Companies, partnerships with a company as a member and collective investment schemes must file 2022/23 Annual Tax on Enveloped Dwellings (ATED) returns for affected properties by 30 April 2022, and pay any tax due for 2022/23 by that date.
The charge applies to UK residential properties held by non-natural persons, subject to some reliefs and exemptions for buildings used for genuine commercial activities or charitable or public purposes.
The 2022/23 rates are:
Property value* Charge
£500,001 - £1m £3,800
£1m - £2m £7,700
£2m - £5m £26,050
£5m - £10m £60,900
£10m - £20m £122,250
Over £20m £244,750
*At 1 April 2017 or on subsequent acquisition.
It is important to remember that returns must be filed for relevant properties even where no ATED is due because a relief is being claimed, for example in respect of properties held as investments rented to third parties, or held as trading stock for dealing or development.
If a relief is being claimed, the appropriate ATED Relief Declaration Return can be filed instead of an ATED return. Failure to make a return and claim the appropriate relief could lead to an ATED charge arising under the discovery rules, with the taxpayer being time barred from making a claim for relief. A failure to make a return can therefore lead to an ATED charge arising where relief would otherwise have been available.
Under Sch 55 FA 2009 a taxpayer is liable to a fixed penalty of £100 for failing to deliver a return by the filing date. A further penalty of £10 per day is due for each day that the failure continues during the period of 90 days thereafter. If the failure continues after the end of six months then the penalty is the higher of 5% of any tax due or £300.
The penalties for filing a Nil liability ATED Return or Relief Declaration Return more than six months late therefore total £1,300.
A penalty is not due if the taxpayer can demonstrate a reasonable excuse for the failure. However, the First-tier Tax Tribunal has rejected ignorance of the law as a reasonable excuse, and rejected the defence of proportionality in relation to fixed penalties, for Nil ATED returns.
With ATED charges increasing, and with future IHT advantages having been limited since 6 April 2017, “de-enveloping” properties from existing structures may be attractive to reduce the administrative burden. This process may also trigger tax charges; however, where there are no debts secured on a property, it may be possible to extract it from a structure without an SDLT charge.
Please contact us for further information or assistance on ATED matters or de-enveloping properties.