Don’t fall foul of ATED penalties

What is annual tax on enveloped dwellings (ATED)?

ATED is an annual tax paid mainly by companies which own UK residential property valued at more than £500,000. The property/dwelling is said to be ‘enveloped’ because the ownership sits within a corporate ‘wrapper’ or ‘envelope’.

QAWhat is considered a dwelling? Property is considered a dwelling if all or part of it is used, or could be used, as a residence, for example a house or flat. It includes any gardens, grounds and buildings within them.

Q What are the penalties and how can they be avoided?

A You could be charged a penalty and interest if you don’t pay or file your return on time, or if you submit an inaccurate return. Where ATED is applicable for the period April 1 2018 to March 31 2019, it is now time to look at preparing the relevant returns which are due for submission by April 30 2018.

Here are some tips

With effect from April 1 2018, properties valued at more than £500,000 each on April 1 2017 (or on acquisition if later) will be required to complete and submit an ATED return. The deadline for the submission of the 2018 return and payment of the ATED charge is April 30 2018. Reliefs are available from the ATED charge for:

Property rental businesses;

Properties opened to the public;

Property developers and traders;

Financial institutions acquiring properties in the course of lending;

The occupation of employees or partners; Farmhouses; Providers of social housing. Even where relief is applicable, the appropriate ATED return will need to be completed and relief from the ATED charge will need to be claimed on a relief return.

Previously, any ATED charge was based on the property’s value as at 1 April 2012 (or date of acquisition if later). For the period April 1 2018 to March 31 2019 and onwards, the charge is based on the property’s value as at April 1 2017 (or date of acquisition if later).

It is therefore important that we reconsider any previous values, as this may affect whether a charge is now due.

The ATED charge is payable in advance of the period. Should a property be purchased after April 1 2018, there will only be 30 days for the property owner to submit the appropriate ATED return and pay any ATED charge due.

What is the ATED charge?

The ATED payable is based on property value bandings, and the charge relating to the property value reflects the whole period from April 1 2018 to March 31 2019. Where a property is purchased or sold in the year, this charge will be apportioned. Annual charges are according to the property value as at 1 April 2017 or date of purchase if later.

More than £500,000 but not more than £1m – £3,500.

More than £1m but not more than £2m – £7,050.

More than £2m but not more than £5m – £23,550.

More than £5m but not more than £10m – £54,950.

More than £10m but not more than £20m – £110,100.

More than £20m – £220,350.

Q How do you report if an ATED charge is due or you can claim relief?

A ATED returns or ATED relief returns can be made on the Government Gateway, or through an agent such as Johnston Carmichael.

ATED Capital Gains Tax For those who own a property caught within ATED, it is also worth remembering that the disposal of the property may be subject to ATED Capital Gains Tax. Calculations are complex and must be reported within 30 days of the disposal.

For more information, visit jcca.co.uk.

Alex Docherty is a partner in Johnston Carmichael.