Designed to reduce the practice of buying high value UK property for non-genuine commercial use, ATED is targeted at companies striving to envelope dwellings.
Not only has the new ruling in April 2016 affected the thresholds, bringing the lower banding down to a £500,000 valuation, but SDLT and CGT are also affected:
1 – Stamp Duty Land Tax (SDLT)
The 15% SDLT payable on properties purchased, acquired or owned by non-natural persons (companies, partnerships with corporate members, investment schemes) will now be payable on properties valued at £500,000 and above. Before March 2014 this only applied to dwellings valued at £2million or above. This new threshold applies to properties purchased on or after 20 March 2014. However, generally, if contracts were commenced prior to this date, but were completed after, the £2million threshold will still stand.
To compare, if a person purchases property for their own personal use, the SDLT is staggered up to 12% for qualifying properties, depending on the banding of the property. This is charged on properties over £125,000 and above. Second properties are charged at 3% above this rate.
2 – ATED-related Capital Gains Tax (CGT)
ATED-related CGT is charged 28% on any profits arising from the sale of properties subject to ATED rules (although tapering relief is available for those properties just over the ATED starting threshold). In line with changes introduced to the ATED thresholds, from April 2016 the lower threshold for property valuation is also £500,000.
This charge only applies to the gain that has occurred since the property was first subject to an ATED charge (for example, if the property was acquired part way through an ATED tax year). However, any portion of profit not subject to this CGT charge may be subject to anti-avoidance legislation or the new CGT charge introduced in April 2015 for non-UK residents.
3 – Non-residents CGT charge
Before the introduction of ATED in April 2013, non-UK companies owning UK property were not liable to pay UK tax on any profits arising from the sale of UK property. After this date, those companies that complied with the rules of ATED were subject to CGT. From 6 April 2015, UK property owned by non-UK corporate companies is subject to UK CGT on profits from the sale of these properties. The tax rate on this is 20%, unless ATED-related CGT charge applies.
What to do now?
This is a self-assessed tax, and requires property owners that meet the regulations to complete an ATED return. A market value is required on the property to calculate the banding rate.
Late returns will attract penalties; 30 days late will incur a fee of 5% of the tax due, and after 3 months there is a daily charge of £10 a day up to £900 maximum, so ensuring a prompt return is crucial.
How Anderson, Wilde and Harris can help
As RICS registered Chartered Surveyors we conduct residential property valuations to help companies meet the requirements set out by HMRC. There are various options to consider when faced with ATED, and Anderson, Wilde & Harris can advise the best option. These include:
- Maintain the structure as it is and pay the ATED
- Apply for relief, or exemption, if applicable
- Consider unwinding into direct ownership, or hold a nominee arrangement
Following assessment of your property to determine whether it is liable to ATED, we will help with:
- Property valuation
- Filling in ATED forms
With extensive knowledge in property tax and regulations, we can provide you with up-to-date information, ensuring you are always at the forefront of any advancements in this sector.
Email us for a free quote at firstname.lastname@example.org