Demystifying Annual Tax on Enveloped Dwellings (ATED): Your Comprehensive Guide

ATED is a tax that applies to high value residential properties held in certain corporate structures, such as companies. The purpose of ATED is to discourage the use of corporate structures to avoid other property related taxes.

ATED Key Points Explained

1. Applicability. ATED applies to dwellings (typically residential properties) valued over £500,000, that are owned by companies, partnerships with corporate members or collective investment schemes.
2. Valuation bands. The tax is levied based on the value of the property. There are different valuation bands, and the tax rate increases with the value of the property.
3. Annual filing. Businesses subject to ATED are required to file an annual return and pay any tax due. The filing period runs from 1 April to 31 March each year.
4. Reliefs and exemptions. Some reliefs and exemptions may apply, reducing or eliminating the tax liability. As an example, properties used for commercial purposes, rental properties or those open to the public may qualify for relief.
5. Penalties for non-compliance. Failure to file a return or pay the tax on time may result in penalties.

Meaning of “dwelling”

A property is a dwelling if all or part of it is used as a residence, for example a house or flat. It includes any gardens, grounds and buildings within them.

Some types of properties are not classed as dwellings:

1. Hotels
2. Guest houses
3. Boarding school accommodation
4. Hospitals
5. Student halls of residence
6. Military accommodation
7. Care homes
8. Prisons

To work out what you need to pay you will need to value your property using a valuation date. You must revalue your property every 5 years in line with ATED legislation.

The initial valuation date is 1 April 2012 for properties owned on or before that date, or the date you required the property if its after 1 April 2012.

There are fixed revaluation dates for all properties, every 5 years after 1 April 2012, which apply regardless of when the property was acquired.

The value of the property for any chargeable period is therefore the later of:

What you need to pay

Chargeable amounts for 1 April 2023 to 31 March 2024:

When to submit your return:

1. By 30 April if your property is within the scope of ATED on 1 April.
2. Within 30 days of acquisition if your property comes within the scope of ATED after 1 April.
3. For a newly build property, within 90 days of the earliest of either the property becoming a dwelling for council tax purposes or is first occupied. Any ATED tax due would need to be paid by 30 April if your property is within the scope of ATED on 1 April. i.e it is payable annually in advance, so the tax due by 30th April 2024 covers the 24/25 tax year.

There are reliefs which can either reduce the amount of ATED to need to pay, or remove the necessity to pay, if the property:

1. Let to a third party on a commercial basis and is not, at any time, occupied (or available for occupation) by anyone connected with the owner.
2. Open to the public for at least 28 days a year.
3. Being developed for resale by a property developer.
4. Owned by a property trader as the stock of the business for the sole purpose of resale.
5. Repossessed by a financial institution as a result of its business of lending money.
6. Acquired under a regulated home reversion plan.
7. Being used by a trading business to provide living accommodation to certain qualifying employees.
8. A farmhouse occupied by a farm worker or a former long-serving farm worker.
9. Owned by a registered provider of social housing or a qualifying housing co-operative. To claim reliefs, use the ATED online service. If your relief claim reduces your ATED charge to nil, you still need to use the service to submit a relief declaration return. Every year that you have a property that falls within the scope of ATED, even if there are reliefs available to reduce liability to Nil, you still have to file a return.

There are some exemptions which would remove the necessity to file a return as follows:

1. Charitable companies using the dwelling for charitable purposes. To obtain the exemption, the charity must comply with all the conditions listed in section 42 of the HMRC ATED technical guidance.
2. Public bodies listed in section 43 of the HMRC ATED technical guidance.
3. Bodies established for national purposes listed in section 44 of the HMRC ATED technical guidance.

Speak to Annual Tax on Enveloped Dwelling Specialists

Don’t let ATED become a burden – take proactive steps to manage it effectively. Speak to Johnston Wood Roach Accountants on 02392 269977 today to navigate the complexities for you.