Residential Property Developer Tax - build-to-rent and non-profit housing out of scope

England and Wales

The government has decided that the RPDT will not be chargeable on build-to-rent (“BTR”) investors, or non-profit housing companies.


On Friday, HM Treasury announced to certain key stakeholders that profits arising from BTR development will not be chargeable to the RPDT.

Clearly, this is welcome news for those in the sector, who have maintained that it would be unfair to levy the RPDT (also known as the “cladding tax”) on BTR, since:

  • BTR landlords are normally responsible for ongoing maintenance costs (including cladding remediation works); and

  • the envisaged design of the RPDT would cause a dry tax charge to arise to BTR investors (the intention being that the tax would be charged on the notional profit from a deemed market value sale on practical completion).

While at the time of writing the government has not released an official statement on this point, updated draft legislation published on 8 October continues to require that in-scope residential property development activities are carried out on property held as trading stock of the developer or related company.

As such, all profits arising from development activities undertaken on properties held for investment purposes will fall out of scope – and consequently, the property rental business income and gains of REITs should not be subject to the tax.

Non-profit housing

The updated draft legislation confirms that non-profit housing companies (broadly, housing associations) will not be subject to the RPDT.

“Non-profit housing company” is at present defined by reference to social housing legislation – being non-profit registered providers of social housing (England), registered social landlords (in Wales and Scotland) and registered housing associations (in Northern Ireland). Therefore, it appears that, where a developer also builds affordable housing – but does not meet the named legislative criteria – any profit which does arise from such housing will remain in-scope.

The legislation allows the government, by regulation, to amend the definition of non-profit housing company.

What next?

As detailed in our Law-Now covering the previous iteration of the legislation, the exclusion of BTR is likely to mean that the “pressure point” for in and out-of-scope profits will be whether the relevant property is held as trading stock.

It is likely that the remaining key details (the rate and the RPDT tax-free allowance) will not be announced until the Budget on 27 October.