RPDT20410 - The charge to RPDT: reliefs: RPDT loss relief - section 41 and part 1 of schedule 7 Finance act 2022

Relief for carried forward RPD losses is provided for by FA22/Sch7. Broadly, a RPD loss that arises from the commencement of the charge on 1 April 2022 may be carried forward to be set against RPD profits of a subsequent accounting periods or surrendered as RPDT group relief as described at RPDT20420. RPD losses are calculated in the same way as RPD profits.

A company’s RPD loss must be set against any attributable joint venture profits as the first A + B stage in the computation required by FA22/S38 described at RPDT20100. Where that produces a net profit in excess of any available allowance then the company is required to make a return as explained at RPDT30300.

Otherwise, a company is not normally required to notify RPD losses until they have the effect of reducing RPD profits actually chargeable to RPDT after taking into account the available allowance. This relieves the administrative burden of notifying losses for companies who may never become subject to the charge given the annual allowance. Companies that do expect to be in the position of deducting carried forward losses in order to reduce or eliminate a future RPDT liability should therefore keep sufficient records to be able to provide evidence of the losses incurred at a future time. Groups in this position who have a dedicated Customer Compliance Manager may wish to discuss their RPDT loss position informally in advance.

It is important to note that carried forward RPD losses and RPDT group relief is still used where a company’s profits are below the available allowance.

Example

A single company is a property developer undertaking residential property development. Its results from the activity are as follows –

  • Accounting period ended 31 December 2023 – loss £25m
  • Accounting period ended 31 December 2024 – profit £15m
  • Accounting period ended 31 December 2025 – profit £30m

There are no RPD profits to report for 2023 or 2024 but the net amount of RPDT loss available to carry forward to 2025 is £10m. This loss is required to bring the company’s profits to below the allowance of £25m in 2025. The company is therefore required to notify HMRC of its RPD profit for 2025 and notify the loss set against this.

An RPD loss that is surrendered as RPDT group relief will necessarily involve notifying HMRC where the surrender has no immediate effect on the liability of the receiving company because that company’s profits are below the allowance. It should be noted that an RPD loss carried forward can also be surrendered as group relief under FA22/Sch7/Part3.

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