student accommodation excluded but construction for rent always included
According to the bill released for consultation, however, rental construction developments have not been excluded from the new tax, despite calls from the British Property Federation (BPF) for it to be.
The BPF said it would be “unfair” to levy RPDT on developers of rental construction to allow remediation work on the market for houses for sale, since investor-developers of rental construction remain entirely responsible for remediation work and costs. are not passed on to tenants.
The RPDT is one of the measures designed to contribute to the costs of the government’s plan to remove hazardous coatings from leased residential buildings. The government launched a first consultation on the design of the tax in April.
The treatment of student accommodation was of particular concern when the proposals were first viewed, according to Richard Croker, property tax expert at Pinsent Masons, the law firm behind Out-Law.
The bill provides that student housing buildings will be excluded from the tax if they are designed or adapted, or under construction or adaptation, for use by students or schoolchildren and it is reasonable to expect the building to be occupied by students or student schools at least 165 days per year.
“It is good news that the government has chosen to exclude student accommodation in a broad and direct manner,” said Croker. “The previous consultation suggested that he was considering distinguishing between different types of accommodation so that studios are taxed, but traditional residences are not.”
“However, building for rent should now also be excluded as it makes no sense for this sector to contribute to the coating remediation costs incurred in relation to the market for homes for sale,” he said.
RPDT will apply to residential property development profits of companies that undertake residential property development activities in the UK. Tax will only be levied on profits exceeding an annual allowance. The allocation figure has not been confirmed, but the previous consultation suggested a figure of £ 25million.
The RPDT will only apply to companies having or having had an interest in the land concerned.
The tax will also only apply to businesses subject to corporate income tax and therefore will not apply to charities such as housing associations or to profits and earnings of property rental companies (REITs).
“Taxable subsidiaries of charitable housing associations will come within the scope of the tax, except to the extent that they are able to donate their profits from such activities,” said Croker.
“Sales of land with planning permission for residential development will be billed with development profits, but there does not appear to be any reason to believe that unrealized profits from planning gain will be subject to RPDT,” he said. -he declares.
The tax on profits from residential real estate development will be levied as if it were an amount of corporate tax. However, the calculation method is different since the financial expenses are not deductible. The tax rate has not yet been announced.
Residential nursing homes will be excluded from the RPDT if personal care is provided. However, the development of residences for the elderly will come within the scope of the tax.
The bill contains anti-prevention measures intended to prevent developers from avoiding RPDT by accelerating profits so that they arise in a financial year ending before April 1, 2022. The measures apply to agreements reached from April 29, 2021 whose main purpose is to obtain a tax advantage resulting from not taking profits into account for the application of the RPDT. If anti-anticipation applies, profits will be considered to be generated in the developer‘s first tax period ending on or after April 1, 2022.
The deadline for comments on the bill is October 15, 2021. The legislation is to be included in the 2022 Finance Bill and the final details of the tax are expected to be announced in the British Chancellor’s budget announcement scheduled for October 27.