Annual Tax Enveloped Dwelling (ATED)

At a glance

The Annual Tax on Enveloped Dwellings (ATED) is an annual charge on UK residential properties which are valued at £500,000 or more and held by a company, a partnership with a corporate partner (also known as mixed partnerships), or Limited Liability Partnerships.  

The rules do not apply to the total value of properties held but apply to each individual property and a separate return is required for each property.

The ATED was introduced on 1 April 2013 and applies to properties with a value of more than £500,000. ATED is self-assessed and you can receive a penalty from HMRC if you fail to submit a return online for any chargeable period.

The ATED charge and its importance

The ATED was introduced to tax the ownership of high-value residential property in vehicles that allow the property to be sold free of stamp duty. Effectively, it makes it less attractive for companies to hold high-value UK residential properties. There are some genuine reasons why a ‘non-natural person’ may own a residential property other than tax avoidance and exemptions do exist.

As an organisation, you must be clear on whether any properties you have an interest in are subject to ATED. It covers freehold and leasehold property, shares or interests in land and the right to receive rent. There can be multiple interests in a single dwelling, such as the leaseholder and freeholder, in which case, each organisation with an interest will need to be clear of its position.

ATED Reliefs

Under certain circumstances relief is available which could result in entities having a reduced or nil ATED charge.  An ATED return will still need to be submitted to HMRC if the charge is reduced to nil, in addition a Relief Declaration Return must also be submitted.

ATED relief can be claimed in the following cases if the property is:

• let to a third party on a commercial basis and isn’t, at any time, occupied (or available for occupation) by anyone connected with the owner;
• open to the public for at least 28 days a year;
• being developed for resale by a property developer;
• owned by a property trader as the stock of the business for the sole purpose of resale;
• repossessed by a financial institution as a result of its business of lending money;
• acquired under a regulated Home Reversion Plan;
• being used by a trading business to provide living accommodation to certain qualifying employees;
• a farmhouse occupied by a farm worker or a former long-serving farm worker, and
  owned by a registered provider of social housing;
• owned by an entity exempt for the purposes of ATED.

ATED Exemptions

There are some cases where properties are exempt from ATED, in which case there is no requirement to submit an ATED return to HMRC.

The main ATED exemptions are:

• charitable companies using the dwelling for charitable purposes;
• public bodies;
• bodies established for national purposes (e.g. the trustees of the British Museum).

Annual charge payment and filing deadline

The ATED year runs from 1 April to 31 March, with any ATED charges payable in advance.  The ATED charge must be paid by 30 April and the return must also be submitted by 30 April.

If a company purchases a property which comes within the scope of ATED after 1 April, the return will need to be submitted within 30 days of acquisition. If the property is a new build, the return will need to be filed within 90 days od becoming a dwelling for Council Tax purposes or of it being first occupied.

For 2024/25 the ATED charge is payable by 30 April 2024 (unless a relief is claimed reducing the charge to nil) and the filing deadline is by 30 April 2024.

The ATED charge will depend on the property valuation on or before 1 April 2022 and can range from £4,400 for property valued between £500,000 to £1m, to £287,500 for property valued at more than £20m.

The property must be revalued every five years, with the latest revaluation date being 1 April 2022 and the next revaluation date being 1 April 2027.

If a property was acquired after 1 April 2022, the valuation is the purchase price, and the first valuation date is the date of acquisition.  A return will still need to be submitted and the next property valuation should be 5 years from the acquisition date.

HMRC can charge interest and penalties for late payment of tax, for not submitting a return or for submitting an incorrect return.

Potential triggers for new valuation dates

The following two events may occur in between the statutory valuation dates of 1 April 2022 and 1 April 2027.  These could prompt a new valuation date:

1. Sale of any substantial part of the dwelling

If a company disposes of part of a property for more than £40,000 this will trigger a new valuation date.  This may result in a lower or higher valuation for ATED purposes and either reduce or increase the ATED charge.

2. A new property acquisition occurs which is linked to the existing ATED property

If a company acquires an interest of more than £40,000 in relation to a property which is already subject to ATED, this will trigger a new valuation date for that property.  A new valuation would be required if, for a leasehold property, more than £40,000 is paid for a lease extension.

If money was spent developing a property this would not trigger a new valuation date.  However, the expenditure could result in the property being put into a higher ATED band when the next 1 April valuation date arises.

If you have any queries or would like to discuss Annual Tax Enveloped Dwelling further, please contact Gursharan Sappal on 01932 830664 or email enquiries@wardwilliams.co.uk.