ATED Penalties and Appeals: Understanding Deadlines & Process

The Annual Tax on Enveloped Dwellings (ATED) applies to UK residential properties valued over £500,000 held by non-natural persons, such as companies, partnerships with at least one company member, and collective investment schemes. It is crucial for entities liable under ATED to file timely returns, even if no tax is due, to avoid late filing penalties.

This article discusses the deadlines for submitting ATED returns, outlines the penalties for non-compliance, and provides guidance on how to appeal against penalties imposed by HMRC.

Understanding ATED Deadlines

Companies within the scope of ATED regime on 1 April must submit an ATED return by 30^th April of the same year. The ATED return is prepared to 31 March annually irrespective of the company's year-end, and unlike other tax returns, ATED is forward-looking.

For example, the return for the year ending March 31st, 2025, should be filed by April 30th, 2024. However, different deadlines apply for new acquisitions, newly built properties, and other cases, as explained below.

• New Acquisition: Within 30 days of acquisition if it falls within the ATED regime.
• Newly Built Property: Within 90 days of the property becoming dwelling for Council tax purposes or its first occupancy, whichever is earlier.
• Any Other Case: 30 April

Overview of ATED Penalties

The ATED penalties imposed on companies vary depending on whether there has been a failure to file the return on time, failure to pay ATED due on time, or submission of an inaccurate return. This section explores how penalties vary in each case:

Failure to File

Failure to file tax returns or other necessary documents on time may result in the imposition of the following penalties:

• An initial penalty of £100 applied the day after the due date.
• Daily penalties of £10 per day for up to 90 days following a three-month delay.
• A 'further penalty' of £300 or 5% of the estimated tax liability (whichever is higher) after a six-month delay.
• A second 'further penalty' of £300 or 5% of the estimated tax liability (whichever is higher) after a twelve-month delay.

Annual Penalty Summary:

It is important to note that after HMRC has applied the second further penalty, the percentage rate may escalate if, by failing to submit your return or document within twelve months, you:

• Concealed information.
• Were aware that the information could aid HMRC in determining your precise tax liability.

During the assessment, HMRC will ascertain whether there is a withheld of information and, if so, the underlying rationale. This rationale is referred to as the 'behaviour'. HMRC charges different penalties based on the behaviour it deems fit.

Failure to Pay

Penalties for late payment under ATED follow the same rules as those for income tax and corporation tax self-assessment regimes and cover late filing, late payment, and inaccuracies. The penalties are as follows:

• An initial penalty of 5% of the tax unpaid at the penalty date,
• 5% of the unpaid tax, 5 months after the penalty date,
• An additional 5% of the unpaid tax, 11 months after the penalty date.

In addition to the penalties, failure to pay the ATED due would also attract interest on the tax due, which will continue to accrue until the full payment of the due amount has been made.

The interest rate for late payment is set at the base rate plus 4%. The current interest rate from 6ᵗʰ April 2025 is 8.50%. However, this may change with the change in the base rate.

For a full table of how the interest rate has changed over the years, visit HMRC’s guidance on interest rates for late payments.

How to Appeal an ATED Penalty

If you receive a penalty notice from HMRC, you have the right to appeal within 30 days of the decision date. Appeals should be made in writing, outlining the grounds for contesting the penalty, and sent to the following address:

HM Revenue and Customs

ATED Penalty Appeals

Stamp Taxes

BX9 1HD

United Kingdom

• Your partner or another close relative died shortly before the tax return or payment deadline,
• You had an unexpected stay in hospital that prevented you from dealing with your tax affairs,
• You had a serious or life-threatening illness,
• You were unaware of or misunderstood your legal obligation, etc.

However, you must send your return or payment as soon as possible after your reasonable excuse is resolved.

Following the appeal, HMRC assesses your situation and sends you a notice notifying you of either cancel or amend your penalty or reject your appeal.

Conclusion

Ensuring compliance with ATED requirements is essential to avoid penalties and potential financial repercussions.

By understanding the deadlines, penalties, and appeals process outlined above, companies can navigate their ATED obligations effectively and minimize the risk of non-compliance.