This regime applies an annual tax charge to all companies that own residential property; increased stamp duty charges on acquisition and capital gains tax charges on sale may also apply. The tax charge is a flat rate amount based on the property value. For 2017-18, properties valued between £500,000 and £1,000,000 will pay a tax charge of £3,500. There are however numerous reliefs, the two most common listed below.
Relief is available where there is a property development trade, with the intention of developing and re-selling as part of that trade. Broadly, this means the property should be sitting in stock/WIP of the company.
Property development can be any or all of the following:
Trade must be carried out on a commercial basis, and with a view to profit.
If a developer rents the property out due to difficulty in selling, relief is still available as the intention is still to sell. However, if the decision is to retain the property for a long-term rental business, relief should be claimed under the property rental business heading.
Relief is available where a dwelling forms part of a qualifying property business.
Qualifying rental business must satisfy two conditions:
Indicators that the business is not commercial include:
If no rent is being generated, relief can still be claimed where steps are being taken to rent the property out and rents are generated without undue delay.
If a non-qualifying individual is in occupation of the property no relief can be claimed from the ATED charge. Plus, any year they take occupation can also mean relief is not available for the next three years and prior year’s relief may be withdrawn!
Non-qualifying individual = anyone controlling the company that owns the property, and anyone related to that shareholder i.e. husband/wife/brother/sister or lineal ancestor/descendant.
Wise & Co can advise on all property tax issues and the reliefs available for developers, landlords and rental businesses.