First, we need to establish whether the company is within the scope of ATED, see FA 2013 s.94. Given the residential property is over £500,000 at the later of acquisition and the revaluation period (1st April 2022) and it is owned by a company, they will be in the scope of ATED.
ATED returns are due on a chargeable person regardless of whether they have ATED to pay. This means if a company has a single dwelling over £500,000 and they are looking to claim relief, they are still due to file an ATED return. ATED returns are due within 30 days of the start of the chargeable period, and it is possible to claim interim relief where circumstances change midway through a chargeable period, resulting in less tax.
As for the relief which may be available on the property, FA 2013 s133 states that where a person who is within the scope of ATED for a property, if they let the property, they may be able to claim relief for running a qualifying property rental business. However, no relief will be due if the letting is to a non-qualifying individual.
A non-qualifying individual is outlined in FA 2013 s136 and includes a range of individuals including ‘a relative of a connected person or of a relevant settlor, or the spouse or civil partner of a relative of a connected person or of a relevant settlor’. Where connected person is the same as outlined in CTA 2010 s1122
With this in mind, during the periods where there’s a non-qualifying individual living in the property (son of director in this case) then relief will not be applicable during the period of occupation by this individual.
We also need to consider the look-forward and look-back rules of FA 2013 s135. In the scenario where a qualifying individual had been renting the property, the company may have received relief by virtue of having intention of renting the property (even if no one was actually living in the property). However, because the son is a non-qualifying individual then the company no longer can claim periods prior or following where the company had intention of letting the property. Relief may be eligible the earlier of when there’s a qualifying individual living in the property or within the three subsequent periods.
So essentially, in the scenario we are considering, there was no qualifying individual living in the property before the son, in which case no relief will be available from the start date until the earlier of a day in which a qualifying individual lives in the property or 3 chargeable periods after a non-qualifying individual ceases to live in the property.
The look forward and look back tests are two different tests, so maybe they don’t obtain relief before the non-qualifying individual lived in the property, but they will be able to obtain relief after the non-qualifying individual moves out and a qualifying individual moves in.
For detailed guidance on the ATED rules, see Croner-i Direct Tax In-Depth at 807-800.
