What you need to know post 30 April
The West Midlands, and Birmingham in particular, ranks as the best English city for investment prospects according to recent reports.* Recent mass infrastructure projects such as HS2, the HSBC operations head office relocation, New Street station redevelopment and the £1.3bn investment package at Birmingham Airport, have resulted in house prices and foreign investment surging across the area.
Over recent years the government has made a lot of changes to taxes affecting both UK and non-UK property owners alike and ATED was another tax to have been recently updated.
Unlike other taxes the ATED return, and charge if applicable, is due at the end of the first month of the ATED year (1 April to 31 March) rather than after the end of the chargeable period. The deadline for the 2018/2019 ATED year was 30 April 2018.
Who this tax affects
The Annual Tax on Enveloped Dwellings “ATED” is a relatively new tax that first took effect in 2013 which, from April 2016, has applied to properties worth more than £500,000. The ATED charge initially only applied to UK residential properties held in corporate and similar structures if worth more than £2m as of April 2012.
However, as the average price for a detached property in Solihull climbed to over £500k** during the past year, it is very likely that companies and individuals owning property in a corporate structure could be caught out by this tax without realising.
The 2018/19 ATED year was the first period where an updated valuation has been necessary since ATED was introduced. Previously the tax was based on a property’s valuation as of April 2012, however, this year’s figures are based on the value of the property as of April 2017. This means that if your property has not been formally valued as of 01 April 2017, a valuation of the property will be required to calculate the ATED charge.
What does this mean for property owners?
The value of the ATED charge is calculated using a banding system based on the value of the property. For example, if you own a Birmingham property worth more than £500,000 but less than £1 million, the annual charge is £3,500. This scale goes up to more than £20 million where the annual charge would be £226,950.
|Property value||Annual charge|
|£500,001 - £1m||£3,600|
|£2,000,001 - £5m||£24,250|
|£5,000,001 - £10m||£56,550|
|£10,000,001 - £20m||£113,400|
If an ATED return is due to HMRC and is filed late, the starting point for a penalty will the first day the return is late.
|1 day late||£100|
|3 months||The penalty above plus £10 for each day late (up to £900)|
|6 months||All the penalties above plus £300 or 5% of the tax due (whichever is higher)|
|12 months||All the penalties above plus £300 or 5% of the tax due (whichever is higher);in serious cases where information has been deliberately withheld, you may have to pay 100% of the tax due|
These penalties will all be due irrespective of whether an ATED charge is due or relief has been claimed. If an ATED charge is due and is outstanding, HMRC will levy tax-geared penalties based on the value of the ATED charge. Further penalties can also be incurred if the return submitted to HMRC is inaccurate. However, discussions between HMRC and the individuals concerned can help smooth any process.
What if you have missed the deadline?
If required, undertake valuations as at 1 April 2012 and 1 April 2017
Liaise directly with HMRC to explore the ATED position and discuss the ATED charges and penalties due
Once the total ATED charges and penalties have been established these will need to be paid as soon as possible to stop further interest from accruing on a daily basis
If immediate payment cannot be made to HMRC it may be possible to agree to a time to pay arrangement where the amounts due can be paid to HMRC over an agreed timescale, although interest will continue to accrue whilst any of the tax remains unpaid.
Those affected by ATED should contact their professional adviser, as early as possible to discuss their options.
* Emerging Trends in Real Estate® Europe 2017: New market realities report
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.