Annual Tax on Enveloped Dwellings

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There is a possibility that some companies may have missed their obligation to submit an ATED return. A return is required even if there is no ATED charge due to a relief and all reliefs must be claimed because they are not automatic. Standard filing deadlines were 31 October 2013 for 2013/14 and 30 April 2014 for 2014/15.

What is ATED?

ATED is a tax payable by companies that own high value residential property (‘dwellings’) that are physically located in the UK. A dwelling may be all or part of a residential or mixed-use property and includes properties ‘capable of being a dwelling’.

Who does it apply to?

Companies need to complete an ATED Tax Return for their property if all of the following apply:

  • It is a dwelling
  • It is situated in the UK
  • It was valued at more than £2 million on 1 April 2012, or at acquisition if later
  • It is owned, completely or partly, by either a company, a partnership where one of the partners is a company, or a ‘collective investment vehicle’. For example, this may be a unit trust or an open ended investment company

ATED does not apply to commercial property.

The value for properties is as follows:

  • From 1 April 2015 a new band will come into effect for properties with a value greater than £1 million but not more than £2 million
  • From 1 April 2016 a further band will come into effect for properties with a value greater than £500,000 but not more than £1 million

Further Information:

If a dwelling falls within the scope of ATED, regardless of any reliefs that may apply, a return will need to be completed and sent to HM Revenues & Customs (HMRC).

All completed returns and payments must be sent by 30 April at the beginning of each ATED period; which lasts for one year and begins on 1 April.  It is possible that some may be late for filing.

If a dwelling first falls within ATED on a date after 1 April within an ATED period, then the return and payment are due within 30 days of purchase, or 90 days if the dwelling is newly built. For example, if a property is bought on 1 July, the return and payment would be due on 31 July.

Late sending or failure to complete and send HMRC a return or payment may result in a penalty and interest.

Reliefs

There are reliefs that may mean ATED does not need to be paid. These can be claimed by completing and sending an ATED return.

A dwelling may get relief from ATED if it is:

  • 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
  • open to the public for at least 28 days a year. If part of a property is occupied as a dwelling in connection with running the property as a commercial business open to the public, the whole property is treated as one dwelling and any relief will apply to the whole property
  • part of a property trading business and is not at any time occupied (or available for occupation) by anyone connected with the owner
  • part of a property developer’s trade where the dwelling is acquired as part of a property development business, or the property was purchased with the intention to re-develop and sell it on and is not at any time occupied (or available for occupation) by anyone connected with the owner
  • for the use of employees of the company, for the company’s commercial business and the employee does not have an interest (directly or indirectly) in the company of more than 10%. The employee’s duties must not include services for any present or future occupation of the property by someone connected with the company. The relief is also available where a partner in a partnership does not have an interest of more than 10% in the partnership
  • a farmhouse occupied by a qualifying farm worker who farms the associated farmland, a former long-serving farm worker, or their surviving spouse or civil partner
  • a dwelling acquired by a financial institution in the course of lending
  • owned by a provider of social housing

Chargeable amounts for period 1 April 2014 to 31 March 2015

Property value Annual chargeable amount 2014 to 2015
More than £2 million but not more than £5 million £15,400
More than £5 million but not more than £10 million £35,900
More than £10 million but not more than £20 million £71,850
More than £20 million £143,750

From 1 April 2015 a new band will come into effect for properties with a value greater than £1 million but not more than £2 million with an annual charge of £7,000. For those who fall into this new threshold there will be a transitional rule where returns will be due by 1 October 2015 and payment by 31 October 2015.

From 1 April 2016 a further band will come into effect for properties with a value greater than £500,000 but not more than £1 million, with an annual charge of £3,500. For future years these charges will be indexed in line with the previous September’s consumer price index.

What to do now

A return will need to be submitted to HMRC for any properties that may be subject to ATED, including any that may be eligible for relief. To find out how to make sure your ATED return is up to date, or for help with any area of business tax, please contact one of our specialists.