Property Tax, ATED and Capital Gains Case Studies
Property taxes overlap, and the expensive mistakes usually happen in the gaps: ATED returns nobody filed, SDLT reclaims that should never be made, and capital gains enquiries built on assumptions. These three real cases show how our Chartered Tax Advisers handled each one.
Two of the three cases below involved telling HMRC it was wrong, with evidence. The third involved telling a client not to make a claim at all. Good advice runs in both directions.
Three years of ATED relief declaration returns filed, and £4,800 of penalties cancelled
The issue. A developer held completed but unsold houses, a show home and a site with an existing house awaiting demolition, all inside a limited company and all worth more than £500,000 each. It had never filed an Annual Tax on Enveloped Dwellings return, because property developer relief reduced the charge to nil and nobody thought a nil charge needed a return. HMRC assessed penalties across three years totalling £4,800, with no tax at stake at all.
What we did. Relief from ATED has to be claimed on a relief declaration return, filed in advance by 30 April each year. One return covers any number of properties in the same relief category, which makes it cheap to do and easy to forget. Because there is never any money to pay, the deadline generates no cash flow prompt and drops off the compliance calendar entirely. We filed the outstanding returns, appealed the penalties on the basis of reasonable excuse and, in the alternative, asked HMRC to exercise its discretion given the nil liability and the client’s otherwise clean record. We then set up a standing April reminder linked to the company’s stock listing.
The outcome. Penalties of £4,800 cancelled and the filing position brought up to date. We also flagged that the next valuation date is 1 April 2027, which will push several properties into higher bands from 2028/29.
We told a client not to make the SDLT reclaim
The issue. A client bought a run down house for £850,000, paid SDLT at residential rates including the 5% additional dwellings surcharge, and was then approached by a reclaim firm offering to recover £43,000 on the basis that the property was uninhabitable and should have been taxed at non residential rates. The fee was contingent, so it looked like a free bet.
What we did. It is not a free bet, because the client signs the amended return and carries the risk. The Court of Appeal decision in Mudan, handed down on 27 June 2025, settled that disrepair capable of being cured does not stop a property being suitable for use as a dwelling. Rewiring, replumbing, a new kitchen, damp and no heating are not enough. The narrow line illustrated by the First-tier Tribunal in Bewley survives only where the property is fundamentally unsuitable, for example asbestos that cannot be safely remediated or a real risk of structural collapse. We read the surveyor’s report, found nothing beyond curable disrepair, and advised against the claim.
The outcome. No claim was made. Had it gone in, we would expect HMRC to have recovered the £43,000, with interest and a penalty, and the reclaim firm would have been long gone.
HMRC enquiry closed with no CGT due on a property disposal
The issue. A client sold a property and HMRC opened a Capital Gains Tax enquiry based on an assumed gain, with a potential CGT exposure of almost £140,000. HMRC were also proceeding on the basis that a 60-day UK property return should have been filed.
What we did. We reviewed the full ownership and occupation history in detail. While the client had not occupied the property for the entire ownership period, part of the period qualified for Private Residence Relief, and the periods of non-occupation were covered by the deemed occupation rules. We sent HMRC a concise, technically precise response explaining that full main residence relief applied, and that, as no CGT was due, no 60-day reporting obligation arose either.
The outcome. HMRC closed the enquiry without requesting any further evidence. The client avoided a substantial CGT charge and unnecessary reporting, and saw first-hand how strong technical analysis, presented clearly, carries real weight with HMRC. This is exactly where our inside knowledge of how HMRC builds and tests a case makes the difference.
Could we do the same for you?
Every case above started the same way: a business owner asking us to look again at something another adviser had treated as settled. Merit is dual qualified. We are Chartered Accountants and Chartered Tax Advisers, our founder worked inside HMRC, and our partners have built businesses of their own. In most cases the tax we save exceeds the fee we charge.
Related services: Capital gains tax reporting · ATED returns · Tax advisory services.