Corporate Property Return Warning
- Does your company own an interest in a residential property?
- Was that property worth £500,000 or more as at 1st April 2022 or, if later, the value at the time the company acquired it?
- Did your company convert a property into a dwelling or build a new one, after 1st April 2022, which at the time of completion or first occupation, if earlier, was worth £500,000 or more?
If you answered yes to any of those question you probably should be completing an Annual Tax on Enveloped Dwellings (ATED) return on a yearly basis. Depending upon the particular circumstances you might be liable to pay an ATED charge which could presently range from as low as £3,800 to as high as £244,750.
Many reliefs exist which could wipe out the ATED charge. For example:
- The dwelling is let out on a commercial basis to an unconnected third party.
- The property is part of a property trader or property developing business where the intention is eventually to sell it on.
- It is a farmhouse occupied by a farm worker or former long serving farm worker.
The vast majority of cases caught by the ATED legislation result in no ATED charge arising.
However, you still have to complete an ATED return to claim these reliefs. Plus the failure to submit the return on time can result in penalties being imposed. Even where the ATED charge is nil, the penalties could rack up to £1,600 if the return is over 12 months late.
If a business acquires an interest in a property, it should complete an ATED return within 30 days of acquisition. Where constructing a new build or converting an existing property into a dwelling then it is 90 days from the earlier of the completion date or the date first occupied. Then a Return should be completed on an annual basis by 30th April.
Example:
- TC Ltd acquires a residential property for £600,000 on 1st June 2023 to rent out on a commercial basis.
- The company should complete their 2023/24 ATED Return by 30th June 2023 and claim interim relief in the body of the return.
- If the property is retained as at 1st April 2024, they will need to complete a 2024/25 ATED return by 30th April 2024.
- This will continue to be the case each year whilst the property is held by TC Ltd
Under the ATED rules residential properties should be revalued every 5 years. If a business has a residential property which was worth less than £500,000 at 1st April 2022, it will need to revalue it again at 1st April 2027. If the dwelling is then worth £500,000 or more, the company would need to complete an ATED return by 30th April 2028, as regards the 2028/29 tax year, irrespective of whether or not there is an ATED charge to pay, otherwise penalties will ensue.
Please contact us if you are worried you might be caught by the ATED legislation on 01484 685413.