Companies and some partnerships that own residential property in the UK valued at more than £500,000 are required to file annual ATED returns and may have to pay an annual ATED tax. All relevant residential properties need to be revalued as at 1 April 2022 to cover ATED returns for the next five years and to check whether the company or partnership will fall within ATED for the first time. This article explains what ATED is, how much tax is payable and the upcoming revaluation requirements.
ATED was introduced in April 2013 to deter the ‘enveloping’ of high value residential property in corporate structures.
You must complete an ATED return if your property:
- is a “dwelling” – defined as a property that is or could be used as a residence, such as a house or flat. It includes any gardens, grounds or buildings within them. Detailed rules apply to mixed-use dwellings
- is in the UK
- was valued at more than £500,000 (for returns from 2016/17 onwards – the limits were higher previously) and
- is owned completely or partly by a company or by a partnership of which any partners are companies or by a collective investment scheme.
Reliefs that can be claimed
The following reliefs must be claimed in a return filed at the beginning of the year of charge:
Relief is available for let properties provided the property is let to a third party and not occupied by the owner or anyone connected to the owner.
Property trading and property development companies
Relief is available for properties acquired as part of a trade of property trading or property development.
Returns cover the year ended 31 March and must be filed by 30 April at the start of the period. So, the forthcoming returns due to be filed by 30 April 2022 will cover the year ended 30 March 2023. There is a penalty for late returns.
How to value your property
Valuations are of a single-dwelling interest (SDI) in a UK dwelling and must be on an open market willing buyer, willing seller basis. The valuation must be a specific amount in pounds sterling (i.e. not “in the range of”). You can work out the value yourself or use a professional valuer.
Please note it is the value of the SDI that is important for ATED purposes, not the value of the company’s interest in the property.
The value of a property interest used for ATED returns from 1 April 2018 to 31 March 2023 was its market value on 1 April 2017 (or when acquired or completed, if later).
Revaluation as at 1 April 2022
All residential property interests owned by companies or certain partnerships need to be revalued as at 1 April 2022 to cover ATED returns for the five return periods starting on 1 April 2023.
The first returns using the new values must be filed by 30 April 2023.
Some companies or partnerships may therefore find themselves within the ATED regime for the first time from 1 April 2023 if they own a residential property that has increased in value to more than £500,000 since the last valuation date in 2017.
What you need to pay
The tax payable is worked out on a banding system based on the property value.
|Taxable value of the property||ATED charge
|£500,001 to £1m||£3,700||£3,800|
|£1,000,001 to £2m||£7,500||£7,700|
|£2,000,001 to £5m||£25,300||£26,050|
|£5,000,001 to £10m||£59,100||£60,900|
|£10,000,001 to £20m||£118,600||£122,250|
If you would like to discuss the annual tax on enveloped dwellings (ATED), please contact your usual client handler or Jill Springbett at firstname.lastname@example.org.
Warning: The above is merely general guidance and should not be relied upon as formal advice. The advice we give to each client will depend on their specific circumstances. We suggest you take professional advice before taking any action in relation to the issues discussed above.