Annual tax on enveloped dwellings

Annual tax on enveloped dwellings

Limited company owns residential property in the United Kingdom with the property valued more than £500,000 is required to pay an Annual Tax on Enveloped Dwellings (ATED). Below are the annual charge payable based on the value of your property.

ATED for 2019 and 2020

Property value1 April 2019 to 31 March 20201 April 2018 to 31 March 2019
More than £500,000 up to £1 million£3,650£3,600
More than £1 million up to £2 million£7,400£7,250
More than £2 million up to £5 million£24,800£24,250
More than £5 million up to £10 million£57,900£56,550
More than £10 million up to £20 million£116,100£113,400
More than £20 million£232,350£226,950

ATED for 2017 and 2018

Property value1 April 2017 to 31 March 20181 April 2016 to 31 March 2017
More than £500,000 up to £1 million£3,500£3,500
More than £1 million up to £2 million£7,050£7,000
More than £2 million up to £5 million£23,550£23,350
More than £5 million up to £10 million£54,950£54,450
More than £10 million up to £20 million£110,100£109,050
More than £20 million£220,350£218,200

ATED for 2015 and 2016

Property value1 April 2015 to 31 March 20161 April 2014 to 31 March 2015
More than £500,000 up to £1 million
More than £1 million up to £2 million£7,000
More than £2 million up to £5 million£23,350£15,400
More than £5 million up to £10 million£54,450£35,900
More than £10 million up to £20 million£109,050£71,850
More than £20 million£218,200£143,750

Your company must complete the Annual Tax on Enveloped Dwellings return and submit it with HM Revenue and Customs.

Seek accountants advice if you are not familiar with ATED.

Replacement of domestic items relief

Replacement of domestic items relief

Replacement of Domestic Items relief is introduced in residential property business to replace the 10% wear and tear allowance that has been abolished. The relief is available for the tax year from 6 April 2016 onward.

Domestic items

If you are calculating your income tax for rental income falls in period prior to 6 April 2016, you may claim the 10% wear and tear allowance.

From 6 April 2016, you may be able to claim a relief for the cost of replacing furniture and fittings, also called the domestic items, in your buy to let properties. The relief covers the following domestic items.

  • Movable furniture for example beds, free-standing wardrobes
  • Furnishings for example curtains, linens, carpets, floor coverings
  • Household appliances for example televisions, fridges, freezers
  • Kitchenware for example crockery, cutlery

The Replacement of Domestic Items relief is available and apply to unfurnished, part furnished or fully furnished residential property.

Replacing old furniture – beyond repair

You may claim the replacement of domestic items relief when you replace, say, a piece of broken and beyond repair furniture in your buy to let property. You buy a new furniture for your property for use by your tenants in that property.

This relief only available for replacement of domestic items not the initial cost of getting the items for your property.

Upgrade of old furniture – modern furnishing

If you are replacing your broken furniture in your buy to let, an upgrade version, say, a sofa with a sofa bed, the allowable deduction is limited to the cost of purchasing an equivalent of the original item. So if a new sofa would have cost you £400 but a sofa bed cost you £550, you could only claim the £400 as a deduction and no relief is available for the £150 difference.

When considering if the new item is an improvement on the old asset, the test is whether the replacement item is or is not, the same or substantially the same as the old item.

Changing the functionally, say from a sofa to a sofa bed, means the replacement is not substantially the same as the old item.

Changing the material or quality of the item also means the replacement is not substantially the same as the old item. Say you upgrade from synthetic fabric carpets to woolen carpets, the replacement is not substantially the same as the old item so there has been an improvement.

If the replacement item is a reasonable modern equivalent, say a fridge with improved energy efficient rating compared to the old fridge, this is not considered to be an improvement and the full cost of the new item is eligible for relief.

In the example above, if you later purchase a replacement sofa bed for use in that buy to let property, you would be able to claim the full cost of this new sofa bed. This is provided there was no improvement on the old sofa bed and the old sofa bed is no longer available for use in that property.

Calculate the replacement of domestic items relief

When calculate the relief, you must take into account if your old domestic item is sold or part exchanged for the new item, and also the incidental costs of disposing of the old item or acquiring the replacement item.

