What is the requirement?
If you own residential property in the UK through a ‘non natural person’ i.e. a Company, SPV, partnership or collective investment scheme, you must file an Annual Tax on Enveloped Dwellings or ATED return. The tax was first introduced in April 2013 to discourage ownership of property in an “envelope” that could avoid payment of Stamp Duty Land Tax on a subsequent sale.
Why is it being missed?
There are two reasons why this has recently become an issue for property developers.
- A recently reduced threshold – From 1 April 2016 an ATED charge of £3,500 is payable for enveloped properties worth between £500,001 and £1m. This increases in bands thereafter for properties worth more than £1m. This reduced threshold is now catching many more property developers than before.
- But we don’t owe any tax, so I’m ok aren’t I? – The issue is arising because there are a number of reliefs available which mean that often property developers will not owe any tax and therefore have no payment to make. However, a nil ATED return must still be submitted and if this is overlooked you will be liable to HMRC late filing penalties.
What are the penalties?
The deadline for completing your ATED return is extremely short and the return (including nill returns) must be filed within 30 days of becoming liable to prepare a return.
If you miss the deadline you can expect an immediate £100 fine. After 3 months you will incur £10 daily penalties of up to £900 in total, a further £300 after 6 months, again at 12 months and further fines are possible. If you have tax due you would also be fined as a percentage to the amount owed over these periods.
How can we help?
Having an experienced team of construction and property accountants looking after your business can ensure that you are aware of such compliance issues facing your property business. If you are looking for a greater level of industry understanding and skills, we would be pleased to discuss our range of construction and property accounting services.
With regards to ATED tax returns, our experienced tax team can:
- Complete returns and submit them on your behalf
- Explain ATED and remind you of filing deadlines
- Advise you on reliefs available
- Advise you on your personal capital gains position
- Assist in obtaining valuations if required
- Advise on new builds and conversions
- Assist in any HMRC tax enquiry
Penalties and interest may apply to late and/or incorrect ATED returns so if you are in any doubt please contact our tax team today.
Specialising in the construction sector, David is an advisor to large joint venture projects and residential / commercial developers.