What penalties apply to the Annual Tax on Enveloped Dwellings (ATED) regime? When can they be charged?

A freeview 'At a glance' guide to penalties and the Annual Tax on Enveloped Dwellings (ATED).

At a glance

Tax penalties for failures to follow the Annual Tax on Enveloped Dwellings (ATED) regime fall under:

  • Late filings (failure to make returns).
  • Late payment (failure to make payment on time).
  • Penalties for error or mistake (penalties for errors).

An ATED return is required even if:

  • No tax is payable.
  • The taxpayer wishes to claim an exemption from the tax charge. 

The ATED applies when UK residential property is owned by a non-natural person or "NNP"

A NNP may be a company, collective investment scheme, or LLP with a corporate partner.

The ATED does not apply to residential property owned by individuals.

Late filing: 

  • An ATED return and payment is due within 30 days of the acquisition of a high-value residential property by a company or other type of NNP.
  • For existing properties, an annual ATED return and tax payment are due by 30 April during the tax year.
  • For 2023-24 the return and payment was due on 30 April 2023.
  • For 2022-23 the return and payment was due on 30 April 2022.
  • Transitional provisions applied in the early years:
    • For 2015-16 the return and payment was due on 1 October 2015 and 31 October 2015.
    • For 2013-14 and 2014-15 there were transitional provisions for properties worth £1 million. The ATED return was due for filing by 1 October 2014 and the tax payable by 31 October 2014,

See ATED rates, dates and deadlines in Annual Tax on Enveloped Dwellings (ATED).

Late payment: 

Late payment penalties are due when ATED is unpaid, the key payment deadlines are:

  • Within 30 days of purchase of a new property.
  • Within 90 days of a new build property.
  • By 30 April (after the start of the tax year) the annual charge is paid in advance for all other properties falling into the charge.

Interest is charged on both unpaid tax and unpaid penalties.

Late filing

Late payment

Penalty

Miss filing deadline

 

£100

 

30 days late

5% of tax due

3 months late

 

Daily penalty £10 per day for up to 90 days (max £900)

6 months late

 

5% of tax due or £300, if greater

 

6 months late

5% of tax outstanding at that date

12 months late

 

5% or £300 if greater, unless the taxpayer is held to be deliberately withholding information that would enable HMRC to assess the tax due.

 

12 months late

5% of tax outstanding at that date

12 months & taxpayer deliberately withholds information

 

Based on behaviour:

  • deliberate and concealed withholding 100% of tax due, or £300 if greater.
  • deliberate but not concealed 70% of tax due, or £300 if greater.

Reductions apply for prompted and unprompted disclosures and telling, giving and helping.


Late filing examples:

Example 1:

Company A Ltd acquires a £2 million property on 1 January 2023. It must:

  • Make its first ATED return and make payment by 1 February 2023.
  • Make a 2023-24 year return by 30 April 2023.

If it fails to file either return until 1 August 2023, it will have missed two filing deadlines. This will cost it £1,100 in penalties:

  • The first return was due 01/02/2023 and made on 01/08/2023: First missed deadline (£100 penalty) and then six months late, incurring daily penalties for 90 days at £10 per day, making £1,000 of penalties.
  • The second return was late (£100 penalty) and was filed 3 months late, making £100 of penalties.

Example 2:

Company B Ltd failed to realise that it has a filing deadline for a £500,000 property. It revalued its property on 1 April 2022 for its 2023-24 return. It then failed to file a 2023-24 return and only realised its error on 1 May 2024. Its penalties will be £1,600, made up as £100 (late filing) + £900 (three months late £10 for 90 days) + £300 (six months late) + £300 (12 months late).

Penalties for errors: schedule 24 FA 2007

A tax-geared penalty will apply in one of three circumstances that result in a potential loss of tax:

  1. When a taxpayer makes a careless error or mistake in an ATED return or document.
  2. When a third party supplies false information, or deliberately withholds information in connection with another person’s return or document.
  3. When HMRC raises an assessment for tax and the taxpayer fails to notify HMRC that the assessment is too low.

See Penalties for errors

Appeal against penalties

  • If HMRC raises a penalty assessment it should be appealed to HMRC.
  • An appeal must be lodged to HMRC within 30 days. The time limit may sometimes be extended by permission of the tribunal.
  • The grounds for lodging an appeal and the way that an appeal is drafted depends entirely on the facts and circumstances of the case, it may be on the basis that:
    • the taxpayer has a reasonable excuse for its failure
    • the penalty fails on technical grounds
    • HMRC has not considered any mitigating circumstances.
  • The amount of the penalty may be appealable, and penalties for errors may be suspended. 
  • See Penalties, grounds for appeal.

Cases

See ATED: Subscriber Guide


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