Companies that own UK property are required to file annual ATED Returns (“Annual Tax on Enveloped Dwellings”) with HMRC.
The purpose of an ATED Return is to collect an annual tax (“ATED Charge”) payable mainly by companies that own UK residential property valued at more than £500,000. There are certain reliefs from paying the ATED charge, notably property held by rental businesses and let out to third parties on a commercial basis and property being redeveloped.
The current ATED Charges are as follows:
Chargeable amounts for 1 April 2021 to 31 March 2022
|
Property value |
Annual charge |
|
More than £500,000 up to £1 million |
£3,700 |
|
More than £1 million up to £2 million |
£7,500 |
|
More than £2 million up to £5 million |
£25,300 |
|
More than £5 million up to £10 million |
£59,100 |
|
More than £10 million up to £20 million |
£118,600 |
|
More than £20 million |
£237,400 |
Regardless of whether the charge is payable or a relief applies an ATED Return and payment or relief claim must be filed and the first is due within 30 days of acquisition of the property, then annually by 30 April each year.
If ATED filing obligations are not met then late filing and payment penalties will apply, again this is regardless of whether an ATED Charge applies or relief is claimed, as follows:
|
Late filing |
Late payment |
Penalty |
|
Filing deadline missed |
|
£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:
Reductions apply for prompted and unprompted disclosures and telling, giving and helping. |
We have seen several cases where companies have been punitively penalised for submitting late ATED Returns, particular companies where an ATED charge does not apply due to available reliefs and these can quickly rack up to 000’s.
As a result there have been several tax cases considering whether it is within HMRC’s powers to issue daily penalties for late submission when a notice to file the Returns has not been issued.
In the case Heacham Holidays Limited v HMRC [2020] TC07883, the First Tier Tribunal (FTT) upheld fixed penalties imposed by HMRC for the late-filing of the taxpayer's ATED Return but daily penalties imposed were discharged as they were issued retrospectively without proper notice, it was concluded HMRC must notify the taxpayer of the starting date from which daily penalties will run. This decision was a welcome relief!
However a more recent case Priory London Limited v HMRC [2021] UKFTT 0282 ruled in favour of HMRC and decided that daily penalties can be issued retrospectively
So where do we stand?
Well at present if ATED Returns are filed late you should expect HMRC to issue late filing penalties, which include daily penalties.
However we understand that one of these cases will be heard by the Upper Tribunal and the outcome will determine whether HMRC are in their right to issue daily penalties retrospectively. So we would suggest that daily penalties are appealed on this basis and until the outcome at the Upper Tribunal is known.
In the meantime, we recommend that all ATED filing obligations are met on a timely basis to avoid penalties being levied. If you would like assistance with the preparation and submission of ATED Returns, then please contact us.