Autumn Budget 2021: Changes for real estate developers & the UK funds sector

  • Written By: Jason Dunlop & Julia Rosenbloom
  • Published: Thu, 28 Oct 2021 11:24 GMT

Budget was light on new announcements directly impacting the UK real estate sector. It included confirmation of the introduction of the much-anticipated residential property developer tax (RPDT), which is expected to have a significant impact for real estate developers, as well as the qualifying asset holding company (QAHC) regime. There were financial pledges for housing and funding for infrastructure projects as well as additional announcements extending investment reliefs through the capital allowances and business rates regimes. This reflects a Government seeking to stimulate investment in the UK following the COVID-19 pandemic.

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As expected, the Chancellor confirmed the introduction of the new RPDT. This will come into effect from 1 April 2022. Broadly, companies carrying out UK residential property development (RPD) activities will be subject to RPDT at a rate of 4% on RPD profits in excess of an annual allowance of £25 million a year. The RPDT will be included within the existing UK corporation tax rules. Any tax due will be reported, and paid, through the corporation tax return. The consultation response confirms that the RPDT is not intended to apply to build-to-rent (BTR) investors, and an exemption for non-profit housing companies has recently been included as well. Student accommodation and care homes are excluded, but the retirement living sector is not.

QAHCs & UK funds regime

A new tax regime for QAHCs will come into effect from 1 April 2022. The legislation is expected to have a significant impact for the wider UK funds sector. For real estate, the new QAHC regime is likely to be an attractive alternative to overseas fund structures for pan-European property investors. A QAHC is exempt from UK tax on gains on disposals of specific shares and overseas property, as well as profits of an overseas property business that are subject to tax in an overseas jurisdiction. A number of other measures designed to simplify the taxation of financing arrangements for QAHCs will also be introduced to ease the tax and administrative burden.

As part of the wider UK funds regime review, technical changes are also being made to the real estate investment trust (REITs) regime. These will come into effect from 1 April 2022. They include a relaxation of the listing condition where institutional investors hold at least 70% of the ordinary share capital of the REIT. The ‘holders of excessive rights’ rule, which penalises a REIT with corporate shareholders who own more than 10%, will not apply to shareholders who are entitled to receive property income distributions gross.

Capital Allowances

The temporary increased Annual Investment Allowance (AIA), of £1m for all qualifying plant and machinery (P&M), will be extended until 31 March 2023, rather than reverting to £200k from 1 January 2022. This is available alongside the 130% super deduction for main rate P&M and the 50% first year allowance for special rate P&M announced in the Spring 2021 Budget.

Business rates

The Chancellor cancelled next year’s 3% planned increase in the multiplier. There will, however, be more frequent valuations; every three years, starting from 2023. From 2023, a new business rates relief will be available for businesses that make improvements to a property they occupy so they will not be subject to increased business rates for 12 months after making the qualifying improvements. Further exemptions will also be introduced where taxpayers have invested in eligible plant and machinery used for onsite renewable energy generation and storage, which are due to last until 2035. The Chancellor has given businesses in the retail, hospitality & leisure industries an additional year of relief; they will be able to claim a 50% discount off their business rates, up to £110,000 for 2022/23.


At Spring Budget 2021, the Government announced eight Freeports across England, and reaffirmed its intention to create further sites, including in Scotland, Wales and Northern Ireland. The first tax sites will be Humber, Teesside, and Thames, which should become active from November. The maps for the first Freeport sites has been published, here.

Capital Gains Tax (CGT)

Despite much speculation, there were no changes to CGT rates. UK resident individuals, trustees and personal representatives disposing of UK residential property that gives rise to a chargeable gain now have 60 days to declare and pay any CGT on account. This is an increase from the former 30 day deadline and applies to any disposal completing on or after 27 October 2021. The extension also applies to non-UK resident persons who are obliged to make CGT declarations in relation to disposals of residential or commercial property or shares in ‘property-rich’ companies.


There were no new announcements on Stamp Duty Land Tax (SDLT). Legislation was recently introduced to give SDLT relief for purchases of land and buildings within a Freeport site until 30 September 2026. The asset must be used for qualifying purposes and relief can be withdrawn throughout a control period of 3 years.

As expected, the Annual Tax on Enveloped Dwellings (ATED) will be increased in line with inflation (3.1%) from 1 April 2022. Unfortunately, there were no relaxations to the administrative aspects of the tax.

Residential property developer tax

The Government confirmed the introduction of a new residential property developer tax (RPDT) that will apply to the profits of companies carrying out UK residential property development (RPD) activities.

Companies carrying out UK RPD activities will be subject to RPDT at a rate of 4% on RPD profits in excess of an annual allowance of £25 million per year, per group. The RPDT will be incorporated within the existing UK corporation tax process with any tax due reported with the company’s corporation tax return.

RPDT will be calculated by first identifying the company's taxable profits that relate to RPD activities and then making prescribed adjustments. No deduction will be permitted, for example, for financing costs and the utilisation of losses will be restricted.

Our comment

The Government had previously announced the introduction of the RPDT, which has undergone a period of consultation since the Spring 2021 Budget. Draft legislation has already been published.

It has been confirmed that the RPDT will not apply to companies that are developing UK residential property for investment purposes: Build-to-Rent (BTR). The potential application to the BTR sector had been debated extensively during consultation. Concerns had been raised about the administrative challenges and the impact for BTR developers that do not realise profits on completion of a development but over a longer time frame.

