In Derrida Holdings Limited v HMRC [2023] TC08905, the First Tier Tribunal (FTT) found that a company that was charged ATED late filing penalties did not in fact need to submit an ATED return. As a return was not required, the penalties charged were cancelled.

  • Derrida Holdings Limited (Derrida), a Property investment company, purchased a derelict pub for £265,000 in January 2017.
    • Refurbishment costs amounted to £191,200 and letting as a house of multiple occupancy commenced in August 2019.
  • In January 2021, one of Derrida’s directors became aware of the Annual Tax on Enveloped Dwellings (ATED) and raised it with the company's accountant.
  • The accountant was not aware of ATED and advised the company to submit an ATED return even if the value of the property was less than the £500,000 ATED threshold.
  • An ATED return for the year ending 31 March 2021 was submitted on 31 January 2021.
    • The statutory filing deadline was 30 April 2020, meaning the return was submitted nine months late.
  • In March 2021, Derrida informed HMRC that it had no properties exceeding the ATED threshold.
  • HMRC charged Late filing penalties totalling £1,300. These were upheld by HMRC following a Statutory review.
  • Derrida Appealed to the First Tier Tribunal (FTT).

The FTT found that:

  • It was necessary to establish the value of the property as of 1 April 2017, being the relevant ATED revaluation date.
  • The purchase price in January 2017 (£265,000) was broadly equivalent to the 1 April 2017 value.
    • The April 2017 value was certainly not above the £500,000 ATED threshold and was unlikely to have been very different from the purchase price.
  • Although an ATED return was submitted, Derrida was not within the ATED charge simply by virtue of submitting that return.
    • There was no requirement for the ATED return submitted, as the property's value on the relevant valuation date was below £500,000. 
    • This was a simple error that was swiftly rectified when HMRC were informed of it in March 2021.
    • It followed that there should be no penalties.

The appeal was allowed.


The FTT went on to consider whether Derrida had a Reasonable excuse.

The tribunal found that the directors and their accountants knew nothing about ATED. They did not realise penalties would be triggered by submitting a return and simply wanted to comply with what was wrongly perceived as being a requirement.

Since no return was necessary, the FTT concluded that “in these very unusual circumstances the appellant has established a reasonable excuse”.

Useful guides on this topic

Annual Tax on Enveloped Dwellings (ATED)
What is the Annual Tax on Enveloped Dwellings (ATED)? Who does ATED apply to? What relief is available and how is it claimed? What are the ATED return filing dates?

Penalties: Annual Tax on Enveloped Dwellings (ATED)
What penalties apply to the Annual Tax on Enveloped Dwellings (ATED) regime? When can they be charged?

Statutory Review (by HMRC)
What is a Statutory Review? When does HMRC offer a Statutory Review? Is it automatic? What happens in a Statutory Review? Can you challenge a Statutory Review's findings? Can you influence a Statutory Review? When does HMRC offer a Statutory Review?

Grounds for Appeal: Reasonable excuse
What is considered to be a 'reasonable excuse' when a taxpayer makes an appeal against a tax compliance failure?

External link

Derrida Holdings Limited v HMRC [2023] TC08905

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