The government plans to introduce a Residential Property Developer Tax to be charged on the profits of companies.
Developers will pay the tax when profits exceed a set allowance – it hasn’t been stated what the allowance will be, though £25m was mooted during the consultation period.
The tax is intended to apply for accounting periods on or after 1 April 2022.
The draft legislation comes from the HM Treasury, while the tax is set to be introduced in the Finance Bill 2022.
Its development comes after a consultation period spanning 29 April and 22 July 2021.
Justifying the tax, the government said it would “ensure that the largest developers make a fair contribution to help fund the government’s cladding remediation costs”.
Developers will be affected by the tax if they are within the charge to corporation tax and are undertaking activities related to residential property development.
For example if they are designing a property, seeking planning permission, constructing or adapting it, marketing a home or managing one.
Some developments will be exempt from the tax, if the homes are used for the armed forces or turned into care homes, hotels, hospitals, prisons, sheltered accommodation or student accommodation.
Real estate membership British Property Federation responded to the draft legislation by calling for build-to-rent to be given an exemption.
Ian Fletcher, director of real estate policy, British Property Federation, said: “We welcome the exclusion of the purpose-built student accommodation sector from the new residential property developer tax.
“This will support new investment into modern and high-quality homes for students, and the higher education sector’s recovery and ambitions for growth.
“Policy decisions regarding the build-to-rent sector’s inclusion in this new tax have not yet been finalised – and we continue to argue for its exemption.
“The build-to-rent sector has not contributed to the building safety problems and the attributed financial disputes between freeholders and leaseholders, which this residential property developer tax is intended to fund.”
The tax aims to raise £2bn over a 10-year period.
A technical consultation on the draft legislation will run until 15 October 2021.
The government said views about the proposal can be sent to RPDT.firstname.lastname@example.org