HMRC's most recent one-to-many letter campaign focuses on companies owning UK residential property valued at over £500,000 that have either not filed an Annual Tax on Enveloped Dwellings (ATED) return, or have potentially claimed ATED relief incorrectly.
Background
The Annual Tax on Enveloped Dwellings (ATED) applies when non-natural persons, such as companies, hold interests in UK residential property valued above £500,000.
Under the ATED regime, tax is charged based on the value of the property held, unless a relief applies and is claimed.
One instance where ATED relief is available on making a claim is where both:
- The relevant dwelling is used in a qualifying property rental business carried on on a commercial basis with a view to a profit.
- The property is not occupied by a 'Non-qualifying individual'.
One-to-many letters
HMRC's one-to-many letters, being sent over the coming months, will address companies that:
- Own one or more UK residential property valued at more than £500,000,
- Declared no profits in their Corporation Tax returns from 2017 to 2020, and
- Either filed:
- No ATED returns, or
- ATED relief returns claiming qualifying property rental business relief.
The letters explain that as the company’s tax returns show that it did not make a taxable profit for the periods 2017 to 2020, it may not have been run on a commercial basis, with a view to a profit.
- As a result, ATED relief might not apply and ATED charges may need to be paid.
Recipients of HMRC's letter are asked to review their ATED position and, within 40 days, depending on the circumstances:
- Provide further information.
- Consider making a disclosure.
- File any outstanding returns.
HMRC warn that if a response is not received by the deadline, a Discovery assessment may be raised. Penalties and/or interest may also be charged.
Useful guides on this topic
Annual Tax on Enveloped Dwellings (ATED)
What is the Annual Tax on Enveloped Dwellings (ATED)? Who does ATED apply to? What relief is available and how is it claimed? What are the ATED return filing dates?
Discovery Assessments
When can HMRC issue an assessment outside of the normal statutory time limits? What conditions must be met? Can HMRC issue two alternative assessments for the same period? What are your rights of appeal and defences?
Penalties: Annual Tax on Enveloped Dwellings (ATED)
What penalties apply to the Annual Tax on Enveloped Dwellings (ATED) regime? When can they be charged?
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