Exemptions under the Residential Property Developer Tax

Earlier this year, we outlined government proposals on a new Residential Property Developer Tax (RDPT), which is set to be introduced from 1 April 2022. Its aim is to raise an additional £2bn over 10 years to help fund the remediation of unsafe cladding. The RPDT is to be paid by companies (or groups of companies) that generate profits of more than £25m from the development of residential property in the UK. At the Autumn Budget, the government announced that the RPDT would be payable at the rate of 4%.

It was always anticipated that charities (including charitable housing associations) would not be subject to the RPDT. However, the NHF was concerned about the potential impact the RPDT could have on housing associations that generate profits of more than £25m from the development of homes by non-charitable subsidiary entities and/or joint ventures. The NHF also felt that there was a risk that more social housing groups could fall within the scope of the tax as a result of future mergers, particularly if the £25m profit threshold reduces or does not increase in line with inflation, or if the RPDT is extended beyond the anticipated 10 year period. Without a wider exemption, the RPDT would reduce the level of funds available for investment in affordable housing and hence would have a negative impact on the supply of affordable homes, an outcome that the government made clear they wanted to avoid.

Over the summer and into the autumn, the NHF, supported by RSM and working with a number of its members, met with HM Treasury (HMT) and the then Ministry of Housing, Communities and Local Government (now the Department for Levelling Up, Housing and Communities), to build a case for an exemption for not-for-profit registered providers and their subsidiary companies. We were therefore delighted that the Finance Bill 2022 takes non-profit registered providers of social housing and their wholly owned subsidiary companies outside the scope of the RPDT.

The Finance Bill 2022 does introduce the concept of an ‘exit charge’ in order to recoup RPDT in certain circumstances. However, these circumstances are limited to situations where:

  • A non-profit registered provider ceases to be a non-profit registered provider (unless all its assets are distributed to another non-profit registered provider).
  • A wholly-owned subsidiary company is transferred by a non-profit registered provider to a for-profit registered provider as part of an internal group reorganisation.

Both of these situations would seem to be highly unusual, meaning that it is extremely unlikely that housing associations will need to concern themselves with the RPDT.

Housing associations will, of course, need to appreciate that this new tax may be payable by the housebuilders they do business. While the response from housebuilders is difficult to predict, they might be prepared to pay less for development sites, or seek to increase the price of construction services or of affordable housing provided under Section 106 arrangements. It might also be the case that smaller housebuilders, who are not subject to the RPDT, become more competitive in terms of pricing.


RSM is a leading provider of audit, tax and consulting services, with around 3,800 partners and staff in the UK. We're working with our tax advisors RSM to help shape government policy on taxation as it affects the sector and to keep housing associations informed of key issues.

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Who to speak to

Adam Gravely, Finance Policy Officer