Annual Tax on Enveloped Dwellings (ATED)

Do you have an Annual Tax on Enveloped Dwellings (ATED) return to submit by 30 April 2022 for the period 1 April 2022 to 31 March 2023? 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 on 1 April 2017 or purchased after 1 April 2017 for more than £500,000.

The annual tax charge will vary depending upon the property value, starting from £3,800 for 2022/23 for a property worth between £500,000 and £1m, rising to £244,750 for a property worth more than £20m

There are a number of exemptions and reliefs which may be claimed on the ATED return to reduce the annual tax charge to nil. Relief may be available for property rental businesses and property developers.

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 2022 to 31 March 2023, the deadline for filing the return and making the tax payment to HM Revenue & Customs is 30 April 2022). 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.

A new valuation at 1 April 2022 will be required for the next five chargeable periods starting from 2023/24. With rising house prices, it is likely that many properties outside of the ATED regime will be brought within the scope of the charge. It is important, therefore, that companies obtain an open market value for their existing residential properties at 1 April 2022. For any properties acquired after 1 April 2022, the ATED valuation will be based on the actual cost at the acquisition date until the next revaluation date (1 April 2027).

Stamp Duty Land Tax and ATED

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.

If you are a client and would like to discuss this further, or If you do not have your own accountant and would like advice on this matter, then please contact