Annual Tax on Enveloped Dwellings (ATED) is an annual tax charge for companies which own UK residential properties valued at more than £500,000.
Companies holding residential property that falls within the ATED charge must ensure the property is revalued as of 1 April 2022, and any tax is paid by 30 April 2022.
ATED: a summary
The charge was first introduced from 1 April 2013 to tackle the avoidance of Stamp Duty Land Tax (SDLT). The charge applies to residential property owned by a ‘non-natural person’, which generally means a company, a partnership with a corporate member, or a collective investment scheme.
When the charge was initially introduced in 2013, it applied to properties with a value in excess of £2million, but the threshold has since been reduced to £500,000, catching many more properties as a result.
Properties are revalued for the purposes of ATED every 5 years, with the next mandatory revaluation date falling on 1 April 2022. As a result of this revaluation, it is likely more residential properties, such as rural properties where prices have risen significantly since the last revaluation date in 2017, will be brought within the scope of ATED or fall within a higher ATED charge band.
The amount of tax payable depends on the rate band that the property falls within, and returns must be submitted online to HMRC between 1 April and 30 April each year if the property is owned on 1 April in that year, or within 30 days of acquisition.
What is a dwelling for ATED purposes?
Broadly, a property is defined as a dwelling if all or part of it is used, or could be used as a residence. This includes a house or flat for example, as well as any gardens, grounds and buildings within the property.
Certain properties are not classed as dwellings, including hotels, guest houses, boarding school accommodation, hospitals, student halls of residence, military accommodation, care homes and prisons.
ATED reliefs and exemptions
In certain circumstances, reliefs are available to reduce the charge payable. Properties which may qualify for relief include those which are:
- being redeveloped or held as stock for resale by a property developer
- part of a letting or property development business
- let out to third parties on a commercial basis
- held by trading companies for the use of certain qualifying employees in the trade
- farmhouses occupied by working farmers
Certain properties are also exempt from ATED and do not have to submit a return or claim a relief, including:
- charitable companies holding a property for charitable purposes
- public bodies
- bodies established for National Purposes
Whether a property falls within the ATED regime is determined by the property’s valuation at a specific valuation date. There are fixed revaluation dates for all properties every 5 years after 1 April 2012.
The value of the property for any chargeable period is therefore the value at the later of:
- its initial valuation date (1 April 2012 or acquisition date if later), and
- the revaluation date
The current revaluation date used is 1 April 2017, with the next revaluation date being 1 April 2022.
This means that companies must now complete an ATED return based on the 2022 value of the property, even where a relief from tax is available for the residential property. ATED has to be declared and paid by 30 April 2022 for the year 1 April 2022 to 31 March 2023 for properties owned at 1 April, or within 30 days of acquisition if acquired after 1 April.
How we can help
As 2022 is a revaluation year, properties that may not have previously fallen within the ATED regime may now do so.
ATED is self-assessed, meaning that if you fail to submit a return on time, late filing penalties will apply, even where no tax is due as a result of an available relief. HMRC will also charge interest on late payment of tax and may impose daily penalties on late submission of the ATED return which can be significant.
If you are the owner of a company that may be affected by the charges, please do not hesitate to get in touch with our tax specialists, who will be able to provide tailored advice to ensure you are complying with the requirements of the regime.
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