No tax due, no penalties surely? Think again!

We are all now more or less inured to the changes made to the tax self-assessment regime which mean that a penalty can be due for late filing of a return even if there is no tax due for the year.

It is worth remembering this draconian rule applies much more widely. In particular it applies to the “ATED” regime (the one which imposes an annual tax on certain residential properties worth more than £500k which are owned by companies, partnerships involving a company or collective investment schemes). Genuine property businesses, whether rental, trading or developer, are exempt from this tax charge. But (and here’s the rub) the exemption must be claimed, by filing a separate ATED return for every property owned. The Government is proposing that from later this year a simplified system of exemption will apply, whereby a company will be able to claim exemption for all properties it holds in a single return. But until then, a separate return still needs to be filed for each property, with multiple penalties for multiple failures.

In two recent Tribunal cases, the taxpayer was fined for late ATED returns, even though no tax was actually due because of exemptions. In each case the taxpayer pleaded ignorance of the obligation to file a return (which seems reasonable – on what planet would you expect to have to file a return just to tell HMRC that you are outwith the charge to tax?). In each case the plea was (predictably) rejected by the Tribunal.

So – while it is tempting to forget about ATED returns, it can be an expensive mistake in terms of penalties. These start at £100 per return, with daily penalties of £10 cutting in once the delay exceeds 3 months and a penalty of £300 (or, if higher, 5% of tax due) if the return is more than 6 months late, and a further £300 or 5% if the return is still outstanding after a year. Of course, no tax related penalty can be imposed if no tax is actually due; but the non-tax related penalties nonetheless tot up to a tidy £1,300 for a delay of 6-months, even if no tax is payable.

It is also worth noting that the same regime applies to returns required following the extension of CGT to non-resident owners of UK residential property (the scope of which is – wouldn’t you know it? – not quite the same as that of ATED). Here, the return must be made within 30 days of completion of the sale (even if there is no capital gain to report) and the same penalty provisions apply.

We have more information on the annual ATED charge and the CGT charge on non-residents.



Sam Inkersole

In 2022, Sam won the Taxation’s Rising Star award at the Taxation Awards in and was named in the Accountancy Age 35 Under 35.

Jon Wedge

While Jon’s client work focuses on the financial services sector, he also oversees the firm’s assurance service, as well as supporting the trainees following in his footsteps.


Elana joined us in 2017 as an ACA trainee, after graduating from Durham University where she had studied languages. She is now a manager in our assurance team.


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