The Annual Tax on Enveloped Dwellings (ATED) charge was implemented from 1 April 2013. ATED is a charge on residential property owned by ‘non-natural persons’ i.e. a company, a partnership with a corporate partner, or a collective investment scheme.
Previously the charge has only applied to properties valued at over £2 million but from 1 April 2015 the lower limit has been reduced to £1 million. The lower limit will be reduced further to apply to properties valued at more than £500,000 from 1 April 2016 and so more and more properties are likely to be caught by this.
The charge is based on a banding system. Assuming the property was owned by the company on 1 April 2012, it is the value of the property at that date which is used for the banding purposes. The property will then need to be re-valued every 5 years to check which band it falls in to.
The bandings and associated tax charge for the current year (YE 31 March 2016) are as follows:
|Value of property||Annual tax charge|
|£1 million – £2 million||£7,000|
|£2 million – £5 million||£23,350|
|£5 million – £10 million||£54,450|
|£10 million – £20 million||£109,050|
|More than £20 million||£218,200|
A return and payment of the ATED charge is due by 30 April at the start of each year. Therefore, those caught for the year ended 31 March 2016 must make a return by 30 April 2015. If property is acquired part way through the year and ATED applies to that property, the return and payment must be made within 30 days of the acquisition of the property.
There are some reliefs which can apply to reduce the tax payable to nil; however a return must still be filed to claim the relief. The most common reliefs are where the property is let to an unconnected third party or where it is used by an employee with no interest in the company. Farmhouses are also granted relief from the charge where it is occupied by a qualifying farm worker who farms the associated farmland.
HMRC may charge interest and penalties for late submission of returns and/or late payment of the tax. The late filing penalties can mount up quickly and become substantial and so it is important that returns are filed on time.
If you think you are likely to be caught by the charge or would like more information then please contact Sheldon Cole or Tara Hayes on 01823 286096.