Companies need to consider whether they need to do an ATED (Annual Tax on Enveloped Dwellings) Return. The annual event date is 1 April and the return is due by 30 April. It is relevant to consider whenever a company owns a residential property with a value over £500,000. In many instances, no tax is due as reliefs can be claimed for ‘commercial’ use such as letting, development or other trading purposes.
It is critical that in those instances a return is done as the relief needs to be claimed. Doing nothing is not an option as many of the penalties levied in this area are due to filing non-compliance. More information is available from HMRC.
HMRC’s latest ‘One to Many letter' campaign focusses on corporate entities who own UK residential property over £500,000. Whilst the specific target of that campaign is offshore companies who have reported consecutive losses on their self-assessment returns from their property rental income from 2017/18 to 2019/20, it is a timely reminder for UK companies to consider whether this annual tax could apply to them. A lack of taxable profit from property rental could suggest that a company is not operating on a ‘commercial basis’ or with the intention of making a profit and so ATED relief would not be available.
Companies are encouraged to file outstanding ATED returns for anything they owe and have not already paid/reported and to correct their position going forward.
The Chartered Institute of Taxation (CIOT) stated in its useful article:
‘HMRC wants the companies and representatives to reassess their loss-making UK rental businesses and register for ATED and file all applicable ATED liability returns. The population will be sent a letter inviting a disclosure, ATED registration or, alternatively, be asked to provide information to evidence that they are a qualifying property rental business.’
Its article here also contains copies of the letters and guidance for members assisting clients.