The country’s buy-to-let landlords have already experienced a tough tax regime and rising costs, but they should now strongly consider seeking the assistance of business consultants in London to avoid being negatively affected by the Annual Tax on Enveloped Dwellings (ATED).
This special capital gains tax will affect residential properties owned by companies; meaning, where a property is owned by non-natural persons – either a company, a partnership with one or more corporate partners, or a collective investment scheme. Formerly referred to as the Annual Residential Property Tax, ATED is an annual charge on residential property within the UK. From April of this year it applies to all property valued at over £1 million, but this is set to be reduced to £500,000 by 1 April 2016.
Before 2015, UK residents only paid Capital Gains Tax on UK property at the high tax rate of 28% on investment properties, and non-residents were able to sell UK properties at a profit without having to pay any tax within the UK at all. The ATED is now on a sliding scale which non-natural persons must pay annually when they own a residential property. Exemptions are possible, but these will typically apply to situations in which non-natural persons are using that property for a genuine business purpose.
The tax will hit both non-residents who use their companies to shelter properties from tax and UK residents who use foreign nominees to own companies and therefore UK dwellings. This will make corporate ownership of those UK dwellings less viable. If this could affect you, we advise that your property may need to be de-enveloped. However, this can cause other tax charges, so it is vital to contact our business consultants in London for advice specific to your own specific situation.