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Pushing the envelope – compliance aspects of the ATED to think about now

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11 July 2013
As we await Royal Assent of the Finance Bill later this month, HMRC are considering the practical aspects of the new legislation. Managing compliance around the Annual Tax on Enveloped Dwellings (ATED) is a case in point.
 
Broadly, ATED applies to companies holding certain high value residential  properties and starts from 1 April 2013. If ATED is applicable, the company must complete an ATED return and pay a tax charge.  This week HMRC have published a draft version of the return for taxpayers so that they can familiarise themselves with the form requirements.
 
While there are reliefs that can reduce the tax charge, the HMRC website advises that those reliefs are only available if a return is filled in and submitted. Clearly, understanding the process is important so as to avoid missing any deductions otherwise available.
 
As second aspect is to get certainty as to what band the property will fall into. HMRC are offering Pre-banding checks, allowing the taxpayer to confirm the banding upfront if they believe they are within 10% of the upper or lower limit of any band. The check is for the banding, not the absolute valuation.
 
Rate bands
Property Value: Annual Tax 2013-14:
£2,000,001 to £5,000,000 £15,000
£5,000,001 to £10,000,000 £35,000
£10,000,001 to £20,000,000 £70,000
£20,000,001 and over £140,000
 
As the table above shows, ATED is a stepped tax, increasing for each band of property valuations. There is no smoothing of the increases, so getting adequate documentation and evidence to support any values towards the top of each band will be important as upwards valuations following HMRC enquiry could be costly.
 
The ATED return must be completed if a property is a ‘dwelling’ situated in the UK; valued at more than £2 million on 1 April 2012, or at acquisition if later; and owned, completely or partly, by a company, a partnership where one of the partners is a company or a 'collective investment vehicle'. The form can be downloaded from the HMRC ATED news website here as can the form for pre-banding checks.
 
A final point to note is the timing of filing the return. For the first year, returns need to be in by 1 October 2013 with payment at the end of the month. In following years the filing deadline will be 1 April with payment due on 30 April. For dwellings acquired during an ATED period, the return and payment is due within 30 days of purchase (90 days if newly built rather than bought).
 
A live version will be available after the Finance Bill has been passed in late July.