Annual Tax on Enveloped Dwellings (ATED) was introduced in 2013 and applies to limited companies that own high-value residential property.
Currently, this applies to any residential property valued at more than £500,000 (although there is currently an exception in respect of dwellings used to house Ukrainian refugees).
Essentially, the tax is aimed at making the ownership of high-value residential property by a limited company less attractive to owners who may be looking to minimise their tax liabilities when they eventually sell that property.
It is an annual tax and the amount payable is dependent on the value of the property. The tax is payable by 30 April each year and is separate from the normal Corporation Tax payment date of 9 months following the year-end.
Returns must be submitted between 1 and 30 April each year and, importantly, if a property is purchased that falls within the ATED regime, a return must be submitted within 30 days of the completion of the conveyance.
The tax also extends to partnerships with corporate partners.
The rules have been updated since the tax was originally introduced, but at the time of writing, the following residential properties are affected if they are owned by a limited company or partnership with a corporate partner.Companies that own ‘dwellings’ on 1 April 2022, that were valued at £500,000 or more on 1 April 2017 (or purchased for more than £500,000 since), must submit an ATED return by the end of April 2022.
Dwellings are defined by HMRC as being property where “all or part of it is used or could be used, as a residence, for example, a house or flat. It includes any gardens, grounds and buildings within them”.
Some properties are not classed as dwellings, including:
- guest houses
- boarding school accommodation
- student halls of residence
- military accommodation
- care homes
Public bodies and charities using a property for charitable purposes are also exempt.
Beyond the general exceptions listed above, some properties that fall outside of those exceptions are also able to claim relief.
If claiming relief then it is likely that you will still need to file an ATED return with HMRC by 30 April and/or a relief declaration.
Generally, any property that is involved in the business of farming (note: this does not include nursery or market gardening businesses) can claim relief.
Other examples of properties that can claim relief include properties that are:
- 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 28 days or more each year
- Stock owned for resale/development
- Owned by a registered provider of social housing
- Used by a trading business to provide accommodation for certain qualifying employees
We recommend getting professional advice before claiming any relief under ATED.
Properties must be revalued every five years and at dates set by HMRC.
1 April 2017 has been the valuation date for properties up to and including the 2022/23 tax year; 1 April 2022 will be the valuation date from 2022/23 through until 2027/28.
Valuations do not have any strict requirements (you don’t need a professional valuation) and a valuation from a surveyor or estate agent is usually sufficient. However, remember that you remain responsible for the accuracy of any valuation and subsequent underpayment of tax and associated penalties and interest.
For the year from 1 April 2022, the following charges apply: