Local authority housing companies: new tax on residential developments

Local authority housing companies and residential housing developers (‘LAHCs’) face a new tax from April 2022, when the residential property development tax (‘RPDT’) is introduced. The government has released draft legislation that makes it clear that RPDT could have a material effect on some local authority housing developments.

We will be hosting an RPDT seminar shortly after the Chancellor’s Budget on 27 October (dates to be confirmed very soon). The seminar will explore the new tax and how it may affect LAHCs and local authority housing developments.

New tax on residential developments – The Background

RPDT will apply from April 2022 on the profits of residential property developers. It is designed to contribute to the government’s costs of dealing with unsafe cladding on leased residential buildings following the Grenfell disaster.

The tax will apply to the profits from the development of residential properties, with some exceptions, including residential care homes, student accommodation, temporary sheltered accommodation, and hotels. There is no rate announced for the tax yet, but the government plans to raise at least £2 billion from the tax over the next ten years.

Residential Property Development Tax will be charged on profits exceeding the developer’s “allowance”. The allowance is not stated in the draft legislation, but it is likely to be £25m. There are specific provisions to tax joint ventures and groups. Although local authorities themselves will be exempt, LAHCs are within the scope of the tax and could find themselves liable for the tax, especially if they are in a joint venture or group structure.

The government is holding a technical consultation (until 15 October) on the draft legislation before its inclusion in the 2021-22 Finance Bill. The final form of the tax, and its rate, will be announced in the Autumn Budget on 27 October.

Residential Property Development Tax Seminar

RPDT might be a costly new liability for housing developments, and LAHCs must be fully aware of how they will be affected. The online seminar will explore the effect the new tax might have on LAHCs, taking into account the legal and tax structures and the various exemptions.

The cost of a place is £180 plus VAT per delegate. Organisations booking three or more places will receive a 10% discount.

Dates will be announced very soon, but if you would like to register your interest, please email bookings@pstax.co.uk. Places will be available on a first-come, first-serve basis.

In the meantime, if you have any questions, please contact PSTAX Indirect Taxes Director, Nick Burrows.

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Nick Burrows

Written by Nick Burrows

Nick has nearly 30 years of working with and supporting public sector bodies with VAT and indirect taxes, starting at HM Customs and Excise and then as in-house VAT Officer at Hampshire County Council. Since moving to advisory firms, Nick has had senior public sector VAT roles at RSM Tenon (now RSM), KPMG, and PSTAX (since 2014). He has led VAT advice nationally on a wide range of public sector issues and helped shape HMRC policy in several key areas.

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