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Do You Have Residential Property Held In A Limited Company?

29 Mar

Here at Dua & Co, we know that the world of property comes with its own set of unique challenges, from ever-changing tax legislation to complex compliance requirements. It’s important to have the right awareness, knowledge and advice, to ensure that you maximise your profits while avoiding accidental non-compliance.

Here, Dua & Co outline Annual Tax on Enveloped Dwellings (ATED) – and what we can do to help you with this.

What is ATED?

ATED is a tax charged in cases where residential properties are held in Limited Companies (for non-commercial use). ATED was introduced with effect from 1 April 2013 and it aims to deter the ‘enveloping’ of high value residential property in corporate structures (Limited Companies) by imposing a fixed annual charge based on the value of the property held. As opposed to other taxes, ATED is a tax that is payable in advance of that relevant tax year.

ATED applies when: companies, partnerships with a corporate partner or collective investment schemes (collectively referred to as non-natural persons), hold an interest in a UK residential property, and when that property is valued at over £500,000.

All companies holding residential property worth over £500,000 must submit an ATED return by the 30th April of that tax year.  For example, for the 2018/19 tax year that begins in April 2018, ATED returns and any payments due must reach HMRC by the 30th April 2018.  Note, this is a compulsory return for all companies that hold residential property valued over £500,000. Companies cannot choose to opt in – it is obligatory.

ATED is only chargeable in cases where property is used by an officer of the company, their family or business partners or is vacant long term. Even though you have to file an ATED return for all applicable companies, you can claim relief to avoid paying the ATED charge. Dua & Co’s team of business advisors in Watford and London can review the position of your company and assess your ATED exposure, and any reliefs you are entitled to.

For the tax year 2018-19, your ATED return will be based on the market value of the property on the 1st April 2017, or the initial purchase price if you acquired the property on or after 1st April 2017.

What does this mean for my residential property company?

When assessing whether an ATED return needs to be submitted to HMRC, it is important to identify the amount at which your property is valued, as the level of tax you will need to pay depends upon this valuation. HMRC has the right to challenge your valuation and if they disagree with your figure, they can penalise you with added interest and penalty charges. 

Once you know that your company holds residential property valued at more than £500,000, you must submit the ATED return to HMRC annually.  Whether you are required to pay ATED depends on the reliefs you are able to claim.

It is therefore vital that you have the right knowledge and expertise to hand – and that’s where Dua & Co can help. Our team of qualified accountants and business advisors in Watford and London have the experience and skills to ensure that you are able to make the most advantageous use of your tax situation, while avoiding any complications and accidental non-compliance.

Managing or developing a portfolio of properties carries huge potential for success – but only when the benefits are maximised and the pitfalls avoided. Contact us directly to find out how we can work with you to ensure you achieve your goals.

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Dua & Co (Watford)

1st Floor, 5 Century Court, Tolpits Lane, Watford, WD18 9PX

+44 (0)20 8421 3555

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12 Hay Hill, Mayfair, London, W1J 8NR

+44 (0)20 3356 9706

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