Tax

Find out about ATED, what you need to pay and how to appoint an agent or adviser to act on your behalf.

What is ATED and does it apply to you?

ATED is an annual tax payable mainly by companies that own UK residential property valued at more than £500,000.

 

You’ll need to complete an ATED return if your property:

 

• is a dwelling
• is in the UK

 

was valued at more than:

• • £2 million (for returns from 2013 to 2014 onwards)
  • £1 million (for returns from 2015 to 2016 onwards)
  • £500,000 (for returns from 2016 to 2017 onwards)

 

is owned completely or partly by a:

• • company
  • partnership where any of the partners is a company
  • ­collective investment scheme – for example a unit trust or an open-ended investment vehicle

Returns must be submitted on or after 1 April in any chargeable period.

There are reliefs and exemptions from the tax, which may mean you do not have to pay.

Definition of ‘dwelling’

Your property is a dwelling if all or part of it is used, or could be used, as a residence, for example a house or flat. It includes any gardens, grounds and buildings within them.

 

Some properties are not classed as dwellings. These include:

 

• hotels
• guest houses
• boarding school accommodation
• hospitals
• student halls of residence
• military accommodation
• care homes
• prisons

Section 19 of the ATED technical guidance explains more about the meaning of ‘dwelling’.

Valuing your property

To work out what you need to pay you’ll need to value your property using a valuation date.

In some circumstances you can also ask HMRC for a Pre-Return Banding Check (PRBC).

For the 5 chargeable periods beginning from 1 April 2018, the 1 April 2012 valuation date was superseded by the 1 April 2017 valuation date. Properties owned on or before 1 April 2017 should be revalued using that date. If you acquired the property after 1 April 2017 the later date is to be used.

What you need to pay

The amount you’ll need to pay is worked out using a banding system based on the value of your property.

Chargeable amounts for 1 April 2019 to 31 March 2020

Property value	Annual charge
More than £500,000 up to £1 million	£3,650
More than £1 million up to £2 million	£7,400
More than £2 million up to £5 million	£24,800
More than £5 million up to £10 million	£57,900
More than £10 million up to £20 million	£116,100
More than £20 million	£232,350

Chargeable amounts for 1 April 2018 to 31 March 2019

Property value	Annual charge
More than £500,000 up to £1 million	£3,600
More than £1 million up to £2 million	£7,250
More than £2 million up to £5 million	£24,250
More than £5 million up to £10 million	£56,550
More than £10 million up to £20 million	£113,400
More than £20 million	£226,950

Chargeable amounts for 1 April 2017 to 31 March 2018

Property value	Annual charge
More than £500,000 up to £1 million	£3,500
More than £1 million up to £2 million	£7,050
More than £2 million up to £5 million	£23,550
More than £5 million up to £10 million	£54,950
More than £10 million up to £20 million	£110,100
More than £20 million	£220,350

 

Section 6 and 7 of the ATED technical guidance tells you more about how to work out the charge if:

• you own the dwelling for part of a year
• you claim a relief for part of the year

You may also have to pay:

• Stamp Duty Land Tax when you buy your property – there’s a higher rate for corporate bodies
• ATED-related Capital Gains Tax or Corporation Tax if you sell your property

 

Submit your return and pay

You can use the ATED online service to submit your return and appoint an agent.

You’ll then need to pay anything you owe.

Other ways to submit your return

If you’re unable to use the ATED online service, further information can be found in the ATED returns notice.

Penalties

You could be charged a penalty and interest if:

• you do not file your return on time
• you do not pay on time
• you submit an inaccurate return

If you need help with your ATED Return, contact DansonOsborne Accountants on 01908 965003

 

 

Tax

30 June year ends will benefit from the full 100% relief of £1m for the financial year starting 1 July 2019.

AIA has been temporarily increased to £1,000,000 as from 1 January 2019 for two years.

Transitional rules apply where years fall outside the two-year window, so for December year ends these transitional rules had no real impact.

As an example, for June year ends the transitional rules would have the following impact on the maximum allowance that a business can claim:

Year end 30 June 2019
£1m x 6/12 plus original allowance £200,000 x 6/12 = £600,000

Year end 30 June 2020
£1m

Year end 30 June 2021
£1m x 6/12 plus reversion back to the original allowance £200,000 x 6/12 = £600,000

Tax

Types of work that are covered by the scheme

The scheme covers all construction work carried out in the UK, including jobs such as:

•  site preparation
•  alterations
•  dismantling
•  construction
•  repairs
•  decorating
•  demolition

The UK includes UK territorial waters up to the 12-mile limit.

The scheme doesn’t apply to construction work carried on outside the UK. However, a business based outside the UK and carrying out construction work within the UK is within the scheme and must register accordingly.

Types of businesses that are covered by the scheme

The scheme covers all types of businesses and other concerns that work in the construction industry, including:

•  companies
•  partnerships
•  self-employed individuals

These businesses can be:

•  contractors
•  subcontractors
•  contractors and subcontractors

Under the scheme, the terms ‘contractor’ and ‘subcontractor’ have special meanings that cover more than is generally referred to as ‘construction’.

