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HMRC Letters to Offshore Corporates – ATED

Published by UK Property Accountants
Published Date: December 26, 2022
Categories: ATED, Nudge Letters

Annual Tax on Enveloped Dwelling (ATED) is a charge payable by companies owning a UK residential property above a certain value.

HMRC have started a massive campaign on overseas companies to collect unpaid ATED charge. They have been sending letters to foreign companies (who have interest in UK land) asking to disclose their tax affairs.

HMRC have started a massive campaign on overseas companies to collect unpaid ATED charge. They have been sending letters to foreign companies (who have interest in UK land) asking to disclose their tax affairs.

Sample Letter of Disclosure for Annual Tax On Enveloped Dwellings/Non-Resident Landlord Liabilities

ATED applies to residential properties owned either partly or completely by a company, a partnership, or any other investment vehicle.

Companies outside the UK i.e., offshore corporates also need to comply with ATED.

HMRC Nudge letter

Not complying with ATED requirements might lead to exorbitant penalties. Hence, companies that own UK residential properties must always be on their feet when it comes to adhering to the ATED return obligations.

Whose Receiving these Letters?

Such letters are sent to overseas companies:

Who own residential property in the UK and have disposed of interest on UK residential property, or

Who need to disclose any unpaid UK tax liabilities (including ATED) on UK residential property.

The letters are addressed to the non-resident company but also recommend that any connected UK-resident individual should update their personal tax affairs.

What is the Purpose of these Letters?

If you have received a letter, it does not necessarily mean that you have done anything wrong or you will be penalised. Many have received letters, including other non-resident companies.

HMRC do not intend to enquire or investigate your tax affairs. The objective is to collect information directly from the taxpayers, without any enquiry or investigation. But if response is not received, HMRC might open an enquiry.

What Kind of Letters do HMRC Send?

Non-resident companies owning residential properties in the UK are liable for different taxes like ATED, tax on rental income and tax on property disposal (Capital Gains Tax). Depending on types of applicable tax, HMRC sends two letters:

01

A letter asking for disclosure on “Annual Tax on Enveloped Dwellings and rental income”

HMRC sends this letter to companies whom they believe to own residential property above the ATED threshold.

02

A letter asking for disclosure on “Disposal of Interest in UK Residential Property”

HMRC sends this letter to companies whom they believe to have sold their UK residential properties. (This has been covered in our NRCGT article)

You might receive only one of the two letters or both – depending on the nature of transactions related to the UK property.

How Should You Respond to ATED Disclosure Letters?

The way you respond to these letters depends upon your actual status regarding your UK tax matters.

01
If UK tax affairs are up to date

If you have correctly reported all information about rental income from UK property, ATED charges, property disposal etc, you just need to declare that your tax affairs are up to date, and no further disclosure is required. You should use a form enclosed in the letter itself named- Certificate of Tax Position.

02
If UK tax affairs are not up to date

If you have omitted to report any information relating to UK property or have incurred mistakes while reporting, you need to confirm the same in the Certificate of Tax Position. Additionally, you need to sign another form mentioning what kind of disclosure you are going to make. This form is called Notice of Intention.

What should be Disclosed or Declared?

The information you need to disclose depends on the type of letter you have received.

If you have received a letter asking for disclosure on “Annual Tax on Enveloped Dwellings”, you need to:

  • Disclose the ATED charges which were due. If you believe an ATED charge is not applicable, mention the reason.
  • Disclose any rental income from UK property earned before 6 April 2020, or declare that it was already disclosed.
  • If tax on rental income has been deducted through the Non-resident Landlord Scheme, declare that it has already been disclosed.
  • Disclose if your company has made any ATED related Capital Gains.

If you have received a letter asking for disclosure on “Disposal of interest in UK residential property”, refer our NRCGT article.

When Should Responses be Submitted?

The deadline for sending your response is 40 days from issue of the letter by HMRC.”

What are the Consequences of Ignoring the Letter?

The letters simply ask you to disclose more information. If you do not disclose and HMRC finds out errors by themselves, they charge heavy penalty. Whereas, if you disclose errors by yourselves, the rate of penalty is reduced.

We strictly advise these letters should not be ignored and appropriate action must be taken. Failure to respond properly might trigger an enquiry or investigation by HMRC. Further, false statements might lead to criminal proceedings. Hence, you should take this letter seriously and seek expert advice.

Conclusion

In short, HMRC wants the company to disclose any unpaid UK taxes arising from UK property that the company was subject to.

Do you have more queries?

We, at UK Property Accountants have helped a lot of clients deal with ATED related issues in an efficient way. If you have any queries on tax enquiries or need some advice from us.

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