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HOME / KNOWLEDGE / HMRC issue ATED nudge letters

HMRC issue ATED nudge letters

Earlier this month (October 2020), HMRC issued “nudge letters” to the corporate owners of high value UK property with outstanding ATED (Annual Tax on Enveloped Dwellings) returns.

A copy of the letter seen by Jeffreys Henry LLP states: “We hold information that suggests you may have had an interest in the above property”, and “The Annual Tax on Enveloped Dwellings” (ATED) may be due on your interest in this property”.

Annual Tax on Enveloped Dwellings (ATED)

The Annual Tax on Enveloped Dwellings (ATED) is an annual tax payable by a non-natural person “NNP” (e.g. a company, collective investment scheme or LLP with a corporate partner) that holds UK residential property valued at over £500,000. In these circumstances, the dwelling is said to be ‘enveloped’ because the ownership sits within a corporate ‘wrapper’ or ‘envelope’. It does not apply to residential property owned by individuals.

ATED was originally introduced in 2013 to discourage ‘enveloping’ high-value residential properties within special purpose vehicles (SPVs), enabling an onward sale of the property via a sale of shares in the SPV, such that no stamp duty land tax is payable by the purchaser.

For the 2020/21 tax year, dwellings worth more than £500,000 attract a fixed annual charge based on the value of the property as set out in the table below:

The ATED year runs from 1 April to 31 March and companies must file an ATED return by 30 April for each ATED year during which they hold a UK residential property. A late return has £100 penalty immediately applied, with further fixed charges stacking up after 3 months, 6 months and up to a maximum of £1,600 at the 12 month mark. Failing to pay ATED in full and on time will result in a penalty of 5% of tax due if 30 days late, a further 5% if 6 months late and a further 5% if 12 months late.

There are a number of reliefs from the annual charge (the most common being property rental business relief) but the reliefs do not apply automatically – an ATED relief return must be submitted in order to claim them.

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Worldwide Disclosure Facility - Andrew Lewis

ANDREW LEWIS

Tax Manager


Andrew has significant experience in dealing with HMRC tax investigations and disputes including Section 9A enquires, the Worldwide Disclosure Facility (WDF), Code of Practice 9 and the Contractual Disclosure Facility.
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DIANE HARPER

Senior Tax Manager (ex-HMRC)


Diane has 38 years of experience in tax starting with 6 years at H M Revenue & Customs. She now manages a portfolio of 350 personal tax clients including high net worth individuals, Barristers, Self Employed, Directors, Non-Residents and Partnerships.
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Bhimal Hira

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Jeffreys Henry LLP is a Limited Liability Partnership registered in England and Wales with registered number OC306971. Registered to carry on audit work in the UK and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales. Details about our audit registration can be viewed at www.auditregister.org.uk under reference number C001108797. VAT Registration Number 243307782. A list of Partners is available for inspection at the below address. Jeffreys Henry Audit Limited is registered in England and Wales with Company number 13172931. Registered to carry on audit work in the UK and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales. Details about our audit registration can be viewed at www.auditregister.org.uk under reference number C008924259. VAT number 374306694. A list of Directors (who we also refer to as Partners) is available for inspection at the below address. Jeffreys Henry Business Services Limited is registered in England and Wales with Company number 13128469. VAT number 369869417. A list of Directors (who we also refer to as Partners) is available for inspection at the below address. Each entity’s registered office is at Finsgate, 5-7 Cranwood Street, London, EC1V 9EE.
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