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Markel Tax

08 Jul 2020

ATED Penalties – a way out?

The Annual Tax on Enveloped Dwellings (ATED) regime has been around for some time. Many companies, or other non-natural persons (e.g. a collective investment scheme or an LLP with a corporate partner), that hold UK residential properties may fail to appreciate the filing requirements imposed by the regime. This is the case even where no tax is found to be due, such as where the taxpayer is entitled to claim an exemption. 

The penalty regime for failing to file ATED returns is the same as that which applies to most other taxes and can be found at Schedule 55 FA 2009. Broadly, the penalties due for late returns are as follows:

  • A £100 penalty for a return filed after the deadline – in other words, if the return is at least one day late,

  • A £300 penalty if the return is three months late,

  • Daily penalties of £10 a day for a maximum of 90 days can be imposed if there is a three-month delay in submitting the return,

  • A further £300 penalty can be imposed if the return is six months late.

So, the maximum penalty a taxpayer could face for each year that they fail to file an ATED return can total a punitive £1,600. It can be seen that if several returns are filed late, significant penalties can accrue despite there being no ATED liability!

Notwithstanding the disproportionality of the penalty, compared with the NIL tax due, it is vital that the penalty notices are thoroughly checked to ensure they are correct and that HMRC is acting within its recognised guidelines.

We have unfortunately seen an increasing number of procedural errors by HMRC and as a result, we have successfully challenged the penalties due, saving our clients considerable money.

Similarly, where professional advice from a competent adviser has been relied on in filing the ATED returns, and the taxpayer has acted on that advice which proves to be wrong, despite the fact that the adviser was given a full set of accurate facts, HMRC should consider the situation as if reasonable care was taken and no penalty should be due.

If you, or your client finds yourself in receipt of ATED penalty notice, regardless of whether there is an ATED liability, we have the expertise and experience to help potentially mitigate the penalty in full, or minimise your exposure to it. Please get in touch with Markel Tax on 0333 920 5708.

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