Partner Article

The end of Stamp Duty Tax avoidance?

HMRC has this week finally released a draft electronic copy of the new ATED (Annual Tax on Enveloped Dwellings) tax return to be completed by non-natural persons (HMRC defines these as companies, certain collective investment schemes, and partnerships) who own UK residential property valued over £2m.

The ATED was first announced last year as part of a clamp down on Stamp Duty Land Tax avoidance by non-natural persons who own expensive properties. Those caught within this category will face an annual tax charge ranging from £15,000 to £140,000, depending on the value of their property.

So what do you do if you this affects you?

You need to think about why the arrangement was put in place originally, and whether it justifies the annual charge. ‘De-enveloping’ can be costly and the commercial and tax considerations need to be thought through, plus doing this will still need a return to be filed and a pro-portion of the charge will still be due for the period from 1 April 2013. If the conclusion is that the structure is still beneficial, then you’ll need to consider the following before filing a return:

• You’ll need to confirm on the return whether a professional valuation or HMRC pre-return banding check (PRBC) has been obtained. The PRBC request must be made online and requires copious details of the property including the taxpayer’s proposed valuation. Although HMRC aims to provide a response within 30 working days, this still leaves very little time to file the return by the 1 October 2013 deadline.
• Relief from ATED is available in limited circumstances and the form contains nine possible relief codes – if more than one relief applies then care will be needed to select the most appropriate relief. This may be a complex assessment in certain circumstances.

The completion of HMRC’s ATED return may seem quite straightforward, but as with many tax returns which collect extensive information and require claims for relief, a careful approach is advised. An incorrectly completed ATED form may necessitate HMRC requesting further information which could result in additional interest being charged, and in some cases, a hefty fine.

This was posted in Bdaily's Members' News section by Baker Tilly .