The Annual Tax on Enveloped Dwellings (ATED) is a tax payable by companies that own high value residential property (a ‘dwelling’). It came into effect from 1 April 2013 and will be payable each year.
The deadline for filing the return for any properties owned on 6 April 2013 is 1 October 2013.
You’ll need to complete an ATED Tax Return for your property if all of the following apply:
- it’s a dwelling situated in the UK
- it was valued at more than £2 million on 1 April 2012, or at acquisition if later
- it’s owned, completely or partly, by a company.
There are reliefs available that could reduce the tax completely .
The amount of ATED is worked out using a banding system based on the value of your property.
Annual Tax 2013-14
|£2,000,001 to £5,000,000||£15,000|
|£5,000,001 to £10,000,000||£35,000|
|£10,000,001 to £20,000,000||£70,000|
|£20,000,001 and over||£140,000|
If you only own the dwelling for part of a year, or you change how you use the property so that it moves into or out of ATED, then ATED applies on a proportionate basis.
What is a dwelling
ATED applies to residential properties (‘dwellings’) that are physically located in the UK. A dwelling may be all or part of a residential or mixed-use property. Sometimes a dwelling is part of a larger, mixed-use property that has parts not used for residential purposes. Only the residential part would have ATED payable on it. The residential part will need to be valued to work out which ATED band it falls into.
If a company owns an historic house that’s open to the public or provides access to the dwelling as part of its services (for example, as a wedding venue) with the intention of being open for at least 28 days per annum it may be able to claim a relief that will reduce its ATED charge to nil. The company’s activities in the historic house must be commercial and with a profit-seeking motive, even if that profit doesn’t cover the full costs of the house.
If a company owns a farmhouse that carries on a trade of farming commercially and with a profit seeking motive it may be able to claim a relief that will reduce its ATED charge to nil.
To qualify for this the criteria will include that a ‘farm worker’ must occupy the property.
A valuation at 1 April 2012 will decide which ATED band the property will fall into for five years.
Take note, if HMRC challenge a valuation and find that it’s wrong, the person responsible for paying ATED may have to pay penalties as well as the increased ATED payable, plus interest for late payment.
If you have a valuable property owned in whole or in part by a company you need to review this tax provision now, as the deadline for reporting to HMRC is 1 October 2013.