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Landlords & property developers: Are you ready to file your ATED return?

Paul Woodward

Posted by
Paul Woodward

With the growing trend of landlords transferring their residential properties into companies to avoid the restriction on interest deductions, this year there will be many more property investors needing to file an ATED return.

In this article we take a look at ATED returns and how we can help you stay compliant.

What is an ATED return?

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’ (ATED) return.

Therefore, it applies to those who hold residential properties in a company or partnership structure, as well as property developers who have completed residential property developments, yet to sell.

What is the threshold?

From 1 April 2018 an ATED charge of £3,600 will be payable for enveloped properties worth between £500,001 and £1m. This increases in bands thereafter for properties worth more than £1m.

No tax to pay?

In some situations, because there are a number of relief’s available (e.g. commercial letting), often for properties developers there will be no tax liability and therefore be 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.

When must I file my ATED?

The deadline for completing your first ATED return is extremely short and the return (including nil returns) must be filed within 30 days of becoming liable to prepare a return (or from transferring into a company structure).

Thereafter, your ATED return must be submitted annually for each property, although one declaration for relief can apply across a portfolio of properties, where the same relief applies to all the properties. The annual declaration is due by 30 April within the chargeable year. Therefore the deadline for the current year (2018/19) is 30 April 2018.

What are the penalties for not filing my ATED?

The penalties for late ATED returns, including relief declarations, mirror the self-assessment tax returns penalties. Therefore, 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.

Act now to meet April deadline

In previous years, ATED returns could be submitted to HMRC in paper form or online. However, they are now moving to online only filing for 1 April 2018 submissions.

For our team to file your return online, we will need to set you up with an HMRC gateway account if you do not already have one, and have you authorise us to submit your return. The process for authorising us may be onerous, so we are advising clients to consider their ATED requirements as soon as possible, and not leave it until the last minute.

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.

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This information has been produced by Rouse Partners LLP for general interest. No responsibility for loss occasioned to any person acting or refraining from action as a result of this information is accepted by Rouse Partners LLP. In all cases appropriate advice should be sought before making a decision.

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