Residential Property Developer Tax 

From 1 April 2022, large residential property developers became subject to Residential Property Developer Tax. It is levied at the rate of 4% and should be paid in quarterly instalments or as a single payment at year end, depending on the payment regime the company follows for corporation tax.

Residential property developers with profits in excess of £25 million should be aware that Residential Property Developer Tax (RPDT) is now live and the tax payments could be due, under the Quarterly Payment regime, by the end of June 2022. The exact timing of the payment for RPDT for each company is in line with its corporation tax liability which can include small, large and very large company payment regimes.

The new tax took effect in April 2022 and it applies to profits generated from residential property development activities only. As the tax is now in effect, companies urgently need to consider their potential liability. In addition to this, other UK tax compliance requirements must be taken into account, such as corporation tax and whether instalment payments should be made. The payment of RPDT is due in quarterly instalments during the accounting period (next upcoming instalment payment deadline for period ended 31 December 2022 is 14 June 2022) or as a single payment at year end which will depend on the payment regime the company follows for corporation tax.

If you need any assistance estimating this year's tax liability, please let us know. We understand the computational aspects of RPDT can be complex. In its simplistic form, the tax is calculated by applying tax at the rate of 4% to the calculated RPDT profits above the group annual allowance of £25 million.

The following administration points should be considered when making a payment.

Payments - transitional rule

There is a transitional rule for quarterly instalments payments (QIP) under RPDT. The first payment should include any payments that would have been due and payable before the commencement date of RPDT. For example, companies with a year ended 31 December 2022 (where the first QIP should have been made on 14 March 2022), and is prior to the commencement of RPDT, the payment on 14 June 2022 should then include both the QIP payments that would have been payable on 14 March 2022 and the RPDT that is payable on 14 June 2022. As this brings the payments up to date, being 50% of the estimated 2022 tax liability, the payments on the subsequent dates will be calculated in the normal way as for corporation tax.

Quantification notice

HMRC have an additional requirement for companies making a payment of RPDT and that is to submit a quantification notice. This notice informs HMRC of the amount of RPDT made by the company or group in each period. HMRC provided the template for the quantification notice as well as quantification notice schedule which should be completed when making payments for multiple companies. These forms should be sent here: [email protected]

The forms should be sent to HMRC on or before the date the payment is made. Failure to submit the notice forms on time could result in penalties being issued by HMRC.

If you have any queries or require assistance with Residential Property Developer Tax, please speak to Caroline Fleet or your usual Crowe Tax Advisor.