fbpx

Previously called Annual Residential Property Tax, the Annual Tax on Enveloped Dwellings (ATED) is a tax payable by companies that own a high value residential property (a ‘dwelling’). The first ATED return is due to be submitted by 1 October 2013 and any tax due must be paid by 31 October 2013.

A property is said to be ‘enveloped’ when the ownership sits within a corporate structure – eg a company, collective investment vehicle or partnerships with a corporate member.

An ATED tax return for a property is due if all of the following apply:

  • it is a dwelling
  • it is situated in the UK
  • it was valued at more than £2m on 1 April 2012, or at acquisition if later
  • it is owned, completely or partly, by a:

    – company

    – partnership where one of the partners is a company

    – ‘collective investment vehicle’: for example, a unit trust or an open ended investment company.

The tax charge is based on property value with the charge being levied according to the band the property falls into. The current bands and tax charges are:

Property Value              Annual charge

£2m to £5m                    £15,000

£5 to £10m                     £35,000

£10m to £20m               £70,000

Over £20m                      £140,000

A number of reliefs are available which can reduce the tax charge to zero. Where a property is valued at an amount close to one of the band thresholds HMRC can be contacted to agree which ATED band the property falls into, or whether it falls outside the tax as it is deemed to be under the £2m threshold. This facility is called a pre-return banding check and is available to owners who are not due another relief that will reduce the ATED charge to nil and where the value of the property falls within 10% of a banding threshold, starting from £1.8m-£2.2m and applying to each band up to £20m with the final check applying to properties in the £18m-£22m bracket.

Once HMRC receives the form, it will send an acknowledgement and a reference number within 30 working days. HMRC will either agree/disagree that the band chosen is appropriate or ask for further information in order to help them make a decision about whether the chosen band is correct.

In some cases, the inside of the building might need to be inspected as part of the check. HMRC will normally be able to accept valuations prepared by a professional property valuer but it reserves the right to enquire into any subsequent ATED returns or challenge valuations included in those returns where they consider there is a risk that the return or valuation is wrong.

More details are available from HMRC.

When relief might apply

A dwelling might get relief from ATED if it is:

  • let to a third party on a commercial basis and it is not, at any time, occupied (or available for occupation) by anyone connected with the owner
  • held for charitable purposes
  • open to the public for at least 28 days per annum
  • the property is part of a property trading business and isn’t, at any time, occupied (or available for occupation) by anyone connected with the owner
  • the property is for the use of employees of the company, for the company’s commercial business and where the employee does not have an interest (directly or indirectly) in the company of more than 5%
  • the property is a farmhouse and is occupied by the farmer who farms the associated farmland full time and the farmhouse is of an appropriate character
  • the property is held as part of a commercial property development provided that it was bought as part of property development business with the intention to re-develop and sell it on and it is not at any time occupied by anyone connected with the owner.

These reliefs could reduce the tax completely but it has to be claimed when the return is submitted.

Article contributed by ACCA