So another World Cup match ends in penalties with the Netherlands suffering the curse of the English in last night’s game against Argentina, and I suppose it was almost inevitable that both teams would play a cat and mouse game after seeing what Joachim Low’s men did to both Brazil’s national team and its national pride the previous night.

And I can’t help thinking that penalties (of the fiscal kind) will be another inevitability for the future given the UK Government’s recent announcements to “Low”er (Sorry, I couldn’t resist that) the threshold for reporting Enveloped Dwellings from £2,000,000 to £500,000.  This is part of the relatively new Annual Tax on Enveloped Dwellings regime (“ATED”)

In outline terms, the ATED rules require that high value residential property held within a corporate (or non-natural person) structure will be subject to a number of measures to combat anti-avoidance.  These range from a higher rate of Stamp Duty Land Tax (SDLT) (15%) to the Annual Tax itself, assessed by reference to the valuation band in which the property sits.

In fact, “assessed” is the wrong word to use here because the ATED tax is actually based on self-assessment.  It is up to the taxpayer, in this case most likely the property owner, to assess their liability and submit a return accordingly.  Now the vast majority of my clients will be eligible for one of the various reliefs on the basis that they are either letting the property or developing it for resale, so does that get them off the hook?

Well, yes and no.  Whilst they’ll have no tax liability they still have an obligation to file the return and that’s where penalties could come into play.  Furthermore, the return appears at first glance to be an annual return but there is in fact an additional obligation to submit an ATED return 30 days after acquiring an eligible property, or 90 days after the creation of a new property.  It’s worth adding at this point that a separate ATED Return must be completed for each individual Enveloped Property.

So back to penalties.  The ATED penalty regime is heavy – a £100 fixed penalty for being late by a day, followed by a £10 per day fine for each of the next 90 days and then a further £300 once 6 months have passed and so on.

But let’s be practical, Enveloped Properties valued at over £2m are not that common and so one could say that at present the non-compliance risk for developers and investors, who let’s face it have a myriad of other things to contend with when acquiring properties or completing developments, is not so great.

However, next year the £2m threshold falls to £1m, and the year after it falls to £500,000.  This gives an exponential increase in the number of ATED returns required, and inevitably an increase in the number of property owners falling foul of their filing obligations

And, just like all World Cup games that end up in penalties, it will seem very unfair to those on the receiving end.