ATED – Annual Tax on Enveloped Dwellings
Up until 1 April 2016 ATED was only applicable to high value (£1m+) residential properties “enveloped” into a structure where it was held by a company, a partnership with a company member or a collective investment scheme. The valuation threshold for properties subject to ATED is now £500,000. The valuation date of properties subject to ATED has been updated from 1st April 2012, or acquisition date if later, to 1st April 2017, or acquisition date if later. This has brought a large numbers of properties, previously below the threshold, in to the scope of this annual tax. Companies letting residential properties to connected persons will be caught by this tax because they will not be able to claim the appropriate reliefs.
The ATED is calculated using a banding system. The annual chargeable amount for 2018-19 has also risen to £3,600 (up from £3,500) for dwellings ranging from £500,001 to £1m.
ATED is an annual tax, payable mainly by companies or partnerships having a corporate partner, that own UK residential property, and payment and returns need to be made by 30 April of each chargeable period (1 April – 31 March) . There are a number of exemptions and reliefs which do apply.
You may be able to claim relief for the following:
- Dwellings being redeveloped or held as stock for resale by a property developer.
- Dwellings held by property rental businesses where the building is let out to a third party on a commercial basis
- Dwellings that are open to the public for at least 28 days a year or used to provide accommodation or other services to the general public on a commercial basis
- Farmhouses occupied by working farmers
- Dwellings held by trading companies for the use of employees in the trade
- Dwellings owned by providers of social housing
- Dwellings acquired by financial institutions in the course of lending
- Dwellings held by property rental businesses for occupation by employees
- Dwellings held by property management companies for occupation by a caretaker
- Dwellings held by a “regular home reversion plan provider” e.g. an equity release scheme
It is important to remember that if a relief needs to be claimed to reduce your ATED changes to nil, you must still submit an ATED return declaring which relief you are claiming.
- Exempt bodies (charities, public bodies and bodies established for national purposes) are not required to make a return.
- Properties need to be a single dwelling to be liable to this charge (hotels, guest houses, boarding school accommodation, hospitals, student halls of residence, military accommodation, care homes and prisons are not single dwellings).
Gains on disposal
A special ATED related Capital Gains Tax will be payable when a property subject to ATED is sold. The amount of CGT payable will depend on the length of time the property has been owned and the length of time the property was subject to ATED.
Returns and payments are due by 31 January following the end of the tax year when the disposal occurred.
Please be aware that the annual tax on enveloped dwellings (ATED) is currently based on property values as at 1st April 2017 but a new valuation is required at 1st April 2022, to be used from 2023. A value can be worked out yourself or you can use a professional valuation. Valuations must be on an open-market willing buyer, willing seller basis. HMRC could challenge valuations if they feel it is not the market value of the property. If the value is within 10% of any band (£500K<£1m / £1<£2M / £2M<£5m / £5m <£10m / £10m <£20m / over £20m) you can request to have a pre-return banding check done by HMRC who will confirm whether your valuation is acceptable.
ATED can be a complex area. If you think ATED applies to you and you would like further assistance in preparing and submitting your returns, please let us know. We will need to get an “authority” in place for us to be able to complete the returns on your behalf using HMRC’s new ATED digital service. The new online service can be used for both chargeable returns and relief declaration returns.
It is important to remember that if a relief needs to be claimed to reduce your ATED charge to nil, you must make a claim using a Relief Declaration Return for each separate relief being claimed.
If you have any questions about the ATED, or are unsure as to whether your company has a property liable to the tax, please email firstname.lastname@example.org or call on 01483 755399