The formula to work out the relief for the new item is as follows:

  • The cost of the new replacement item, limited to the cost of an equivalent item if it represents an improvement on the old item (beyond the reasonable modern equivalent) plus
  • The incidental costs of disposing of the old item or acquiring the replacement less
  • Any amounts received on disposal of the old item

An Example

Sheila has replaced a single, wooden framed bed in her rental property with a new double divan bed. The new double bed is an improvement on the old bed and Sheila paid £400 for it which is significantly more than the £150 it would have cost if she had replaced the old bed with a new equivalent wooden framed bed. Therefore Sheila cannot claim more than £150 of the purchase cost as a deduction. Sheila also paid an additional £20 to have the new bed delivered but managed to sell the old bed online for £30.

Sheila needs to work out how much he can claim as a deduction:

  • Cost of new replacement item limited to the cost of an equivalent new item £150
  • Add the delivery charges £20
  • Less proceed from selling the old bed £30
  • Amount deductible under Replacement of Domestic Items Relief is £140.

Furnished holiday Let

If you replace a domestic item in a property which qualifies as a Furnished Holiday Let, Replacement of Domestic Items relief is not available. You will continue to be able to claim capital allowances on these items.

Rent A room

If you use the Rent a Room Scheme, Replacement of Domestic Items relief is not available.

10% Wear and Tear allowance

You cannot claim the 10% Wear and Tear allowance while also utilizing the Replacement of Domestic Items relief.

Wear and tear allowance

Wear and tear allowance

Wear and tear allowance is abolished after 5 April 2016. A new relief called Replacement Domestic Item relief is introduced to replace the wear and tear allowance.

You can still claim the wear and tear allowance in your income tax return up to 5 April 2016.

Calculate wear and tear allowance

You may claim wear and tear allowance if you paid for the following items in renting out of your property.

  1. Bed
  2. Sofas
  3. Televisions
  4. Fridge, freezer, washing machine, dryer (including other white goods)
  5. Carpets and floorings
  6. Curtains, linen
  7. Crockery or cutlery
  8. Portable/movable furniture and fittings like table and chairs and cupboards

The wear and tear allowance is 10% of the net rent. The net rent is rental income less any costs and expenses incurred for the property. You must not include expenses paid by your tenants such as council tax bill, gas, electricity and water etc.

If you claim the 10% wear and tear allowance, then you cannot claim the cost of repairing or replacing the furniture and fitting for that property such as missing cutlery or broken cupboard door.

If you rent your a residential property from a landlord and then sublet it to another tenants, you cannot claim wear and tear allowance if you did not furnish the property for the tenants.

Seek accountants advice if you are not familiar with the income tax rules for property lettings business.

Partnership tax

Partnership tax

A partnership is an organization with more than one person jointly running a business. Partnership is a very popular form of business structure for many professionals, solicitors, barristers, legal advisers, consultants, accountants, architects and engineers in the United Kingdom.

Partnership tax

Each partner is taxed individually just like as if he/she is a sole trader. In other words, partners are taxed as if they were running their own self employed business. Under the partnership tax rules, each partner is responsible for his or her own tax bill. Partners must include share of partnership profits or losses in their self assessment tax calculation and tax return.

In addition to income taxes, partners must also pay class 2 and class 4 national insurance contributions to HM Revenue and Customs.

Salaried partners are normally taxed under the employee scheme called Pay As You Earn (PAYE) scheme and are not required to submit self assessment tax return if they have no other income except their salaries.

It is the partnership responsibility to deduct the salaried partners’ income taxes and national insurance contributions and pay its over to HM Revenue and Customs.

Difference between ordinary partnership and Limited Liability Partnership

Limited Liability Partnership (LLP) is a legal body corporate by its own just like a limited company. The main benefit of trading as LLP are that partners are not personally liable for their business debt provided they are not negligent. Partners’ personal liability are limited to the amounts of capital contributed to the LLP. Partners’ personal assets are safe if the business fails in this respect. This is contrary to normal partnership rules.

There are formal compliance requirement in registering a limited liability partnership. You must submit your LLP incorporation application with Companies House.

Generally your LLP is governed by the Limited Liability Partnership Act 2000. Normal partnership is not governed by the LLP law.

For income tax purposes, partners in your LLP will be taxed as if they are in an ordinary partnership.

Late filing penalty for limited liability partnership

Late filing penalty for limited liability partnership

Late filing penalty for Limited Liability Partnership if deliver your partnership accounts late to Companies House even if your account just late by one day.

