What is an ATED Return?

Annual Tax on Enveloped Dwellings (‘’ATED’’) is an annual tax payable mainly by companies that own UK residential property valued at more than £500,000. It was introduced as part of a package of measures aimed at making it less attractive to hold high-value UK residential property indirectly, in order to avoid or minimise taxes such as Stamp Duty Land Tax (“SDLT”) on a subsequent disposal of the property.

Do I Need to File One?

An ATED return is required if your company, partnership, or Collective Investment Scheme (‘’CIS’’) owns a dwelling in the UK that is valued at more than £500,000.

What’s Classed as a Dwelling?

Your property is a dwelling if all or part of it is used, or could be used, as a residence, for example, houses, flats, apartments, or annexes. It includes any gardens or grounds and buildings within them.The following properties are excluded from ATED and not classed as dwellings;

  • Hotels
  • Guesthouses
  • Boarding school accommodation
  • Student halls of residence
  • Care homes

How Much do I Need to Pay?

The taxable value of a dwelling for ATED purposes is its market value. Once you’ve completed your valuation you can apply it to the table of ATED rates below.

Property value Annual charge

01/04/20 – 31/03/21
More than £500,000 up to £1 million £3,700
More than £1 million up to £2 million £7,500
More than £2 million up to £5 million £25,200
More than £5 million up to £10 million £58,850
More than £10 million up to £20 million £118,050
More than £20 million £236,250

 

Amounts are payable by 30 April in advance of the following chargeable period. So for chargeable periods in the year ending 31 March 2021, ATED returns must be submitted by 30 April 2020.  

How Do I Complete the Valuation?

The charge is based on the market value of your property. The valuation can be made by either yourself or a professional valuer. The valuation must be done on an open market and willing buyer/willing seller basis.

HMRC has fixed windows for revaluation every 5 years, the initial 2012 was surpassed by 2017, with the next one being 2022. Effectively, if you’re basing your property on a valuation completed pre-April 2017, you’ll need to get a new valuation completed.

For these purposes, the value of a property is measured on the later of:

  • The valuation date; and
  • The date of acquisition.

Are There Any Reliefs Available?

There are reliefs available to reduce chargeable amounts to nil. Some examples of reliefs that are available are where 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;
  • 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;
  • 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;
  • Open to the public for at least 28 days a year; or
  • Owned by a registered provider of social housing.

However, even when the property is eligible for one of the above reliefs and no tax is payable, a “Relief Declaration Return” must still be submitted by 30 April each year.

Exemptions 

The legislation provides specific examples of persons that do not fall within the ATED charge and are therefore exempt. These include charitable companies, public bodies, and specified heritage bodies.

Penalties and Interest

Penalties and interest could be charged if you do not file your return or make your payment on time.  Penalties could also be charged if an inaccurate return is submitted.  

How Can We Help?

This is a complex area of taxation and we would recommend seeking assistance prior to submitting ATED returns and making payments. If you are affected by ATED or require tax advice, feel free to contact our offices on 0161 399 0121 / 0151 303 3112 or by email at info@williamsoncroft.co.uk