Last week, my industry colleague, friend and Buy-to-Let Watch partner-in-crime Ying Tan and I exchanged a series of emails about the annual tax on enveloped dwellings, which went a bit like this:

Ying: What are your thoughts on ATED?

Me: It’s an annual tax designed to ‘capture’ empty buildings mostly held in a limited company that are not let or being made available to let. Specifically, overseas investors camped out in property will pay – in London and expensive dwellings. Have I overlooked something?

Ying: We have clients saying their accountants are telling them the tax is still due if the dwelling is worth £500,000+ and is let and is in a limited company.

Me: Then I suggest they and their accountants read the first paragraph of the exemption section, namely “let to a third party on a commercial basis”. What’s difficult about that?

Ying: Nothing! That’s my point. Some accountants out there are just not helping…

Now, we all make mistakes. But at a time when the sector is going through massive change, it is vital all types of adviser keep up to date with developments that directly affect their landlord clients.

For landlords, this means getting the right tax advice first time.

For accountants with landlord clients, it means correctly understanding the relevant taxes and where they apply.

For BTL brokers, it means having a basic understanding of certain taxes to guide clients towards taking appropriate tax advice.

According to our Limited Company Buy to Let index, 77 per cent of all purchase applications in Q1 were made via a corporate vehicle. Landlords who get the wrong tax advice could go out of business.

The guidance on ATED is useful. The key points for brokers are:

• ATED is payable annually mostly by companies that own UK residential property valued at more than £500,000. Charges are calculated on a banding system and range from £3,500 to £220,350 (on properties worth over £20m).
• However, relief is available to residential landlords operating via a limited company because their property is “let to a third party on a commercial basis and isn’t, at any time, occupied (or available for occupation) by anyone connected with the owner”.
• ATED is payable if the letting business ceases (but not if there is just a tenancy void).
• Relief is also available where a property is “being developed for resale by a property developer”.

David Whittaker is managing director of Mortgages for Business

www.mortgagestrategy.co.uk/