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Company owned residential property

Company owned residential property

Does your company own a residential property worth more than £500,000?

By Mark Middleton, Director at LB Group, a Top 75 firm of Chartered Accountants, Chartered Tax Advisers and Business Advisers.

If you own a residential property worth £500,000 or more within a company or a partnership with at least one corporate member, you need to be aware of the Annual Tax on Enveloped Dwellings (ATED) regime.

The ATED rules were introduced several years ago and initially applied only to very expensive residential properties worth more than £2m. However, the rules now extend to all residential properties worth more than £500,000 held in a corporate structure.  The key valuation date in 1 April 2012, or the purchase date if this is later, although regular revaluations every 5 years will mean that increasing numbers of properties will potentially be caught by the rules.

If the rules apply to your company, the next ATED return and payment, if applicable, will be due by 30 April 2017. This return will cover the period from 1 April 2017 to 31 March 2018. Please note if you acquire a property during the year which falls within the rules, an ATED return must be submitted within 90 days of the acquisition. Similarly, selling a property within the ATED regime or changing use during the year normally requires a further return to be submitted to HMRC.

Not all companies caught by the rules will have tax to pay. There are several reliefs available, for example for rental properties and properties purchased for development and sale, and these reliefs can reduce the tax charge to zero. Even if a relief applies, the company must still complete an ATED return and claim the relief each year otherwise significant late filing penalties can arise.

Penalties incurred for late submission (even if tax charge is nil) start with an automatic £100 for missing the 30 April deadline, with daily penalties after 3 months and further fixed penalties after 6 months and 12 months. Altogether, a return more than 12 months late can incur penalties of up to £1,600. Although these penalties can be reduced if there is a reasonable excuse for missing the filing deadline, this excuse must be more than simply not being aware that a return is required.

With a risk of harsh penalties for late filing, every company which may need to complete an ATED return should ensure that this matter is considered without delay.

If you have any questions regarding this article please email charlotte.mottram@lbgroupltd.com. Please note the above does not constitute financial advice and LB Group cannot be held responsible for any errors or omissions.

 

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