This tax, known as ATED, applies to residential properties owned by companies. It only came into effect on 1 April 2013 and was extended to properties worth over £500,000 from 1 April 2016.
Landlords who have transferred their residential property portfolios into companies need to be aware of the ATED. Where any of those properties was worth over £500,000 on the day the company completed the purchase, an ATED report is required and the tax may be due.
The first ATED charge is payable within 30 days of the completion date. For properties worth up to £1 million, the ATED is £3,500 for 2017-18, or a proportion relating to the part of the year for which the property was owned. The ATED charge for 2018-19 starts at £3,600 and is normally payable by 30 April 2018.
In most cases a relief can be claimed, notably where the property is let on a commercial basis to tenants who are not connected with the company. However, the relief must be claimed on the relief declaration return, which is also due within 30 days of the completion date or by 30 April within the tax year.
There are stiff penalties for late ATED returns, including relief declarations. One day’s delay earns a £100 penalty and six months can generate penalties of up to £1,300 per form. As relief from the ATED is claimed in advance, you must be careful to report to HMRC if the conditions for the relief are later broken. For example, the relief will no longer apply if the tenants become connected with the main shareholder or with the company. An amended ATED return must be submitted within 30 days of the start of the next year, so by 30 April 2018 for a condition broken in 2017-18.
We can help you submit the ATED forms, which, from 1 April 2018, must be submitted online.