Whilst the RDPT is intended to target the largest developers, the restriction on deductions for interest and utilisation of losses will inevitably bring many companies within the scope of RPDT. The annual allowance of £25 million is also a group-wide allowance and cannot be carried-forward if not fully utilised in a chargeable accounting period. This may also increase the impact. In addition, the structure of the legislation does not provide any form of 'grandfathering' to mitigate the impact for existing developments that were initiated before the RPDT was announced but will not complete until after the introduction of the rules in April 2022.

When will it apply?

From 1 April 2022

UK to ease corporate re-domiciliation to align with international competitors

Post-Brexit, in order to maintain and enhance its role as a global investment and business centre, the UK is to make it possible for companies to re-domicile to the UK by moving its place of incorporation here. This will allow continuity of business, reduce administration and negate the need to incorporate a new entity in the UK.

In order to align and compete with other common law global centres such as multiple US states, Canada, Australia, New Zealand, Singapore, and around 50 other jurisdictions, the UK will allow companies to re-domicile to the UK without the need for a new corporate identity. Permitting this re-domiciling will bring new investment and growth opportunities to the post-Brexit UK economy.

Corporate identity, structure, assets, contracts, and intellectual property will remain undisturbed.

The Government is consulting on the regime, including any required changes to tax laws, to facilitate re-domiciliation. Rules currently exist for companies that migrate control to the UK, but these may need to be extended; for example, to prevent importation of foreign losses to offset profitable group entities already within the UK.

Our comment

The Government has not specifically mentioned substance as a requirement. In reality, this may be a challenge. For companies considering re-domiciliation, a key test may be around management and control, for instance if an entity re-domiciles, but certain functions are not transferred with the re-domiciling entity.

The Government has not expressed an intention to allow re-domiciling between the three separate Registrars of Companies within the UK.

When will it apply?

Consultation concludes on 7 January 2022.

Other announcements

This section covers other points raised in the Budget that may be of interest, and some previously announced changes.

  • Following the previous announcement in December 2020, the Government confirmed its intention to include legislation in Finance Bill 2021/22 to establish a new tax regime for qualifying asset holding companies from 1 April 2022.
  • The rules allowing for cross border group relief between UK-tax resident and EEA-tax resident companies in the same group will be abolished for accounting periods ending on or after 27 October 2021.
  • The change to international financial reporting standard (IFRS) 17 will affect the timing of the recognition of profits and losses for insurance companies for reporting periods beginning on or after 1 January 2023. Ahead of the change, the Government is proposing legislation to lessen the transitional impacts and allow adjustments to be spread for tax purposes.
  • The Government is planning to amend how the corporate tax loss relief legislation applies to the reversal of onerous lease provisions. The reforms are to ensure that, where leases are accounted for under IFRS 16, companies are not disadvantaged in how their deductions allowance is applied. The changes will apply retrospectively for accounting periods beginning on or after 1 January 2019.
  • The annual investment allowance will now remain at £1 million until 31 March 2023. It was otherwise going to revert to £200,000 from 1 January 2022.
  • The Government announced in July 2021 that it planned to legislate for mandatory disclosure by large businesses of any uncertain tax treatments in their VAT, income tax (including PAYE) or corporation tax returns. The legislation will be effective for returns that are due to be filed on or after 1 April 2022. Taxpayers will only need to notify HMRC where the tax advantage is expected to be over £5 million for a 12 month period. A potential widening of the scope of the proposed rules was announced in the Autumn 2021 Budget to include where there is a substantial possibility that a tribunal or court would find the taxpayer’s position to be incorrect.
  • The Government announced its intention to legislate for tax reporting by UK digital platforms. As part of this, a consultation will be opened shortly on a proposed online sales tax.

Extension of deadline for reporting and paying tax on property disposals

The deadline for reporting specific property disposals, and for paying tax on any gain arising, will be extended from 30 days after completion to 60 days.

Rules were introduced in April 2015 that require non-UK residents making disposals of UK residential property to report the disposal on a special CGT return. An on-account tax payment of any CGT is also due within 30 days of completion of the disposal.


The reporting regime was extended for non-UK residents from April 2019 to include commercial property, as well as indirect disposals, where the disposal is of a ‘property-rich’ company. It was extended further from April 2020 to include disposals of UK residential property by UK residents, but only where a gain is realised. The requirements apply to disposals by individuals, trustees or personal representatives of deceased individuals.

The deadline for filing the CGT return and paying any tax due will now be extended to 60 days from the date of completion.

Our comment

The 30-day deadline for filing property CGT returns has proved problematic, especially for individuals who do not have professional advisers or do not have a detailed knowledge of the UK tax system. In May 2021, the Office of Tax Simplification recommended that the deadline be extended to 60 days from completion, so the adoption of this measure will be welcomed by both taxpayers and advisers.

While the complexities inherent in a system requiring an on-account tax payment before the end of a tax year will not be resolved by the change, the increase in the deadline will at least allow taxpayers more time to estimate their tax liabilities accurately and comply with the registration and filing requirements, meaning that fewer will become liable to late filing penalties.

When will it apply?

For completion dates on or after 27 October 2021

Read more on changes to Real Estate

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.

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