Author: Amit Roy

ATED in a nutshell

First published 2 Feb 2020

  1. Applies to Companies owning residential properties valued over £500k
  2. Relief given if let on commercial basis.
  3. Valuation
  • Initial – Date of Purchase
  • Subsequent – 1st April 2012 and then every 5 years i.e. 1st April 2017, 1st April 2022 and so on.
  1. Tax year runs from 1st April to 31st March.
  2. Tax return due date
  • Initial – within 30 days of purchase
  • Subsequent – by 30th April during the tax year i.e. for tax year 1st April 2018 to 31st March 2019. Return must be submitted by 30th April 2018.
  1. ATED UTR – we get a 15 digit UTR on registration
  2. To file a return no need to wait for UTR.

    Source:
    ATED Return Notice
Updated December 2022
SDLTM04042 – Stamp Duty Land Tax on de-enveloping transactions

Shareholders maybe able to de-envelop the property without payment of any SDLT see link SDLTM04042

 

Update March 2023

There are fixed revaluation dates for all properties i.e. every 5 years from 1 April 2012. The latest revaluation date is 1 April 2022. This valuation should be used in your clients return for the 1 April 2023 to 31 March 2024 chargeable period.

Valuation – Self assessment allowed.

See Agent update 105

Incorporating a letting business

Should I transfer my existing properties in a new company ?

Three taxes are considered when considering the question of incorporating a letting business:

  1. Corporation/Income Tax
  2. Capital Gains Tax ; and
  3. Stamp Duty Land Tax (SDLT)
  4. Inheritance tax

1. Corporation/Income Tax

  • Corporation tax rates are lower than income tax rates
  • Continued tax relief on mortgage interest
  • Flexibility in timing of profit extraction.

2. Capital gains tax (CGT)

Transfers between connected parties are deemed at market value (MV).`Incorporation relief ` is available but it will only be available in case of a `business`. Keeping in view case law as in Lord Fisher and Ramsay, it will be a difficult threshold to cross for landlords with one or two BTL properties.

Incorporation relief

No CGT payable if transfer is for shares in the business.

Eligibility conditions:

  • Rental activity is a business. Main case law here is `Ramsay Vs HMRC` to determine whether the activity is really a business. HMRC guidance CG65715 states the activity should be carried for around 20 hours a week personally.

    Please note HMRC no longer provides non-statutory clearances as conformation that a particular property letting is sufficient to qualify as a business. 

  • Consideration in new issued shares only – not a credit in director’s loan account.
  • Transferred as a going concern i.e. profitable business.

Please note annual exemption allowance, currently £11,700 not available to companies

3. SDLT – Usually SDLT is not payable when consideration is nil. But FA 2003 Sec 53 also see SDLTM30220 inserted a special provision to ensure SDLT is payable on Market Value, irrespective of consideration actually paid. 

Future purchase – In case buyer is a company it pays 3% surcharge (threshold £40k) in all cases, whether or not company owns another property or not. Thus landlords cannot avoid the 3% surcharge by buying properties via company.

Also, be aware of 15% SDLT rate for companies but relief maybe avaliable for rental business.

SDLT Calculator

4. Inheritance tax : Property will be a chargeable asset for both individual or owned by a company, as Business Property relief not available see IHT Act 1984 sec 105 (3)

Practical considerations:

  • Refinance costs
  • Increase in interest rates – as bank usually charge more to limited company landlords.
  • Huge SDLT bill on transfer of assets.
  • Other fees – Lawyer, accountant, valuer etc.

Lastly, there is no guarantee HMRC will not change the rules for finance costs relief for companies in the future.

Conclusion:

I think the sensible approach will be to leave the existing portfolio as it is but to buy new properties in a limited company if the aim is to expand the portfolio rather than profit extraction from the business. This will require another article in greater detail.

 

First written in May 2018; updated March 2023

Yearend tax planning for employed (PAYE) individuals

  • Pension contributions 1 – for self, see our detailed blog on this topic.
  • Pension for children or non-working spouse pension. Government top ups contribution of £2,880 by £720 to gross up to £3,600.
  • ISAs – Self, children or life time.
  • Claim employment expenses like subscription, working from home £6 minimum
  • Marriage Allowance
  • Investments in VCT, SEIS or EIS. These are risky investments so beware.
  • Giving to charity via Gift Aid – among a married couple if one is basic and other higher rate payer. One with higher rate should make the donation. Further tax planning scenarios in case income is between £50k-£60k (child benefit) and £100k to £125k (personal allowance reduction).
  • Check your National Insurance record if gaps. See our detailed blog.
  • Premium Bonds
  • Pay off your loans. What you save is what you earn. Start with the one which charges highest interest rate usually credit cards.
  • Use Capital Gains – Annual Exemption limit.
  • Inheritance tax – give away £3k per annum.
  • Buying assets for capital appreciation in children’s name (Bare Trust)as Parental settlement rules are not applicable for CGT. See blogs from Aberdeen and Step Journal.

Slowdown, any action in haste will most likely be regretted.

Plan for next tax year.

Notes:

  1. Pension contribution lowers Income tax not National insurance contributions; unless it is via a Employer’s salary sacrifice scheme.

Do I need an accountant?

Why you need to hire a qualified accountant to handle your affairs

Tax rules are complex and handling tax matters can be a stressful experience.

Few reasons for hiring a qualified accountant:

  • A qualified practicing accountant has number of years of experience before starting his own practice.
  • He/she will know about many reliefs and rules available on various income and gains, lowering your tax bills.
  • If a mistake happens after taking advise from a qualified accountant, HMRC considers it an error after taking reasonable care, resulting in lower penalties
  • A qualified accountant will also ensure all tax calculations and procedures are properly followed.
  • A qualified accountant can take an independent view of the matter, as both tax payer and HMRC’s judgement can be skewed by their incentives.
  • A qualified agent is a good emotional barrier between you and HMRC.

Why you should hire us ?

Our commitments to you

  • We will provide information in a clear and understandable way.
  • We abide by the Golden Rule – we will treat you as we wish to be treated.
  • We will provide a high level of service.
  • We will endeavour to make our service flexible to meet your needs.

What we ask of you

  • We request you to be mindful of our time as that is our `Stock in trade`.
  • We request you to be forthright and succinct in your communication with us.

How to change name, address, telephone number or email address with HMRC

HMRC calls these `designatory details`

For Agent see Link Agent Update 105

For Client see the same link, scroll down a bit and read,
Updating your client’s designatory details
re PAYE – guidance says to call HMRC but this seems incorrect, as changing address on Companies House website automatically updates PAYE records on HMRC website.