RPDT10410 - Key concepts: meaning of residential property: excluded buildings-section 37 Finance Act 2022

FA22/S37(2) and (3) provide statutory exclusions from the meaning of residential property for RPDT purposes. The exclusions include buildings where the use as a dwelling is either temporary, generally without the occupiers of the dwellings having a legal interest in the property, and / or where the use as a dwelling is incidental to the primary purpose of the property. Where a developer constructs or adapts property as part of a property development trade and the intended use is similar to one of those mentioned in FA22/S36(2) the following guidance is intended to assist in determining whether the property is treated as residential property for the purposes of the tax:

Student accommodation

In addition to school boarding houses or university halls of residence, the exclusion will also apply to other purpose-built student accommodation (PBSA), where term-time occupation is generally restricted to students undertaking a course of education for at least 165 days a year, by virtue of the requirement at FA22/S37(3).

The conversion of a former individual private dwelling into a house of multiple occupation which has the potential to be let to university students would not generally meet this criterion, in the unlikely event that this activity was carried out at sufficient scale to bring a developer’s profits above the RPDT annual allowance.

Retirement accommodation

The exclusion at FA22/S37(2)(b) covers care homes and other institutions that provide personal care to people requiring it by reason of old age, disability et cetera. It does not provide a general exclusion for purpose-built dwellings that are intended for occupation by people of retirement age, whether as owners or tenants.

The provision by a property developer of personal care in a person’s own home, including within ‘retirement village’ developments, is a relatively recent business model for the UK involving a number of specialist developers. Residents can opt to purchase care packages either when they purchase a property in these developments, which are marketed primarily or exclusively to people of retirement age, or they may be able to purchase additional care at a later date. Such developments can be variously described as ‘supported living’ or ‘extra care’ accommodation, depending upon the level of care package available. Where a developer’s trade involves disposing of freehold or leasehold interests in such properties, then the sale is treated in the same way as other residential property. This will be the case whether the disposal is direct to residents, or to investors, or an operator who will run a retirement development; the developer’s profits from its RPD activities are within scope of the tax. To the extent that profits arise from the provision of care packages, these are not treated as arising from the property development trade, so would be outside the scope of RPDT.

Residential accommodation of members of the armed forces and emergency services or hospital workers

The exclusions under these headings are restricted to accommodation that is specifically designed or adapted for use by these workers and that is provided by reason of their employment.

Temporary sheltered accommodation

Where developers construct accommodation that is designed for use as a temporary refuge or similar sheltered dwelling, any profits from such buildings will not be in scope of the RPDT. This will cover buildings housing persons seeking temporary shelter from domestic abuse, homelessness, or other reasons. It does not include ‘sheltered housing’ that is intended as longer-term dwellings for the elderly.

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