Application to substantial property developers where the profits of the company (or if relevant the group) exceed an annual allowance of £25 million.
This clarification is welcome but with less than six months to go before implementation, developers who are part way through their development will be concerned as to how this impacts on their return to their investors. Developers of new projects will be able to model this into their returns and ultimately with current spiralling construction costs this extra tax charge is likely to be passed on to purchasers of off-plan apartments. Businesses will need to consider carefully what is meant by the term profit for this new tax as whilst the starting point is the same there are differences.
Developers who have always been compliant with high building standards or are new to development, may well consider that there should have been different thresholds applied to them as opposed to old developers whose buildings are in need of remediation.
Chancellor Rishi Sunak has unveiled the contents of his Budget in the House of Commons.