30th June 2016Annual Tax on Enveloped Dwellings (ATED) on £500,000+ Properties

From 1 April 2016 the scope of ATED widened significantly. Every company or corporate entity owning UK residential properties worth over £500,000 must now file an ATED tax return and either pay the appropriate ATED charge or claim the appropriate relief.

ATED was originally introduced to discourage ‘enveloping’ high-value residential properties within special purpose vehicles (SPVs), enabling an onward sale of the property via a sale of shares in the SPV, such that no stamp duty land tax is payable by the purchaser.

ATED Charge

The ATED tax liability depends on which banding the property falls into:

Property value at 1 April 2012 or acquisition ATED Charge
More than £500,000 but not more than £1m £3,500
More than £1m but not more than £2m £7,000
More than £2m but not more than £5m £23,350
More than £5m but not more than £10m £54,450
More than £10m but not more than £20m £109,050
More than 20m £218,200

* The value of the property as of 1 April 2012, or its value when it was acquired, built or converted if later.

ATED Reliefs and Exemptions

There are a number of reliefs available that can eliminate or reduce the ATED charge but these are not automatically given. An ATED return must be filed to claim the appropriate relief – the relief is not automatic.

You may be able to claim the following reliefs:

  • Companies which carry on a genuine property business and let the properties to third parties on commercial terms. The property must not at any time be occupied (or be available for occupation) by anyone connected with the beneficial owner.
  • Where a property (or land) is acquired as part of a property development business such that the property (or land) was purchased with the intention to re-develop and sell it on.
  • Properties which are open to the public for at least 28 days per annum.
  • Properties which are part of a property trading business.
  • Property acquired for the use by certain employees and partners.
  • A farmhouse, if it is occupied by a qualifying farm worker who farms the associated farmland, a former long-serving farm worker.
  • A property repossessed by a financial institution in the course of its business of lending money.
  • A property owned by a registered provider of social housing.
  • There are also a number of other exemptions from ATED notably charitable companies using the dwelling for charitable purposes, certain public bodies and certain bodies established for national purposes.

ATED Returns and Assessments

An ATED return (with payment where applicable) must be submitted by 30 April for every company or corporate entity that owns residential property with a value over £500,000 irrespective of the use of the property on 1 April.

Additionally, where a residential property that is within the scope of ATED is acquired during the year, an ATED return must be filed within 30 days of acquiring the property.

Failure to submit an ATED return will result in late filing penalties even if no tax is payable due to a relief. Failure to pay tax promptly will also result in late payment penalties.

Relief can only be claimed by completing an ATED return and submitting this to HMRC.

Further advice

HW Fisher & Company is one of the UK’s leading property tax specialists with clients including buy-to-let landlords, property investors, developers, housing associations and related businesses such as chartered surveyors, architects, consulting engineers and estate agents.

For further information or advice on ATED, please contact:

Toby Ryland, Corporate Tax Partner
T 020 7388 7000
E tryland@hwfisher.co.uk

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