Does your Company own Residential Property?

If so see what action you should be taking now.

What is the Annual Tax on Enveloped Dwellings (ATED)?

ATED is an annual tax payable on residential properties which are owned, typically, by a company. This tax charge was first introduced on 1 April 2013 with the intention of making it less attractive to hold high-value UK residential property indirectly for example through a company or other structure that involves non natural persons (such as partnerships with a corporate partner).

At the outset ATED only applied to properties worth £2 million or more but over time this threshold was reduced to bring properties valued at £500,000 or more into the ATED regime.

What has changed?

The legislation includes fixed revaluation dates which apply to all properties owned by companies. The revaluation date is fixed as every five years from 1 April 2012. This means that the most recent revaluation date was 1 April 2022. The value of a residential property on 1 April 2022 will be used for any ATED submission required in April 2023. This return covers the period 1 April 2023 to 31 March 2024 and is due for submission by 30 April 2023.

What does this mean for my company?

The revaluation date may bring property previously unaffected by the ATED legislation into the ATED regime. It could also result in properties moving into a higher ATED charge category. This is because of the significant increase in the value of residential property since the date of the last revaluation on 1 April 2017. For example:

  • Where the residential property was bought for, or valued at, less than £500,000, but at 1 April 2022 was valued at more than £500,000; or
  • Where the residential property is now subject to a different ATED charge because of an increase in value

The ATED charge is based on the property value.  The charge, which is subject to annual increase set by the government, is currently:

Is my company eligible for any reliefs against an ATED charge?

Relief is available in some circumstances but must be claimed to prevent an ATED charge becoming payable to HMRC. The reliefs available are:

  • Residential property being redeveloped or held as stock for resale by a property developer;
  • Residential property held by a property rental business and let out to a third party on a commercial basis; and
  • Farmhouses occupied by working farmers.

What happens if I fail to submit an ATED return?

Where relief from the ATED charge is available, an ATED return must still be submitted by 30 April each year. The next ATED returns are due by 30 April 2023.

The submission deadlines for an ATED return are:

  • Within 30 days of purchase of a new property;
  • Within 90 days of a new build property; and
  • By 30 April (after the start of the tax year).

The late filing penalties, including in the circumstances where relief from the ATED charge applies, are:

  • £100 for missing the submission deadline;
  • Daily penalty of £10, up to 90 days (maximum £900), where the submission is three months late;
  • Where the return is six months late, the greater of £300 or 5% of the tax due; or
  • Where the return is twelve months late, the greater of £300 or 5% of the tax due.

What do I need to do now?

If your company owns a residential property, and the value of that property is close to or above the value of £500,000, you need to revalue the property as at 1 April 2022. Be aware of the significant increase in the values of residential property and obtain an up-to-date property valuation if you think there is any possibility your property may be valued at £500,000 or more.

Whilst you can self-assess the value of your residential property, we recommend obtaining a professional valuation as you are required to take reasonable care in establishing an accurate value.  If you choose to self-assess, we recommend you retain evidence of how you have established the value and, at the very least, use the Nationwide House Price Calculator (or similar) which you can access here.

If you think you are affected, please speak to your usual contact at M+A Partners or contact one of our tax team who will be pleased to help you on this difficult area of tax law.

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