This late filing penalty is also applied to limited liability partnership that is dormant since it’s incorporation. In other words, dormant limited liability partnership must also file dormant accounts.

Your partnership must pay the late filing penalty to Companies House.

Deliver accounts lateLate filing penalty apply
Less than 1 month £150
Less than 3 months £375
Less than 6 months £750
More than 6 months £1500

See accountants advice if you are not familiar with Companies House filings for your limited liability partnership.

What is confirmation statement

What is confirmation statement

Confirmation statement replaces the annual return filing.

Limited company registered with Companies House are legally required to deliver Confirmation Statement with the Registrar of Companies at least once every 12 months.

Confirmation Statement is a snapshot of general information about your company director, secretary, registered office address, shareholders and share capital and so on.

Confirmation Statement is a separate document to that of your company accounts.

You may submit your Confirmation Statement using the Companies House web filing service or by submitting paper form CS01. There is statutory filing fee payable to Companies House.

Information is require for filing your Confirmation Statement

  • Your limited company name
  • Your Company number. This is the number given by Companies House and can be found in your certificate of incorporation.
  • The date to which your confirmation statement is made up, often this is referred to as the made up date. The made up date is usually the anniversary of the incorporation of your company or the date of previous confirmation statement submitted with Companies House.
  • Your company’s business activity. choose the SIC code closely describe your company business activity.
  • Type of your company whether it is a private limited company or public limited company.
  • Your company’s Registered office address. This address must be kept up to date at all times as all legal notices and statutory mails from Companies House and HM Revenue and Customs will be sent there.
  • The address where you keep your company statutory books if it is not kept at your company registered office. You must provide SAIL (Single Alternate Inspection Location) address.
  • Details of person directors and corporate directors.
  • State whether the shares of your company has been traded in the regulated market.
  • A statement of capital
  • Details of shareholders.
Pass resolution at general meeting

Pass resolution at general meeting

Voting at Annual General Meeting

Pass resolution resolution in a general meeting is by a show of hands unless the shareholders call for a poll. A poll is a vote based on the number of shares held by people rather than on a show of hands. A declaration by the chairman that the resolution is carried on a show of hands is all that is required for a resolution to be passed, but this does not apply if the shareholders call for a poll. You do not have to count the number of votes for or against on a show of hands.

Notice of annual general meetings

A private company must give a minimum notice of 14 days of a general meeting. A public company must give a minimum of 21 days notice of its Annual General Meeing unless the company’s articles specify a longer period of notice. A company may call a general meeting at shorter notice, with a majority of 90% of the voting rights in the case of a private company and 95% in the case of a public company. This does not apply to Annual General Meetings of a public limited company, where all members must agree. Notices for public limited company’ Annual General Meeting must state that the meeting is an AGM.

Companies may give notice of a meeting:

  • by electronic form
  • in hard copy form
  • by means of a website or
  • a combination of any of the above.

The notice must state the time, date and location of the meeting and any resolutions to be agreed.

You can find further information on resolutions and meetings in the Companies Act 2006.

Records of resolutions and meetings

Your company must keep minutes of all proceedings at general meetings and copies of all resolutions of shareholders passed other than at general meetings for 10 years and make them available for inspection by shareholders on request.

Many companies use the standard company registers to keep their resolutions and annual general meeting minutes. The company registers are organized into sections and very easy to use.

Accounting reference date

Accounting reference date

Accounting reference date (ARD) is technical your company account year end date. Companies House set your ARD when you first incorporated your company.

Your company must prepare your accounts as at the accounting reference date set by Companies House. Your company may shorten or extend your accounting reference date. You must apply to Companies House by submitting the Companies House form AA01 and specify your preferred company account year end date.

Companies House will review your application and if approve, they will inform you and publish your company account year end date on their website.

Your company account filing deadline will be nine months from your new accounting reference date. If your new accounting reference date is 31 December 2019, your new accounts filing deadline will be 30 September the following year, 2020.

If your company changed your company account year end date within 12 months of incorporation, your first company account filing due date remained unchanged. Companies House will reset your new ARD filing deadline after your company account is filed.

If your company is a public limited company, your company account filing due date is six months from your new accounting reference date.

Companies House will not accept your application to change your accounting reference date if your company’s accounts already overdue.