Tax On Residential Property Held By A Company
A new annual UK tax was introduced on 01 April 2013 called the Annual Tax on Enveloped Dwellings, or ATED. This new tax relates to any entity other than individuals; so companies, partnerships, LLPs (Limited Liability Partnerships) that hold a residential UK property worth over £2m.
Where an ATED charge applies the first returns have to be submitted by 01 October 2013 and the tax paid by 31 October 2013. Penalties and interest apply where payment and/or filing dates are not met.
The main tax reliefs available so that ATED is not payable are as follows:
- Properties let to a third party on a commercial basis
- Properties acquired as part of a property development business
However, an ATED Tax Return must be completed and submitted in order to claim the relief.
It should be noted that certain properties are not classified as residential property, for instance, guest houses and care homes so properties such as these do not fall within the ATED regime.
The amount payable to HMRC under this new Annual Tax on Enveloped Dwellings is assessed according to the value of the property. The initial valuation of a property will be determined by its value at 01 April 2012 and will be re-assessed every 5 years thereafter. If a property was purchased after 01 April 2012 then the valuation will be the purchase price.
The current banding is as follows:
£2m – £5m £15,000
£5m – £10m £35,000
£10m – £20m £70,000
Over £20m £140,000
Valuations can be either done on a self-assessment basis or via a professional valuation and HMRC can, provided certain conditions are met, perform a Pre-Return Banding Check (PRBC). A PRBC can be used to confirm that the property is below the £2m threshold or to confirm which band a property is in, particularly if its value is close to one of the band thresholds.
If you are uncertain about any aspect of ATED we can help by assessing whether the property is subject to ATED and, if so, by completing and submitting the relevant returns.