Annual Tax on Enveloped Dwellings – New Valuation Date

What is ATED?

The Annual Tax on Enveloped Dwellings (ATED) is an annual tax payable mainly by companies that own UK residential property valued at more than £500,000. The new valuation date is 1 April 2022 (or the date of purchase if later).

Property Valuation

The value of the property initially used to calculate the ATED charge is the value or purchase price on acquisition. This is superseded by the open market value of the property as at the most recent statutory revaluation date.

ATED legislation states that properties are required to be revalued every five years.

For the 2023-24 tax year and the next four years, the ATED charge will be based on the value of the property on 1 April 2022 (or the date of purchase if later).

ATED returns for the 2023-24 tax year need to be submitted by 30 April 2023.

ATED Charge

The ATED is an annual charge on UK dwellings owned by a ‘Non-Natural Person’ (NNP). NNPs are most commonly companies but also include partnerships which have a corporate partner. The charge does not apply to individuals.

The amount of the charge depends on the value of the property at the applicable valuation date unless a relief is claimed. The charge applies if the property has a taxable value in excess of £500,000. It is payable at the start of each tax year, with payment and ATED returns due by 30 April.

The charges for the year commencing 1 April 2023, based on property value, are as follows:

  • £500k to £1m: £4,150
  • £1m to £2m: £8,450
  • £2m to £5m: £28,650
  • £5m to £10m: £67,050
  • £10m to £20m: £134,550
  • £20m+: £269,450

A time apportioned charge applies when a property is acquired part way through the year, with the ATED return and payment deadline being 30 days from completion.

ATED Reliefs

The main headings under which relief applies are in respect of dwellings that are:

  • Let to a third party on a commercial basis and 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;
  • 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;
  • Being used by a trading business to provide living accommodation to certain qualifying employees to meet the purposes of the trade (relief will not be available where the employee holds more than a 10% interest in the company); and
  • A farmhouse occupied by a farm worker or a former long-serving farm worker.

An ATED Relief Declaration Return must be submitted in order to claim relief. Failure to make a return can result in an ATED charge arising where relief would otherwise have been available.

Next Steps

It will be necessary to consider the value of any properties held and whether to employ the services of a professional (eg estate agent or surveyor) to provide a valuation for each residential property. This will include properties which have been below the £500,000 threshold and are currently outside of the ATED regime.

If a property is thought to have a value just under £500,000 then we would suggest obtaining a professional valuation to confirm this is the case and to provide a defence in the event of an HMRC enquiry.

It may not be considered necessary to obtain a valuation for those properties for which a relief is already being claimed where it is envisaged that the relief will continue to apply.

If a property valuation is within 10% of an ATED band threshold then it is possible to submit a ‘pre-return banding check’ to HMRC to seek agreement regarding the ATED band the property falls within.

Please speak to your usual contact at M+A Partners if you would like more information or assistance on ATED matters or de-enveloping properties.

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