Annual Tax on Enveloped Dwellings (ATED) tax unlike other corporation taxes is reported ahead of time rather than retrospectively, in other words, the returns for this year covering the period through until 2022 should have been submitted at the end of April this year.
As your accountant, we need to know as soon as you buy a relevant property at any point in the tax year so that we may report the relevant details on your behalf. If you don’t tell us and you are late, although you may not even realise, the penalties are steep and some you will certainly want to avoid.
Key things to remember
Your accountant needs to know as soon as possible of any instances of any of the following;
- a property is purchased by your business
- your business already owns a property and the value exceeds £500,000.
In many instances, no tax will be due. Reliefs are available to landlords and developers but a declaration must be submitted to notify any relevant reliefs and this has the same filing deadlines and penalty regime as the full ATED return.
Don’t forget to report in year purchases or new build completions. Your accountant needs to report within 30 days of purchase, or for new builds within 90 days from the earliest of;
- date of becoming a dwelling for council tax purposes
- or the date that it is first occupied
Penalties can build up – even when no tax is due. For example, this year the ATED deadline was 30th April. If your business didn’t hold any properties then but bought one this summer, and in the rush to complete you forgot to tell us, it may not come to light until the annual accounts are prepared, or even April next year.
By then, the return is then late as the ATED submission would have been required 30 days after purchase.
There is an automatic £100 penalty and 5% of the tax due for missing the first 30 day deadline, followed by potential daily penalties of £10 per day up to 90 days, 5% of tax due, or £300 (whichever greater) at 6 months and again at 12 months.
So a return for a property bought this summer could be overdue by 6-12 months by next April, and penalties can quickly escalate. In the above example they could reach £1,300, for being 6-12 months late, even when no tax is due!
Finally, note that if HMRC discovers the omission rather than the tax-payer, your business may be time-barred from claiming the relevant relief. This means you could be liable to tax and additional penalties, when none would have due been due if the return had been filed correctly.
For a more detailed explanation of ATED and the particulars, keep reading.
What is ATED?
ATED (Annual Tax on Enveloped Dwellings) is an annual tax mainly payable by companies that own UK residential property with a value of £500,000 and over. An ATED return must be filed by your business or your appointed agent/accountant if your property meets the following criteria;
- is a dwelling – what do we mean by a dwelling? A dwelling if your property is partially or fully used or could be used as a residence – for example, a house or a flat, the tax also covers any gardens, ground and buildings within the property.
- is located within the UK
- was valued at more than £500,000 (for returns from 2016/17 onwards)
- is owned completely or partly by:
- a company
- a partnership where any of the partners is a company
- a collective investment scheme – for example, a unit trust or an open-ended investment vehicle.
When does it need to be reported and when do you need to pay?
You’ll need to submit your returns and pay HMRC by 30 April if your property is within the scope of ATED on 1 April. Note you are reporting and paying for the year ahead, not the year just passed as is normal in most tax situations.
Further information and advice
The full detail of the regulations is too vast to reproduce within this article, if your business profile includes property, check your circumstances with us, and if in doubt – substantial penalties could be avoided with a quick chat. You can contact us today for a free consultation and to discuss your needs.