QUESTION: Our company’s accountant has asked for the value of the residential property held in the company. Why would they need to know this if they have already prepared last year’s financial statements?
ANSWER: I would suspect they are asking ahead of the lessor known annual tax on enveloped dwellings (ATED) filing date. An ATED return for relevant properties owned between the April 1 2022 to March 31 2023 period is required to be filed by April 30 2022.
ATED applies to residential dwellings in the UK valued in excess of £500,000, that are owned by a company or within a corporate wrapper. While you may not have needed to complete an ATED return in the past, you can now fall into the ATED regime if:
• The company recently bought a dwelling for over £500,000, an ATED return will be required within 30 days of acquisition to cover the remainder of the year to March 31 2022.
• The dwelling’s value has increased in recent years and its market value exceeds £500,000 from April 1 2022.
HMRC have set five yearly intervals on which properties must be revalued for ATED purposes; the next date for ATED valuations is upcoming on April 1 2022 and following that April 1 2027, etc.
Valuations must be on an open-market willing buyer, willing seller basis and be a specific amount. There is no need for a formal valuation to be obtained each time, but of course HMRC can challenge a valuation which they believe to be significantly different from the open market value of the single dwelling interest.
A ‘dwelling’ is defined as ‘a distinct unit of residential property (i.e. a house or flat which is considered as one residence)’. ATED can apply to a property which is suitable for use as a dwelling, not just a property which is actually so used.
The annual charges start at £3,650 for properties worth more than £500,000 and increase depending on the value of the dwelling.
There are various reliefs available for the ATED charge, including where the property 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 a year as part of a trade;
• being developed for resale by a property developer;
• owned by a property trader as the stock of the business for the sole purpose of resale;
• repossessed by a financial institution as a result of its business of lending money;
• acquired under a regulated home reversion plan;
• being used by a trading business to provide living accommodation to certain qualifying employees (provided they are entitled to less than 10% of the trade profits, the single dwelling interest and the company holding the single dwelling interest);
• a farmhouse occupied by a farm worker or a former long-serving farm worker;
• owned by a registered provider of social housing.
It is important to remember that returns must still be filed for relevant properties even where no ATED is due because a relief is available, the return should be filed, and the appropriate relief claimed.
As with other tax returns, HMRC can impose penalties if the ATED return is filed late, therefore it is important to engage early with your accountant to ensure there are no delays in obtaining a valuation and filing a return if required.
KellyAnne Murtagh (k.murtagh@pkffpm.com) is senior manager at PKF-FPM (www.pkffpm. com). The advice in this column is specific to the facts surrounding the question posed. Neither the Irish News nor contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.
