Further to our previous Law-Nows (Residential Property Tax and A Three Pronged Attack on High Value Residential Property), the Finance Bill 2013 has now received Royal Assent and on 17 July 2013 the Annual Tax on Enveloped Dwellings (“ATED”) legislation became law.
Annual ATED returns are required to be made. The first ATED period commenced on 1 April of this year with the return due to be filed by 1 October (either online or by paper) and payment due by 31 October. These are transitional arrangements for the first ATED period. Thereafter a completed return and payment must be made by 30 April in each ATED period. This month HMRC have revealed the form of ATED return.
Do I need to complete an ATED return?
You need to complete an ATED return for your property if all of the following apply. Your property is:
- a residential property;
- situated in the UK;
- valued at more than £2 million on 1 April 2012, or at acquisition if later; and
- owned (completely or partly) by a company, a partnership where one of the partners is a company or a “collective investment vehicle” such as a unit trust or open ended investment company (a “chargeable person”).
If the above applies then any of the following which are applicable should be notified on the ATED return:
- the amount of tax due in respect of the ATED period;
- any change of circumstances which may result in a repayment of tax already paid for the year or further tax being due; or
- any claim for relief that may reduce the ATED charge to nil.
What information do I need to provide to complete the ATED return?
First, details of the chargeable person need to be provided. Interestingly, the form does not require the details of the ultimate beneficial owners such as shareholders in a company. The details of a beneficial owner would only be required where there is a bare trust and the beneficial owner themselves are within the ATED charge. If a relief is claimed and HMRC conduct an enquiry, the identity of the beneficial owner may be of importance if it relates to the relief i.e. the property is let to a third party and is not occupied at anytime by the owner or a person connected with the owner. Each chargeable person will be issued with a scheme reference number.
If the chargeable person is claiming a relief, that person may complete one return for all the dwellings where they are claiming that relief. If the chargeable person owns a number of dwellings, in respect of one or more of which is liable to ATED, that person will need to complete one return per dwelling which they own.
Secondly, details of the property are required such as the title number and address of the property. Details of the value of the property at acquisition, actual value of the dwelling and the date of valuation also have to be provided. The valuation figure will be used for the first five ATED return periods beginning with 1 April of this year. The chargeable person will need to self assess the value of the property either themselves or by using a professional valuation. Valuations must be on an open-market willing buyer, willing seller basis. The valuation will determine which ATED band the property will fall into for the first five years. If HMRC challenges a valuation and finds that it is wrong, the chargeable person may have to pay an increased amount of ATED, interest for late payment and penalties.
The chargeable person can request a Pre-Return Banding Check. This is where a chargeable person asks HMRC to confirm their view of the appropriate banding of the property according to the valuation. HMRC will not confirm the specific valuation.
Thirdly, an agent can be appointed to act on the chargeable person’s behalf in relation to ATED. It is simply done by the completion of the agent’s details on the form.
Chargeable persons need to consider their position in relation to ATED now and determine whether they need to file an ATED return either to pay the charge or claim a relief and how they will approach valuing the property.