Changes to Residential Property Developer Tax – are you ready?
Property developers with operating profits face a new tax from 1 April 2022.
The autumn budget confirmed the introduction of a new tax that Robert Jenrick MP, then Secretary of State for Housing, first announced back in February 2021 before going through a consultation process during the spring and summer of 2021.
The tax, which was published in the 2021 budget and becomes effective from 1 April 2022, ensures that any companies, including those in group structures, will pay an additional 4% of corporation tax on profits exceeding £25M. This tax calculation is intended to only be on profits from development activities and will be achieved by effectively giving relevant companies or of course groups, a £25M annual allowance which can be applied against their taxable profits for the year.
Whilst this may not feel of relevance to a large proportion of smaller operators within the housebuilding sector, history tells us that the current incumbents in Numbers 10 and 11 Downing Street have form for reducing thresholds, so one can only guess how long this £25M threshold will be in place for.
This increase comes at a time when the government is setting the bar high as far as their national housebuilding targets are concerned and any increase in tax rates for property developers can only create additional costs to the average house purchaser.
If you would like to discuss these upcoming changes please contact us here.
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