Consultation on Proposed Residential Property Development Tax

A new Government consultation has been published regarding the proposed Residential Property Developer Tax (“RPDT“). It has implications for the care and retirement development sector.  

It is planned to be introduced 1st April 2022 as part of a package of proposals to raise revenue for remediation work to unsafe cladding on high-rise residential buildings. The tax aims to raise at least £2bn over 10 years and would apply to developers with annual profits in excess of £25m.

Housing Secretary Robert Jenrick says:

“We’re making the biggest improvements to building safety standards in a generation, investing over £5 billion helping to protect leaseholders from the cost of replacing unsafe cladding on their homes and ensuring industry is held to account for the wrongs of the past. This tax will strike the right balance between developers making a contribution and ensuring fairness for the taxpayer.”

The Government has made it clear that the tax should not have a disproportionate impact on housing supply, or other government objectives on housing.

There is a need to consider the impact that this tax could have on the care and retirement living sector. Care homes and communal establishments are exempt; however, this extract from the consultation demonstrates that the Government are not sure which way to progress with regard to the ‘different forms of retirement accommodation’ which would include those with different levels of care.

The consultation sets out that it closely follows the Stamp Duty Land Tax definition, i.e.

"a house or flat that is considered as a single residence, generally together with the grounds and garden or any other land intended for the benefit of the dwelling”.

The consultation specifically says the following:

“There is a need to consider the treatment of different forms of retirement accommodation where varying levels of care provision may be included. Where care and allied service functions such as catering and cleaning at provided as an integral part of a communal dwelling, as in a residential home, then the government intends that profits from such developments to be out of the scope of RDPT.

Where this is not the case for example retirement communities that offer accommodation and communal facilities for older persons that are not reliant on care provision, the government considers that profits from the development should fall within the scope of the tax.”

The consultations then specifically asks:

• Is there an alternative to the approach described for retirement housing which considered provision of care and allied services, that should be considered?
• Are there additional forms of communal housing that you believe should be excluded from the definition of residential property for the purposes of RDPT?

I suggest this warrants a detailed response on behalf of the care and retirement living sector, setting out the operational challenges of running, particularly larger retirement/care village schemes where there are varying levels of care provided within the site. The consultation proposals have the potential to impact on the viability of proposals alongside the already existing challenges of providing communal facilities in what is an ongoing commercial operation as opposed to standard housing.

At present the national Planning Practice Guidance says the following:

How does the use classes order apply to specialist housing for older people?

“It is for a local planning authority to consider into which use class a particular development may fall. When determining whether a development for specialist housing for older people falls within C2 (Residential Institutions) or C3 (Dwellinghouse) of the Use Classes Order, consideration could, for example, be given to the level of care and scale of communal facilities provided Paragraph: 014 Reference ID: 63-014-20190626 dated: 26 June 2019.”

Many developers will know the frustration of arguing over the use class because it has significant impacts on how local plan policies are applied and then financial and other contributions. There have been many calls over a long period of time to clarify the use class of retirement and care accommodation or provide it with its own use class under planning legislation. This consultation has the potential, as a side effect of its main purpose, to do this but clarifications and clearer definitions are not always good things and there can be unintended consequences. Those with an interest in development and the provisions of such accommodation need to react and be heard. 

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The full consultation is available here (opens new window) and runs until 22 July 2021. If you would like any further information on this or would like TKP to produce a response on behalf of your organisation, please get in touch john.sneddon@tetlow-king.co.uk.  

Tetlow King Planning are proud to sponsor the Housing LIN’s planning portal. Here you can access a range of free tools and resources on Planning Homes and Communities for Older People.