Residential Property Developer Tax (RPDT) is a 4% charge on the residential development trading profits of companies within the charge to corporation tax, payable only on profits above an annual allowance of £25 million per group. It applies to accounting periods beginning on or after 1 April 2022 and is collected as if it were corporation tax, through the company tax return and the normal payment dates. Most small and medium developers will never pay it, but they still need to know whether they are in scope.

Why was RPDT introduced?

HMRC’s Residential Property Developer Tax Manual at RPDT01100 explains that RPDT was announced in February 2021 as part of the building safety package after the Grenfell Tower fire. Its aim is to obtain a contribution from the UK’s largest residential developers towards the cost of remediating unsafe cladding. HMRC says it is intended to raise at least £2 billion over ten years and that the government has said it will be time limited. The legislation is Part 2 of the Finance Act 2022, sections 32 to 52, with Schedules 7 to 9.

Which companies are residential property developers?

Under section 34 a company is a residential property developer (RP developer) if it carries on residential property development activities, or if it (alone or with group companies) has a substantial interest in a relevant joint venture company. HMRC’s manual at RPDT01200 breaks this into four questions:

  1. Is the company liable to UK corporation tax?
  2. Is it carrying on activities for, or connected with, developing residential property in the UK as part of, or in support of, a trade of the company or its group?
  3. Does the company or a group member hold an interest in the property being developed, directly or through a joint venture, that forms part of trading stock?
  4. Does the development involve residential property that is not specifically excluded?

Section 35 lists the activities that count: dealing in, designing, seeking planning permission for, constructing or adapting, marketing and managing residential property, and anything ancillary to these. Section 36 requires the company or a related company to hold an interest in the UK property that is trading stock. Security interests and simple licences to occupy are excluded, except a licence granted under arrangements where the property is to be conveyed at the developer’s direction, which brings in many promotion and licence structures.

Non profit housing companies, such as non profit registered providers of social housing and registered social landlords, and their wholly owned subsidiaries, are not RP developers (section 34(3) and (4)). Companies outside corporation tax, and companies with no trade, are outside the tax. Gains on property held as an investment and gains on shares are not RPDT profits (RPDT01100).

What counts as residential property?

Section 37 covers buildings designed or adapted, or being constructed or adapted, for use as dwellings, together with their gardens and grounds, rights over them, and sites with planning permission sought or granted for dwellings. Some buildings are excluded if they are designed or adapted primarily for use as:

  • children’s homes and care homes providing personal care;
  • accommodation for the armed forces, emergency services or hospital workers;
  • hospitals, hospices, temporary sheltered accommodation and prisons;
  • hotels, inns and similar establishments, monasteries and nunneries;
  • student accommodation, meaning buildings reasonably expected to be occupied by people in education on at least 165 days a year.

What about build to rent?

RPDT10210 sets out HMRC’s view. A landowner that builds an apartment block on its own site and lets the flats has created a capital asset for its property business, so that is not an RPDT activity. A developer that builds the same block as trading stock and sells it to an investor landlord is within RPDT, even if the buyer is in the same group. The test is whether the property is developed and disposed of in the course of a trade. For the wider distinction, see property developer or investor.

How are RPDT profits calculated?

Section 38 gives the formula A + B − C − D − E. A is the company’s adjusted trading profit or loss. B is its share of joint venture profits or losses. C, D and E are RPDT loss relief, RPDT group relief and group relief for carried forward losses under Schedule 7.

Section 39 starts from the corporation tax trading profit and strips out:

  • profits, losses and capital allowances from activities that are not residential development, apportioned on a just and reasonable basis where a company does both;
  • ordinary corporation tax loss relief and group relief, because RPDT has its own loss rules;
  • loan relationship debits and credits; and
  • derivative contract debits and credits.

Excluding loan relationships means interest costs give no relief for RPDT, even where they are deductible for corporation tax. This is a material difference for highly geared developers, and it operates separately from the corporate interest restriction. RPDT20100 notes that RPDT group relief can reduce a claimant’s profits to nil but cannot create a loss, and carried forward losses are subject to a restriction similar to the corporation tax rule.

How does the £25 million allowance work in a group?

Section 33 charges 4% only on RPDT profits above the company’s allowance. Section 43 gives £25 million for a 12 month period, reduced pro rata for shorter periods. In a group the allowance is shared:

  • The group can nominate an allocating member under the Residential Property Developer Tax (Allocation of Allowance) Regulations 2022 (SI 2022/266). It submits an allowance allocation statement saying how much of the £25 million each RP developer gets.
  • If no allocating member is nominated, each RP developer’s allowance is £25 million divided by the number of group companies within the charge to corporation tax at the end of the parent’s accounting period. In a large group with many dormant or service companies this default can leave very little allowance for the developers.
  • A company not in a group has the full £25 million.

Section 44 has separate rules for joint venture companies.

What does a worked example look like?

RPDT20100 has an example. A parent provides ancillary services to two subsidiaries and is the allocating member. One subsidiary builds houses and makes £40 million, reduced to £38 million by £2 million of RPDT group relief from a group property management company. The other builds apartments for sale to investors and makes £10 million. The parent makes £100,000 from recharges. The parent allocates £100,000 of allowance to itself, £10 million to the apartment company and the remaining £14.9 million to the housebuilder. Only the housebuilder is charged, on £23.1 million.

Illustration only. Applying the 4% rate to that £23.1 million gives RPDT of £924,000, payable on top of the group’s corporation tax.

How is RPDT reported and paid?

Section 45 and RPDT30100 apply the corporation tax rules on returns, payments, enquiries, assessments, information powers, penalties, interest and appeals. RPDT is included in quarterly instalment payments and group payment arrangements, so a large company pays it on its normal instalment dates. See corporation tax deadlines for the timing.

RPDT30300 says the liability is reported in the CT600 return with supplementary page CT600N. The return shows the RPDT profits, adjusted trading profits, joint venture amounts, loss and group relief, and the allowance allocated. A company need not return RPDT profits if it is reasonable to assume it would have no liability before deducting RPDT losses. HMRC’s example is a company with £20 million of RPDT profits and a £3 million loss brought forward: it can reasonably assume no liability because the profits are below the allowance. With £27 million of profits it must report, even though the loss would remove the charge. The allocating member can use CT600N to allocate the allowance, and it is the form for RPDT group relief unless the simplified arrangements are used. Partnership profits are included in each corporate partner’s share, and transfer pricing and the GAAR apply.

What mistakes do developers make?

  • Assuming the allowance is per company. It is £25 million per group. Without a nomination, the default split by the number of chargeable companies can leave developers well short.
  • Deducting interest. Finance costs are removed from RPDT profits even when they are allowed for corporation tax.
  • Ignoring licence arrangements. A licence to build, with the freehold conveyed to buyers at the developer’s direction, can still be an interest in the property for RPDT.
  • Missing joint ventures. A substantial interest in a relevant joint venture company can make a group company an RP developer even if it does no building itself.
  • Treating every excluded building the same. Student accommodation is only excluded if it meets the 165 day occupation test, and build to rent is only outside the tax where the builder keeps the property rather than selling it.
  • Forgetting non residential mixed use. Mixed developments need a just and reasonable apportionment between residential and commercial elements.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.