Companies that hold UK residential properties worth over £500,000 have until 30 April to file and pay the Annual Tax on Enveloped Dwellings (ATED), but due to recent property price inflation many may be unaware that they are caught by the charge.
ATED was introduced in April 2013 and imposes a fixed annual tax mainly on companies that hold UK residential properties.
Initially introduced to apply to properties valued at over £2m, the threshold was reduced to £1m from April 2015 and £500,000 from April 2016. A different charge applies depending on the band that the property’s value falls within.
Throughout this period, the position for a particular property was determined with reference to its value as at 1 April 2012. It was always the intention that this valuation would only be used for five years, with new valuations required at 1 April 2017. However, this change could easily be missed, especially by those not subject to the charge up to now.
With the house price index showing an increase in house prices over the period for April 2012 to April 2017, it is essential that valuations are obtained as soon as possible.
Properties that were previously worth less than £500,000 and were not subject to ATED may now fall within the ATED regime for the first time in 2018/19. If caught, the deadline for reporting and payment is 30 April 2018 – a month into the assessment year unlike most other taxes where they are due after the relevant event/period.
HMRC advises that owners can either work out the value themselves or use a professional valuer. HMRC does offer a check where a property does not fully qualify for a relief and it is considered that it falls within 10 per cent of a threshold. HMRC aims to provide a response within 30 working days but time is already running out if this is required.
Time will then be needed to assess the change in value and the correct position reflected in ATED returns. For 2018/19, HMRC requires all online ATED returns and relief declaration returns to be submitted through the new online ATED service introduced in 2017. It is worth noting that if a company is using an agent to complete the form for the first time there is an additional step required for authorisation and so again time should be allowed for this.
Historically, ATED has provided greater returns for HMRC than expected. However, it remains to be seen to what extent the tax take from increased property valuations will be reduced by the impact of any de-enveloping carried out as result of last year’s changes to inheritance tax affecting companies holding these properties.
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