Annual Tax on Enveloped Dwellings (ATED)

What is Annual Tax on Enveloped Dwellings [ATED] and who does it apply to?

ATED was first introduced in April 2013 against high-value residential properties (dwellings) situated in the UK, worth more than £2million and beneficially owned by “Non-natural persons” (NNPs) namely, companies, corporate partnerships and certain investment vehicles.

The government’s objective for ATED was to collect annual revenues from these ‘envelopes’ which were predominantly used as tax geared vehicles and therefore with this in mind, individuals, non-corporate partnerships and most trust structures do not fall within the scope of ATED. The tax collection has been administered using a self assessment filing regime placing the responsibility on each chargeable person.

From 1 April 2016 the scope of ATED widened significantly, bringing into charge dwellings which held a value of more than £500,000. The assessment date of a dwelling’s value is ordinarily based as at 1 April 2012 or the date of acquisition if later, and the illustration below demonstrates when a property comes into charge based on its ATED value.

ATED Return Period Required Relevant Market Value  Submission Deadline
1 April 2013 to 31 March 2014 More than £2million 30 April 2013
1 April 2014 to 31 March 2015 More than £2million 30 April 2014
1 April 2015 to 31 March 2016 More than £1 million 1 October 2015
1 April 2016 to 31 March 2017 More than £500,000 30 April 2016
1 April 2017 to 31 March 2018 More than £500,000 30 April 2017

The valuation and return submission dates for dwellings which have been constructed or developed may vary from the dates above depending on the facts of each case. Please note the ordinary self assessment late filing penalty regime applies to all ATED returns, whether or not a liability arises.

What are the tax implications?

An appropriate ATED charge will be levied against a NNP based on a value banding system for each ATED property beneficially owned, assuming the property is not exempt and nor does it qualify for a relief against the ATED charge. Below are examples of the reliefs which exist for your information:

  1. Property rental business made to unconnected third parties on a commercial basis.
  2. Dwellings open to the public for at least 28 days during the period on a commercial basis.
  3. Property being developed for resale.
  4. Property held as stock in the course of a property trading business.
  5. Financial institutions acquiring dwellings in the course of lending.
  6. Dwellings used for trade purposes (i.e. occupation by qualifying employees and partners).
  7. Farmhouses occupied by a farm worker or former long-serving farm worker.

The banded ATED charges are as follows and apply to each ATED property held by a company which is not relievable or exempt. Even if a property is relievable, an annual relief declaration must be submitted to HMRC before the designated deadline in order to avoid late filing penalties.

Property Valuation Annual ATED Charge (2017/18)
More than £500k but no more than £1m £3,500
More than £1m but no more than £2 £7,050
More than £2m but no more than £5m £23,550
More than £5m but no more than £10m £54,950
More than £10m but no more than £20m £110,100
More than £20million £220,350

 

The Consumer Price Index (CPI) will dictate the relevant increase to the annual charges for the 2018/19 ATED year.

What’s the future for ATED?

For the 2017/18 ATED year onwards, HM Revenue & Customs have introduced a mandatory ATED online service which enables both chargeable persons and their tax agents to generate and submit ATED returns to HM Revenue & Customs online, adjustable to their specific filing requirements.

In order to meet the very prompt filing deadlines imposed by ATED it is imperative for your online ATED registration to be completed at your earliest opportunity.

A new valuation date has been introduced as at 1 April 2017 for 2018/19 ATED returns, and will continue to be used for the next 5 ATED periods (i.e. 2018/19 to 2022/23). The ATED valuation assessment will must be reassessed every 5 years from 1 April 2012. Strictly speaking an ATED relief declaration return which incurs no liability to ATED does not require a property valuation to be disclosed, however should the purpose and use of the property cease to be relievable, a chargeable return will be required including this information.

The valuation of the property need not be completed by a professional; however where the property’s value falls within 10% of the next valuation tax band detailed above, we would recommend a professional valuation is strongly considered and used as evidence of your self assessment.