ATED – Do you need to act before 30 April 2023 to avoid large penalties?

Do you have an Annual Tax on Enveloped Dwellings (ATED) Return to submit by 30 April 2023 for the period 1 April 2023 to 31 March 2024? If you miss the deadline, large penalties may be charged.

If you are a portfolio landlord and carry-out your rental business through a limited company or partnership with a corporate member, or if you are a company or partnership with a corporate member that owns a UK residential property, then you must read the following carefully.

ATED is an annual tax that is charged to a non-natural person (usually a company or a partnership with a company member) that either:

  • owns a UK residential property valued at more than £500,000 on 1 April 2022, or
  • purchased a UK residential property costing more than £500,000 after 1 April 2022

All UK residential properties held by companies and partnerships with a corporate member must revalue each of their properties every 5 years as required by the ATED legislation. The 2023 to 2024 chargeable period is a revaluation year and companies must use the revaluation date of 1 April 2022 to revalue properties purchased before 31 March 2022. With rising property values, it is likely that many properties previously outside of the ATED regime will be brought within the scope of the charge. As advised last year, it is important that companies consider the 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).

The annual tax charge will vary depending upon the property value, starting from £4,150 for 2023/24 for a property worth between £500,000 and £1 million, rising to £269,450 for a property worth more than £20 million. 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 Return is required where a single property is valued at more than £500,000.
  • For existing properties, an annual ATED Return and tax payment are due by 30 April in the chargeable period. The deadline for the return and tax payment for the period 1 April 2023 to 31 March 2024 is, therefore, 30 April 2023. 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. Interest is charged on late paid tax.
  • An ATED Return and tax payment may also be due within 30 days of the acquisition of a high value residential property. 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 return is due even where an exemption applies which reduces to the tax charge to nil.

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