RPDT20100 - The charge to RPDT: computation of RPDT liability section 33 and 38 Finance Act 2022

FA22/S33 charges the RPD profits arising to a company in an accounting period that exceeds the amount of annual allowance available to the company at a rate of 4% which is treated as an additional amount of Corporation Tax. Guidance on the annual allowance is at RPDT20500.

FA22/S38 explains how those RPD profits are calculated. The rules also apply to the calculation of RPD losses and the guidance on how RPD losses can be used can be found at RPDT20400 onwards.

The calculation is expressed as the formula A + B – C – D – E where:

  • A is the company’s own RPD profits (or losses) of the period. See RPDT20200 for guidance on how these are calculated.
  • B is any amount of joint venture profits (or losses) that are attributed to the company. RPDT20300 explains the circumstances in which an attribution is to be made.
  • C is any amount of relief for carried forward losses available to the company. RPDT20410 explains how these are calculated.
  • D is any amount of RPDT group relief surrendered to the company. Guidance on this is at RPDT20420.
  • E is any amount of RPDT group relief for carried forward losses that is surrendered to the company. Guidance on this is at RPDT20430.

The calculation of the A + B figure is an important first step as if a company does not make a RPD profit for the accounting period, after taking into account any amount attributable under the joint venture rules, then the further elements of the calculation become irrelevant. There will be no profits against which to set its own carried forward losses and, while both forms of group relief can be used to reduce a claimant company’s RPD profits to nil, they cannot create a loss in that company.

There is a restriction on the amount of RPD profits that can be covered by carried forward losses, including group relief for such losses, elements C and E in the calculation. The operation of this restriction, which reflects a similar rule for standard Corporation Tax, is explained at RPDT20440.

Example 1

F Ltd is the parent company of a group with direct 100% subsidiaries G Ltd, H Ltd and I Ltd

  • F Ltd is a holding company providing ancillary services and is also the nominated company for allocating the annual allowance
  • G Ltd is a house builder
  • H Ltd develops blocks of apartments that are sold to investment companies that will let the apartments
  • I Ltd provides property management services to the group companies and others

In APE 30 June 2027 the companies made the following profits or losses from RPD activities –

  • F Ltd made a small profit of £100,000 from recharging the services it provides to G Ltd and H Ltd
  • G Ltd made a profit of £40m from sales of houses
  • H Ltd made a profit of £10m on the sale of a development of apartments
  • I Ltd made a loss, £2m of which was attributable to the services it provided in support of G Ltd and H Ltd’s RPD activities. It surrenders this loss to G Ltd as RPDT group relief.

Each company’s RPD profits are therefore -

  • F Ltd: £100,000
  • G Ltd: £38m after the group relief surrendered by I Ltd
  • H Ltd £10m

F Ltd allocates the £25m annual allowance so as to reduce both its own and H Ltd’s RPD profits to nil and leave only G Ltd liable to pay RPDT –

  • F Ltd: profits £100,000 less allowance £100,000 means no profits chargeable to RPDT
  • G Ltd: Profits £38m less remainder of allowance £14,900,000 (£25m less £10,100,000) means profits chargeable to RPDT are £23,100,000
  • H Ltd: profits £10m less allowance £10m means no profits chargeable to RPDT

The group’s RPDT liability is therefore G Ltd’s profits in excess of its allowance, being £23,900,000 charged at 4%, meaning tax payable of £924,000.

Example 2

P Ltd made trading profits of £70m in its accounting period ended 31 December 2025. During this period, it undertook both residential property development and property maintenance activity. The maintenance activity was loss making and the profit attributable to development is £75m.

P Ltd also held a 50% stake in a joint venture Q Ltd which made a £30m loss from residential property development.

P Ltd made small RPD loss in the previous accounting period of £5m.

P Ltd is a member of the same group as –

  • R Ltd which made a RPD loss of £10m in the period ending 31 December 2025 and had also made a loss of £2M in the previous period, and
  • S Ltd which made a RPD profit of £7m in its accounting period ending 31 December 2025.

P Ltd is responsible for allocating the annual allowance within the group and allocates £7m to S, which covers its profit.

Q Ltd agrees that P’s 50% share of its RPD loss (£15m) can be used by P Ltd, rather than carried forward.

R Ltd surrenders both its current period loss and its carried forward loss to P.

P Ltd’s RPDT liability is calculated as follows –

A £75m – B £15m – C £5m – D £10m – E £2m = £43m

P Ltd has £18m of allowance available after the allocation to S Ltd. That leaves £25m of RPD profit in excess of the available allowance. RPDT is charged on this amount at 4% making P Ltd liable to pay £1m in addition to its Corporation Tax liability for the period.

Note that the figures used in this example mean that there is no restriction on the use of carried forward amounts under FA22/S42. The operation of this restriction is explained at RPDT20440.

RPDT01100 contains a general introduction to RPDT and a list of abbreviations used.