Annual Tax on Enveloped Dwellings (“ATED”)

Key Points

  • Revaluations of property are required based on Market Value on 1 April 2022
  • Properties within ATED require reports to be filed before 30 April 2023
  • Failure to comply with the revaluation requirements could result in penalties and interest.

What is ATED?

ATED has been with us since 1 April 2013 and was introduced to deter the “enveloping” of high-value residential property in corporate structures.

If a property is within ATED, then an annual return needs to be filed each year along with payment by 30 April if the property was held on 1 April, for the 12 months to the following 31 March. If a property is acquired after 1 April then a return to the following 31 March needs to be filed within 30 days of the acquisition. New builds have 90 days to file a return from the earlier of:

  • date of first occupation, or
  • date first becoming a dwelling for Council Tax purposes.

If a property is disposed of, the return filed for the period can be amended.

From 1 April 2018 all ATED returns must be made online using HMRC’s ATED online service.

ATED imposes an annual charge based upon the value of the property held where:

  • a company, a partnership with a corporate partner, or a collective investment scheme (collectively referred to as non-natural persons)
  • hold an interest in a “UK dwelling,” and
  • That interest is valued at over £500,000.

A property will be a dwelling if all or part of it is used, or could be used, as a residence.

Property Valuation

The value of a property for ATED purposes is measured on the later of:

  • the valuation date, and
  • the date of acquisition.

The valuation date is set by legislation, with fixed revaluation dates for all properties every five years, regardless of the date the property was acquired. The initial valuation date was 1 April 2012, and there is a statutory requirement for the property to be revalued at each fifth anniversary thereafter, i.e., April 1 April 2017, 1 April 2022 etc.

For any properties within the ATED regime, updated valuations should be established now in advance of the next annual return cycle. The only exception to this is if you expect full relief to apply for the whole of the next period, as the RDR does not require a valuation.

If relief is not going to be available in full, the market value of the property as of April 2022 needs to be ascertained. The most prudent approach to obtaining a valuation will be to engage the services of a RICS Chartered Surveyor. With less than a month before the new ATED reporting period begins, action should be taken immediately to obtain any necessary valuations.

Exclusions

The ATED technical guidance can be found on HMRC’s website here, and it details certain properties that are excluded from the definition of a dwelling for these purposes:

  • residential accommodation for school pupils
  • residential accommodation for students, including halls of residence for students in further or higher education
  • residential accommodation for members of the armed forces
  • an institution that is the sole or main residence of at least 90% of its residents
  • a home or institution providing residential accommodation for children
  • a home or institution providing residential accommodation with personal care for persons in need of personal care by reason of old age, disablement, past or present dependence on alcohol or drugs, or past or present mental disorder
  • a hospital or hospice
  • a prison or similar establishment
  • a hotel or similar establishment

Charities and certain public bodies are exempt from ATED subject to detailed provisions that can be found in sections 42 and 43 of the guidance.

Reliefs

In addition to these exemptions, there are a number of reliefs, detailed in sections 31 to 41 of the guidance, where the ATED charge can be reduced to nil, although it should be noted a return still needs to be submitted to claim the relief.

Relief may be claimed for:

  • Property Rental Businesses, including preparation for sale etc.
  • Dwellings opened to the public.
  • Property developers, including the exchange of dwellings.
  • Property traders.
  • Financial institutions acquiring dwellings in the course of lending.
  • Occupation by certain employees or partners.
  • Providers of social housing.

As above, in order to claim a relief for a period a Relief Declaration Return (“RDR”) needs to be completed and submitted online.

ATED Rates

The rates of ATED are increased each year in broadly in line with inflation, the current rates are as follows:

Chargeable amounts for 1 April 2023 to 31 March 2024

Property value                                                            Annual charge

More than £500,000 up to £1 million                    £4,150

More than £1 million up to £2 million                   £8,450

More than £2 million up to £5 million                   £28,650

More than £5 million up to £10 million                 £67,050

More than £10 million up to £20 million               £134,550

More than £20 million                                              £269,450

Failure to comply with the ATED regulations may result in late payment interest and penalties.

If you require any assistance with this or any other matter, please do not hesitate to get in touch.

Ryan Ward

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