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More Tax on Companies owning High Value Residential Property

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Most residential properties (dwellings) are owned directly by individuals. But in some cases a dwelling may be owned by a company, a partnership with a corporate member or other collective investment vehicle. In these circumstances the dwelling is said to be ‘enveloped’ because the ownership sits within a corporate ‘wrapper’ or ‘envelope’.

ATED is a tax payable by companies on high value residential property (a dwelling). It came into effect from 1 April 2013 and is payable each year.

Budget 2014 announced a reduction in the threshold from £2 million to £500,000 to be introduced over 2 years. From 1 April 2015 a new band will come into effect for properties with a value greater than £1 million but not more than £2 million with an annual charge of £7,000. From 1 April 2016 a further new band will come into effect for properties with a value greater than £500,000 but not more than £1 million with an annual charge of £3,500.

Chargeable amounts for chargeable period 1 April 2014 to 31 March 2015

Property value Annual chargeable amount 2014 to 15
More than £2 million but not more than £5 million £15,400
More than £5 million but not more than £10 million £35,900
More than £10 million but not more than £20 million £71,850
More than £20 million £143,750

 

There are reliefs that might lead to you not having to pay any ATED. You can only claim these by completing and sending an ATED return.

A dwelling might get relief from ATED if it is:

  • let to a third party on a commercial basis and isn’t, at any time, occupied (or available for occupation) by anyone connected with the owner
  • open to the public for at least 28 days per annum, if part of a property is occupied as a dwelling in connection with running the property as a commercial business open to the public, the whole property is treated as one dwelling and any relief will apply to the whole property
  • part of a property trading business and isn’t, at any time, occupied (or available for occupation) by anyone connected with the owner
  • part of a property developers trade where the dwelling is acquired as part of a property development business the property was purchased with the intention to re-develop and sell it on and isn’t, at any time, occupied (or available for occupation) by anyone connected with the owner
  • for the use of employees of the company, for the company’s commercial business and where the employee does not have an interest (directly or indirectly) in the company of more than 10%, the employee’s duties must not include services for any present or future occupation of the property by someone connected with the company, the relief is also available where a partner in a partnership does not have an interest of more than 10% in the partnership
  • a farmhouse, if it is occupied by a qualifying farm worker who farms the associated farmland, a former long-serving farm worker or their surviving spouse or civil partner
  • a dwelling acquired by a financial institution in the course of lending
  • owned by a provider of social housing

Alternatively in some cases it might be better to own the property as an individual or jointly with other individuals.

Joint tenants

As joint tenants (sometimes called ‘beneficial joint tenants’):

  • you have equal rights to the whole property
  • the property automatically goes to the other owners if you die
  • you can’t pass on your ownership of the property in your will
  • you can only sell or remortgage the property with the other owners’ agreement

Tenants in common

As tenants in common:

  • you can own different shares of the property
  • you can pass on your share of the property in your will
  • you can stop one owner from selling or remortgaging the property without the other owners’ agreement

 

The main source for this blog was HMRC

 

steve@bicknells.net


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