Annual Tax on Enveloped Dwellings (ATED) – Deadline Approaching

7th February 2020 Tax Ian Orgill

Annual Tax on Enveloped Dwellings (ATED) was introduced on 1 April 2013 and whilst it has been with us for several years now there remain a lot of people who are still not aware that ATED has mandatory filing requirements.

Ian Orgill, Director at CHW Accountants in Bolton explains what the tax is, what you need to pay and what the filing requirements are.

ATED is an annual tax payable mainly by companies which owned UK residential property valued at in excess of £500,000 at the start of the tax year.

The ATED charge is calculated based on a banding system depending on the value of the property and ATED returns must be submitted in April each year for the fiscal year in advance.

So, for 2020/2021, ATED returns and any ATED due must be submitted and paid over to HMRC by 30 April 2020.

The amount of ATED due if the UK residential property is valued between £500k and £1m is £3,650 and if the value is more than £20m the ATED due is in excess of £232k.

How do I value my property?

You can work out the value yourself or you can use a professional valuer. The valuation of the property must be in pounds sterling.

Valuations must be on an open-market willing buyer, willing seller basis and be for a specific amount. The valuation date you need to use depends on when you owned the property.

The valuation dates are:

• an initial valuation date – this is 1 April 2012 for properties owned on or before that date or the date you acquired the property if it’s after 1 April 2012
• a revaluation date – there are fixed revaluation dates for all properties, every 5 years after 1 April 2012, for example at 1 April 2017, 1 April 2022 and so on, regardless of when the property was acquired

The value of the property for any chargeable period is the later of its initial valuation date and the revaluation date.

Acquisitions and disposals

If you acquire a UK dwelling during the year worth more than £500,000 or incur expenditure on a property already owned, which results in its value increasing above £500,000, these properties will also be caught by the ATED rules.

Likewise, if you dispose of a property which was the subject of an ATED charge, you will need to submit an amended return during the year to reclaim part of the ATED charge already paid.

So, the ATED charge must still be paid up front and in full, even if you the property will be sold after 30 April.

Are there any reliefs?

There are several reliefs available that can eliminate or reduce the Annual Tax on Enveloped Dwellings charge.  For example you may be able to claim relief for the property if it is:

• let to a third party on a commercial basis and isn’t, 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
• being developed for resale by a property developer
• owned by a property trader as the stock of the business for the sole purpose of resale
• repossessed by a financial institution because of its business of lending money
• being used by a trading business to provide living accommodation to certain qualifying employees
• a farmhouse occupied by a farm worker or a former long-serving farm worker
• owned by a registered provider of social housing

Are there any exemptions?

There are a number of exemptions from Annual Tax on Enveloped Dwellings:

• charitable companies using the dwelling for charitable purposes
• public bodies
• bodies established for national

If you meet the conditions for an exemption, you don’t need to file a return.

In Summary

All companies owning residential property worth more than £500k must submit either the ATED return or submit a claim for relief unless they are exempt.

This article is only a brief summary of the ATED basics to consider when reviewing your property portfolio ahead of the 30 April 2020 filing deadline. However, the rules can be complicated and for further advice get in touch.

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