The annual tax on enveloped dwellings (ATED) is aimed at making it less attractive for corporate entities to own high-value UK residential property to avoid or minimise taxes on a subsequent disposal
What is ATED
ATED is a tax payable by a company, a partnership where one of the partners is a company, or a ‘collective investment vehicle’ owning high value residential properties (dwellings) situated in the UK and valued at more than £2 million, reducing to £500,000 in April 2016.
Annual chargeable amounts
The amount of ATED is worked out using a banding system based on the value of the property.
|More than £2 million but not more than £5 million||15,400|
|More than £5 million but not more than £10 million||35,900|
|More than £10 million but not more than £20 million||71,850|
|More than £20 million||143,750|
From 1 April 2015 a new band will come into effect for properties with a value greater than £1 million but not more than £2 million with an annual charge of £7,000.
From 1 April 2016 a further new band will come into effect for properties with a value greater than £500,000 but not more than £1 million with an annual charge of £3,500.
If you only own the dwelling for part of a year, or you change how you use the property so that it moves into or out of ATED, then ATED applies on a proportionate basis.
What is a dwelling
A dwelling includes gardens and grounds and any building within them. If a property consists of a number of self-contained flats, each flat will usually be valued separately.
Hotels, guest houses, boarding school accommodation, hospitals, student halls of residence, military accommodation, care homes and prisons are not deemed to be dwellings.
Valuation of property
The value of the dwelling is its value on 1 April 2012, or when you acquired it if later. Properties must be revalued after five years.
Valuations are self assessed but must be on an open-market willing buyer, willing seller basis. If HMRC challenge a valuation and find that it’s wrong, the person responsible for paying ATED may have to pay penalties as well as the increased ATED payable, plus interest for late payment.
Returns and payment
If your dwelling falls within the scope of ATED you will need to complete and send HMRC a return, even if the property is covered by relief.
An ATED period lasts for one year beginning on 1 April. Completed returns and payment must be made by 30 April at the beginning of each period
Stamp Duty Land Tax (SDLT)
SDLT at a rate of 15% is charged on the purchase of property subject to the ATED.
Relief from ATED and 15% SDLT
Properties not occupied (or available for occupation) by anyone connected with the owner may be eligible for relief from the ATED charge and the higher rate of SDLT.
Relievable properties include those:
- let to a third party on a commercial basis
- open to the public for at least 28 days per annum
- part of a property trading business
- part of a property developers trade where the dwelling is acquired as part of a property development business and the property was purchased with the intention to re-develop and sell on
- for the use of employees of the company provided the employee has less than a 10% interest in the company
- a farmhouse, if occupied by a qualifying farm worker who farms the associated farmland, a former long-serving farm worker or their surviving spouse or civil partner
- a dwelling acquired by a financial institution in the course of lending
- owned by a provider of social housing