M+A Partners HomeBlogHMRC Campaign Targeting Annual Tax on Enveloped Dwellings Avoidance

Annual Tax on Enveloped Dwellings (ATED) is an annual tax payable mainly by companies that own UK residential property valued at more than £500,000.

HM Revenue & Customs (HMRC) have recently launched a ‘One to Many Letter’ campaign, where they will be contacting companies that they believe may owe tax under the ATED provision – demonstrating their ongoing focus on tax relief claims for property businesses.

Campaign indicators

The criteria HMRC will be using to target their campaign includes companies that:

  • Own UK residential property valued at over £500,000;
  • Reported rental losses in their Self Assessment tax returns from 2017-20; and
  • Either filed ATED returns, which included claims for QPRBR or did not file any ATED returns.

Rationale behind the campaign

The purpose of the campaign is to identify companies that are not complying with the ATED tax rules, specifically because they are utilising reliefs that are not applicable to them.

A significant relief in these circumstances is Qualifying Property Rental Business Relief (QPRBR). QPRBR is used by companies that run a dwelling on a commercial basis, with a view to profit –  it cannot be claimed if someone occupying the property has an interest in it or is connected to someone that does.

The reason behind HMRC contacting companies that have reported loses, and also claimed QPRBR, is that if the company has not made a profit, it is doubtful this particular relief is available and consequently ATED liabilities may be due.

Next steps

If you are contacted by HMRC, it is necessary to respond promptly and before the deadline outlined. The action you take depends on your specific circumstances, if it is deemed that you have ATED liabilities, you will need to make a disclosure to HMRC and file the necessary returns.

If there are legitimate reasons for using QPRBR relief, you still need to contact HMRC and provide the information requested in the letter.

Letters will be sent in batches over the coming months and it is therefore important to take early action to avoid any penalties or interest on tax paid late. All responses must be made within 40 days of the date of the letter.

How M+A Partners can help

M+A Partners team of experienced property tax experts provide specialist advice to guide you through the complexities of tax, helping you to plan ahead and remain compliant.

Should you have any queries on ATED or ensuring your tax affairs are in order, get in touch with me using the details below or email enquiries@mapartners.co.uk

Written By

Sam Holloway
Senior Tax Manager
BIO
Sam joined M+A Partners in July 2008 after obtaining a degree in accounting and finance at the University of East Anglia.

Sam has since gone on to qualify as a Chartered Tax Adviser and is now one of our Senior Tax Managers. He is able to give specialist advice in matters concerning corporation tax, income tax, capital gains tax and stamp duty land tax. His current clients include individuals, companies, partnerships and sole traders with a focus on tax planning.

As a landlord, Sam has a keen interest in property related businesses whether held personally, in a partnership or in a corporate structure and advises many of our clients with property income.

Sam takes a straight talking approach to the advice he gives, getting to the point, and he likes to stay in contact with his clients regularly. He says: ‘Emails and letters are a great way to stay in contact, but sometimes it is about picking up the phone and speaking to your clients to get an understanding of how they are getting on, what challenges they are facing and how tax is impacting their business’.
EXPERTISE
  • Accounting Services
  • Service Charge Accounting
CONTACT