Annual Tax on Enveloped Dwellings (ATED)

Do you have an Annual Tax on Enveloped Dwellings (ATED) return to submit by 30 April 2021 for the period 1 April 2021 to 31 March 2022? Unlike most taxes, ATED returns are submitted at the start of the year and are required even where there is no tax to pay.

The Annual Tax on Enveloped Dwellings (ATED) is an annual tax charged to a non-natural person (usually a company or a partnership with a company member) that owns a UK residential property valued at more than £500,000.

The annual tax charge will vary depending upon the property value, starting from £3,700 for a property worth between £500,000 and £1m, rising to £236,250 for a property worth more than £20m. These are the rates for 2020/21, and the rates for 2021/22 may be higher and will be announced in the Budget Statement on 3 March 2021. There are a number of exemptions which may be claimed in certain circumstances to reduce the annual tax charge to nil.

As a reminder, the ATED regime applies where a single property is valued at more than £500,000. An ATED return and tax payment is due within 30 days of the acquisition of a high value residential property. For existing properties, an annual ATED return and tax payment are due by 30 April in the tax year (e.g for the period 1 April 2021 to 31 March 2022, the deadline for filing the return and making the tax payment to HM Revenue & Customs is 30 April 2021). Late filing penalties will be charged if the deadline is missed, which start at £100 for initially missing the filing deadline, rising to £1,600 where the return is 12 months late. A return is due even where an exemption applies to reduce to the tax charge to nil. Interest is charged on late paid tax.

If you purchase a property for more than £500,000, please contact us immediately so that we can ensure that you meet your reporting and tax payment obligations.

Alongside the ATED regime, an increased Stamp Duty Land Tax rate of 15% may also apply where a property is purchased by a non-natural person costing £500,000 or more, though an exemption may be claimed to reduce the rates to the usual higher rates that would normally apply. The exemptions that may apply are similar to the exemptions which apply under ATED. ATED and Stamp Duty Land Tax should, therefore, be considered together carefully during the purchase of the property to ensure the correct Stamp Duty Land Tax charge is paid and that you meet your ATED obligations. Some solicitors, however, appear to be overlooking some of the tax and reporting implications of the ATED regime and not warning their clients about these. You should not, therefore, rely on your conveyancing solicitor to consider ATED for you, so please contact us as soon as you start purchasing a property for more than £500,000 in your company or partnership with a company member so that we can discuss this with you.