The 2013 Liberal Democrat Party Conference made much mention of the so-called Mansion Tax but it’s easy to forget that, for many people, the tax has already arrived in the shape of the Annual Tax on Enveloped Dwellings or ATED.
This was introduced by the Coalition Government to counter two main public concerns. First, it was felt that very wealthy foreign individuals continued to buy expensive UK properties without contributing very much towards the cost of such public amenities as roads, police and fire services. Secondly, many prime properties were being registered in the names of offshore tax haven companies to avoid Stamp Duty. Whenever such properties were sold, the buyer simply bought the company owning the property thus avoiding the duty.
The new ATED has been designed to capture revenue from residential property valued at over £2 million which is owned by non-natural persons (UK or non-UK) if they are registered in the name of a collective investment scheme, a company or a partnership where one of the partners is a company.
The tax to be paid each year is dependent on the market value of the relevant property as at April 1st 2012 or on the date of purchase if that occurred subsequently. There are four bands starting with £15,000 being payable for properties worth £2 million and rising to a maximum of £140,000 for properties valued at over £20 million.
Although this new tax appears on the face of it to be watertight, there are a number of reliefs available and, if anyone has any doubt, clearly they need to consult a specialist UK tax accountant. An example of one group who could well enjoy relief from ATED are businesses operating in the residential sector which are actively involved in refurbishment, development and property trading as well as rental. It is important to note that anyone aiming to claim relief will still need to complete an ATED return.
The ATED return includes the ability to include a recent valuation figure which is useful in the rare event that a property appears to have fallen in value since 2012.
There needs to be a figure for the latest valuation and confirmation of whether a professional valuation was obtained to back it up. This will probably only need to be produced in the event that the valuation is subsequently challenged by HMRC.
Finally, it should be borne in mind that the return is filed electronically and that it will contain confidential information which many property owners from overseas might be reluctant to divulge. In these circumstances, they might be advised to have the return handled by an agent such as an accountant with knowledge of the procedure.