Another little nudge letter – this time on ATED

HMRC are seeking Annual Tax on Enveloped Dwellings (ATED) charges from Non Natural Persons or typically offshore structures such as companies and trusts.  ATED returns are required even if the taxpayer wishes to claim an exemption from the tax charge.

How much is at stake?

At the start of each year since 1 April 2013, such owners have been required to submit a return and pay any tax due by 30 April of the same tax year.  The lowest property bank started initially at £2m to £5m on which there was a charge of £15,000 rising to £140,000 on property valued at £20m or more.  For 2019/2020, the lowest band starts at just £500,000 to £1m costing £3,700 rising to £236,250 per annum per property.  There doesn’t need to be too many properties at the top end of the range to justify HMRC’s intervention(s).

What is the issue?

The main issue is that of potential non compliance.  It would appear that not all property owners or property managers are registering properties.    There are limited exemptions from making a return on time.

The nudge letters can be triggered as a result of HMRC having up to date and automatic access to all property transactions reported on Land Registry through its CONNECT software.  HMRC work on the presumption that non compliance in one area may be indicative of other irregularities or failures and investigate.  Moreover, properties have to be revalued for ATED purposes every 5 years.

Even a mere oversight will trigger interest which accrues on a daily basis.  And then there may also be penalties that are due.

What can HMRC do?

HMRC can take many different actions, some simultaneously.  The ultimate position might be that HMRC makes a Revenue Determination.  These cannot be appealed against nor can the payment of tax be postponed.

In the absence of  the property being registered and the submission of an annual ATED return, HMRC will undoubtedly investigate.  For those based offshore, the last thing they will want is to be challenged by HMRC and be drawn into potentially protracted correspondence.

What should be done?

Seek specialist advice and engage with HMRC.

Any unoccupied property should be visited periodically to ensure there are no missed communications.  Any return that has been omitted will need to be submitted.  Alternatively the reason why there is no return due needs to be stated.  Finally, any unpaid amounts will also need to be addressed.

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