On 1 July 2013, HMRC released the draft return for the reporting of ATED charges (Annual Tax on Enveloped Dwellings) return. This has been long awaited because the return must be filed by 1 October 2013 and the tax must be paid by 31 October 2013.
In addition, on 15 July HMRC published draft regulations setting out the types of ATED arrangements to be disclosed to HMRC under the Disclosure of Tax Avoidance Schemes (DOTAS) rules.
The ATED return
We have previously reported extensively on the ATED charge and full details can be found here (High value residential property – UK companies do not escape charge; Ownership of UK property – tax planning after Budget 2012).
The new return requires the following details to be disclosed:
- Details of chargeable person – name and address of the company, reference numbers etc.
- The type of relief claimed, if any.
- Property – address, date and value at acquisition, value at April 2012 and date of valuation.
- Bank details (only required if a repayment is due).
- Agent details.
- Declaration that the above information is correct.
There was some concern that HMRC may use the ATED return to gain information about shareholders of offshore companies. Thankfully this is not the case and there is no requirement to disclose details of the company shareholders on the return.
DOTAS and ATED
The DOTAS rules require a promoter (and in some cases users) to provide information to HMRC about certain tax schemes which provide a tax benefit. Finance Act 2013 added ATED to the list of taxes to be covered by DOTAS (with retrospective effect) and on 15 July 2013 HMRC published a consultation document including draft regulations setting out the types of ATED schemes requiring disclosure, and those that will not.
The regulations are aimed at planning which attempts to avoid or minimise the ATED charge by:
- Removing residential property worth more than £2 million from the ownership by a chargeable person.
- Reducing the taxable value to under £2 million.
- Reducing the taxable value so that a lower charging band applies.
and in each case where planning is contemplated to reduce or eliminate the ATED charge, consideration will need to be given as to whether DOTAS applies. Thankfully, the draft regulations do, however, seek to identify planning which would not require disclosure, for example:
- arm’s length transactions between unconnected parties; or
- company distributions to individuals
What to do now?
The Government’s intention behind introducing an ATED charge is to encourage the ‘de-enveloping’ of UK property and it is still possible to do this. Anyone potentially caught by the ATED charge should review whether changes to the existing structure might be possible and beneficial.