Some accountants have been wrongly telling buy-to-let residential landlords that they need to pay ATED, according to industry experts.
Now buy-to-let brokers are being pushed to clarify these tax rules for landlords, while accountants are being told to make sure they are familiar with all the latest tax changes affecting the buy-to-let sector.
The government introduced ATED (Annual Tax on Enveloped Dwellings) in 2013. This applies to residential properties owned either partly or completely by a partnership, a company, or investment vehicle.
Managing Director of The Buy to Let Business, Ying Tan, said: “It is difficult to quantify how many landlords are affected. We have certainly seen some landlords, off the back of speaking to an accountant, say that a limited company is not a good option due to ATED, even though ATED would not apply to them.”
He added: “This is contradicting other accountants who are acutely aware that, if the property is let out, ATED does not apply.”
Tax changes affecting the buy-to-let sector seem to be confusing some accountants, whose landlord clients are then confused and ill-informed. Yet it’s arguably more important than ever for landlords to be aware of their tax obligations, especially in the face of so much change for the buy-to-let sector.
In addition to the 3% stamp duty rise in 2016, since April of this year the government is phasing in changes to mortgage interest tax relief, which has contributed to the number of landlords choosing to incorporate.
According to research from Mortgages for Business, in the first quarter of this year, 77% of buy-to-let applications for property purchases were made through limited companies. With increasing numbers of landlords transferring their properties into a limited company, the problem could get worse.
The importance of landlords receiving the correct tax advice cannot be overstated. If landlords are not given the correct advice, it could lead to some landlords submitting an ATED tax return when they do not need to, or failing to file an ATED tax return when they do need to.
As always, it is important that landlords receive the right tax advice at the right time. For a landlord to be unaware of his or her tax obligations is not considered an excuse, and as a landlord, you will likely be fined if a due tax return is delivered after the deadline.
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