Contractor

A contractor is a business or other concern that pays subcontractors for construction work.

Contractors may be construction companies and building firms, but may also be government departments, local authorities and many other businesses that are normally known in the industry as ‘clients’.

Subcontractor

A subcontractor is a business that carries out construction work for a contractor.

Businesses that are contractors and subcontractors

Many businesses pay other businesses for construction work but are themselves paid by other businesses too. When they’re working as a contractor, they must follow the rules for contractors and when they’re working as a subcontractor, they must follow the rules for subcontractors.

Registering for the scheme

All contractors must register with HMRC for the CIS. Subcontractors who don’t wish to have deductions made from their payments at the higher rate of deduction should also register with HMRC. HMRC will provide registration details that contractors and subcontractors will need to use when they deal with payments.

Verifying subcontractors

Before a contractor can make a payment to a subcontractor for construction work, they may need to verify with HMRC that the subcontractor is registered. HMRC will check whether the subcontractor is registered and then tell the contractor the rate of deduction they must apply to the payment, or whether the payment can be made without any deductions.

Making deductions from payments

Under the scheme, all payments made from contractors to subcontractors, must take account of the subcontractors’ tax status. This may require the contractor to make a deduction, which they then pay to HMRC from that part of the payment that does not represent the cost of materials incurred by the subcontractor.

If no deduction is required, the contractor can make the payment to the subcontractor in full.

If a deduction is required, the contractor must:

• calculate the deduction
• make the deduction
• record details of the payment, materials and deduction
• make the net payment to the subcontractor
• complete and give the appropriate statement of deduction to the subcontractor 

Returns
Each month, contractors must send HMRC a complete return of all the payments they have made within the scheme or tell HMRC that they have made no payments. The return will include:

• details of the subcontractors
• details of the payments made, and any deductions withheld

• a declaration that the employment status of all subcontractors has been considered
• a declaration that all subcontractors that need to be verified have been verified

 

Payments to HMRC

Each month, or quarter in some cases, contractors must send HMRC a payment for the deductions they’ve made from subcontractors.

How subcontractors pay tax

Subcontractors have to make a return of their profits each year, and their tax liability is based on that return. A subcontractor may already have paid tax by payments on account or had deductions made, as shown on the payment and deduction statements given to them by their contractors.

If the amount already paid or deducted is greater than the amount due, HMRC will repay the excess. If there is a shortfall, then the subcontractor must make a balancing payment.

Subcontractors setting off deductions

Subcontractors that are limited companies should set off deductions they bear on their receipts against the following sums payable to HMRC:

• PAYE tax due from the company’s employees
• Employers’ and employees’ National Insurance contributions due
• Student Loan repayments due from the company’s employees
• CIS deductions made from the company’s subcontractors

At the end of the tax year, once HMRC have received the company’s final Full Payment Submission (FPS) and final EPS, any excess CIS deductions that cannot be set off may be refunded or set against Corporation Tax due. No repayments or set-offs against other liabilities can be made in-year except where the company is in liquidation or administration.

Further guidance:
HMRC and CIS (click here)
What you need to do as a contractor (click here)
What you need to do as a subcontractor (click here)
CIS and VAT – further changes (click here)
DansonOsborne Accountants (contact us)

 

 

 

 

 

 

 

 

Tax

A Taxing Decision

Membership of the European Union has contributed to the economic prosperity of the United Kingdom. Uncertainty about the outcome of the referendum has already started to weaken growth in the United Kingdom.

A UK exit (Brexit) would be a major negative shock to the UK economy, with economic fallout in the rest of the OECD (Organisation for Economic Co-operation and Development), particularly other European countries. In some respects, Brexit would be akin to a tax on GDP, imposing a persistent and rising cost on the economy that would not be incurred if the UK remained in the EU.

The shock would be transmitted through several channels that would change depending on the time horizon.

In the near term, the UK economy would be hit by tighter financial conditions and weaker confidence and, after formal exit from the European Union, higher trade barriers and an early impact of restrictions on labour mobility. By 2020, GDP would be over 3% smaller than otherwise (with continued EU membership), equivalent to a cost per household of GBP 2200 (in today’s prices).

In the longer term, structural impacts would take hold through the channels of capital, immigration and lower technical progress. In particular, labour productivity would be held back by a drop in foreign direct investment and a smaller pool of skills.

The extent of foregone GDP would increase over time. By 2030, in a central scenario GDP would be over 5% lower than otherwise – with the cost of Brexit equivalent to GBP 3200 per household (in today’s prices).

The effects would be larger in a more pessimistic scenario and remain negative even in the optimistic scenario.

Brexit would also hold back GDP in other European economies, particularly in the near term resulting from heightened uncertainty would create about the future of Europe.

In contrast, continued UK membership in the European Union and further reforms of the Single Market would enhance living standards on both sides of the Channel.