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HMRC nudge letters about filing ATED returns and what to do if you receive one
6th November 2024
HMRC have been stepping up their efforts in 2024 to tackle non-compliance in relation to offshore corporate entities owning property in the UK. An area under increased scrutiny is the Annual Tax on Enveloped Dwellings (ATED) with HMRC issuing nudge letters to companies to remind them of their obligations.
Has your business received a nudge letter about filing your ATED returns? Here’s what you need to know if you have.
What is Annual Tax on Enveloped Dwellings (ATED)?
ATED is an annual tax chargeable to companies, whether in the UK or not, that own UK residential properties. Currently the charge applies if the value of the property is more than £500,000 as at 1 April 2022 or later, however the charge has been in force since April 2013. An annual ATED return must be filed between 1 and 30 April each year, or within 30 days of acquiring a property.
Relief from the charge is available to companies, if, for example:
- The property is let to a third party on a commercial basis, and not occupied by anyone connected to the owner of the business;
- The property provides accommodation to employees of a trading business;
- The property is being developed for resale by a property developer.
Where relief is available, an ATED filing must still be made to HMRC. If the charge applies, it is levied based on the value of the property at the last ‘valuation date’, or purchase date if later. The latest valuation date is 1 April 2022.
Why have I received a nudge letter?
HMRC hold information regarding the ownership of UK properties and their values. HMRC use this information to determine who to contact with nudge letters as a reminder to submit an ATED return.
HMRC may send you a nudge letter, if:
- Your company owns a residential property valued over £500,000
- An ATED return has not been filed by the company
- An ATED return has been submitted inaccurately, for example HMRC may challenge the property’s value and use.
What you should do if your business received an ATED nudge letter
Letters from HMRC should not be ignored. An authorised person in the business should respond to HMRC if you feel you have submitted ATED returns correctly. If an ATED return should have been filed, or a return was filed incorrectly and inaccurately, then a disclosure should be made to HMRC to avoid further investigation and possible repercussions.
Letters should also be reviewed if the corporate entity is based offshore as HMRC may reference non-resident landlord obligations to ensure these have also been addressed. For instance, if the residential property is being let commercially, meaning it can claim relief, the offshore corporate entity will need to ensure it is compliant with its UK corporation tax obligations on any rental profits.
Making disclosures
ATED disclosures can be made under HMRC’s Digital Disclosure Service, and a disclosure should be made if you were not aware of your ATED obligations or errors have been made when filing historic ATED returns. When preparing a disclosure relating to undeclared ATED charges you will need to consider the following factors:
- Disclosures should include all years within the scope of HMRC assessment, from 2013/14 as applicable, considering historic valuations of the property;
- Details including address, acquisition dates, property use and valuations at the valuations dates will need to be included;
- Details of disposal and any associated capital gains/losses should also be reported if they have not been previously.
- It is recommended seeking advice from a disclosure’s expert given the specialist nature of making a historic disclosure to HMRC.
Where ATED liabilities were deliberately ignored, the Contractual Disclosure Facility, or COP9, should be considered as an alternative route to making a disclosure. It is necessary in this case to seek the expertise of a COP9 specialist to ensure disclosures are made correctly.
Menzies’ Tax Disputes and Disclosures team can provide guidance if you need to respond to HMRC after receiving a nudge letter, need support filing ATED returns, or if you are thinking about making a disclosure on behalf of a company.
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