If your company, partnership with a corporate member or collective investment scheme owns a residential property in the UK with a value of more than £500,000, then you should be thinking about your potential obligations to file an ATED return with HMRC before the 30 April 2018 deadline.
The Annual Tax on Enveloped Dwellings (‘ATED’) is a tax payable mainly by companies. A number of reliefs are available from the tax itself, but reliefs must be claimed via an online filing process and failing to do so can result in penalties.
The common misconception is that ATED is only applicable to Russian oligarchs owning mansions in London’s most exclusive post codes. This is a misconception that appears to be borne out by approximately 80% of ATED receipts being collected by HMRC in respect of properties located in the City of Westminster and the borough of Kensington and Chelsea. However, the point to consider for many businesses throughout the UK who have no ATED liability is the obligation to file relief claims with HMRC, at least once a year.
If a company fails to file the appropriate relief claim with HMRC by the 30 April deadline, this can result in penalties, even where there is no ATED liability. A full year of late filing penalties can be as much as £1,600, before considering the cost of tax-geared penalties where tax is due.
Many businesses will need to file ATED relief claims but will not have any tax to pay. A number of reliefs exist, including relief for property rental and property development businesses, as well as reliefs for specific types of dwellings, including farmhouses. Certain criteria must be met to satisfy these reliefs.
It is important for a business to stay in dialogue throughout the year with the individual dealing with ATED returns, rather than just in April. Purchases of new properties, completion of new builds and changes of property use can all trigger new filing deadlines, sometimes as little as 30 days after the event.
It should be noted that there are certain exemptions. For example, charitable companies are often exempt from the ATED process and HMRC has confirmed that certain types of property, including hotels, boarding schools and care homes, do not fall into the ATED definition of ’residential’ and are therefore also exempt.
The key message for business owners with residential properties in their companies, partnerships with a corporate member or collective investment schemes is that some consideration must be given to ATED and professional advice is required to ensure that tax compliance obligations are met, and penalties are avoided.
Should you wish to discuss this further, please email or call your usual RG contact.