UK and International Tax news
HMRC Announces ATED Consultation
Thursday 31st July 2014
HMRC has recently issued a consultation document in which it proposes to reduce the administration burden for businesses subject to ATED and which claim ATED reliefs under s.133 to 150 FA 2013.
HMRC has held several informal meetings with external stakeholders to canvas views on the burden imposed by ATED administration given, in particular, the 2014 Budget changes and the proposed reduction in the threshold from £2 million to £500,000 to be introduced over two years. It was clear from these meetings that those who manage large property portfolios have the largest administrative burden.
Where a business has a number of properties, it is required to submit returns for each of those properties in order to claim relief which reduces the ATED charge to zero. In the case of those who are claiming relief under code 1 (property rental businesses) this could lead to the submission of multiple returns on an annual basis for the same properties. Following representations from this sector in advance of the introduction of ATED, HMRC allowed and continues to allow these companies to submit one return annually and provide a list of properties to which the same relief code applies. The list must include full details of those properties and must be submitted by the return filing date.
Whilst this reduces the administrative burden, submission of this information at the beginning of the year means that there is an increased possibility of having to submit an amended return or new return within the chargeable period to reflect any changes in the property portfolio.
Those claiming relief under codes 3 and 4 (property developers and traders) are required to submit a return within 30 days for existing residential properties and 90 in the case of newly built or renovated properties. If they acquire and dispose of numerous properties throughout the chargeable period, they are required to submit multiple returns.
Many property developers find the 90 day filing deadline for newly built and renovated properties challenging as there can be a delay in finalising the date at which the property comes within the charge to Council Tax and thus ATED.
The constant turnover of properties can also mean that returns have to be submitted for a period of as little as a few days, before the sale of the property triggers the need for an amended return.
HMRC proposes two options, the first one retaining the current filing date but allow those businesses who are eligible to claim a relief from ATED for more than one property and who do not have an ATED liability, to submit a supplementary return after the end of the chargeable period. This option should only apply to those holding more than one property. For those businesses who claim a relief for single properties, the requirement to submit a return at the beginning of the chargeable period and a statement at the end of the chargeable period would increase their administrative burden so this approach is not felt to be relevant or appropriate.
Under the second option, those who are entitled to claim a relief which reduces their ATED liability to nil could apply to HMRC for “exempt status”. This would mean that an ATED return would not be required annually but a confirmation of status would be required at various intervals. This could be annually or longer, i.e. every three or five years.
HMRC has requested comments on what problems are envisaged with this approach, what criteria should be adopted in order for businesses to apply for and be granted exempt status, and how often continued entitlement to the status should be confirmed.
The consultation will run for eight weeks to 16 September 2014 and HMRC has requested views from interested parties in response to the questions set out in the condoc. HMRC will publish their response to the consultation in the autumn.
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