Do you own a UK residential property with a value of more than £500,000 through a company or other corporate vehicle ?
If so, then you are probably within the ATED regime. You will need to make sure that you file a return and pay the tax due for the year 2017/2018 by 30th April this year. If you do not file a return, then even if one of the reliefs apply you will be charged penalties for late-filing. If you do not pay the tax on time then you will also pay interest charges on the unpaid tax.
When does ATED apply ?
Tax is potentially payable on any individual dwellings in the UK valued at more than £500,000, which are owned by companies, LLPs and partnerships with corporate members. It doesn’t matter if the company or other corporate entity is a UK company or an overseas company, the tax will still apply. Properties owned by trustees who are acting as nominees or holding the property on bare trust for an individual should not be subject to the charge.
Where a property is part-residential and part-commercial, the residential element should be valued separately. Each self-contained flat within a block represents a separate dwelling.
If you make a disposal of a property part-way through the year and you have already paid your ATED charge for the full year then you should be able to claim a refund of part of the annual charge, since it is calculated on a daily basis.
How much tax do I pay ?
The annual tax charges for the period for 1 April 2017 to 31 March 2018 are set out below:-
|Property value||Annual chargeable amount 2017 to 2018|
|More than £500,000 but not more than £1 million (from 1 April 2016)||£3,500|
|More than £1 million but not more than £2 million (from 1 April 2015)||£7,050|
|More than £2 million but not more than £5 million||£23,550|
|More than £5 million but not more than £10 million||£54,950|
|More than £10 million but not more than £20 million||£110,100|
|More than £20 million||£220,350|
What about reliefs ?
Full relief is available for genuine property investment and development businesses. The most common relief will be where a property is purchased with a view to letting it out for an arm’s length market rent to an unconnected tenant. However, in order to claim any of the reliefs it is still necessary to file a return on time.
What value do I use ?
The valuation date for these purposes is at 1 April 2012 (or the acquisition date if later). Please note that properties are required to be revalued every five years; the first such revaluation will be on 31 March 2017.
For the period beginning 1 April 2018, it will be the value at 31 March 2017, or purchase price, if acquired later which will determine whether the property falls within the ATED regime.
If the company has owned the property for some time and you believe that the current value is likely to be in the region of £490,000- £500,000 we suggest that you take a prudent approach when valuing the properties and if in doubt a professional valuation should be undertaken, otherwise the company may be open to a challenge from HM Revenue & Customs.
If the property is valued at £490,000 or more on a directors’ valuation or estate agents value, we would recommend that you consider a RICS professional “red book” valuation and make a return so that HM Revenue & Customs can challenge the value if they so choose. However, if reasonable care has been taken in arriving at a value as at 31st March 2012, no penalty should arise.
Similarly, if corporate agents overseas consider that the property held through the company they administer may be approaching this level then they should seek advice from a professional valuer. Any liability to the ATED charge falls to the company itself and the responsible officers of that company are therefore required to arrive at a realistic valuation, which can be supported in the event of a challenge by HMRC and to submit a return if the charge applies .
What about ATED – related Capital Gains Tax ?
Where a property falls within the ATED regime, and no reliefs apply, then ATED-related CGT will potentially apply when there is a disposal of the property. If you are planning to sell any properties which would fall under the ATED regime, then you need to think about this in advance of the completion date. HMRC need to be notified within 30 days of completion of the sale of any Capital Gain, and any Capital Gains Tax should also be paid within 30 days of completion. If the company does not complete a self-assessment tax return and pay the tax due then late-filing penalties and interest may be charged.
It should also be remembered that even if ATED-related CGT does not apply, there may still be Non-resident CGT to pay on the disposal, this can apply if a non-resident company or an individual is selling a property.
We suggest that you review your property-holdings and consider whether ATED applies this year – you will also need to think about the re-valuation date and obtaining an April 2017 value for your properties . If you would like help in filing your ATED return or you have any questions about whether the tax applies to you then please give Pauline Hudd a call using the details below. She is more than delighted to assist on any Stamp Duty, SDLT or ATED matters.
This blog has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this blog without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this blog and, to the extent permitted by law, Wilder Coe LTD, or its Members, Partners, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this blog or for any decision based on it.
Please contact Wilder Coe for further information and bespoke professional advice, tailored to your circumstances, on any matters of specific interest to you.