TAX PLANNING

Understanding Annual Tax on Enveloped Dwellings

Annual Tax on Enveloped Dwellings (ATED) is a once-yearly tax which generally applies to companies who own UK residential property that is valued at more than £500,000.

Do I need to complete an ATED return?

You will need to complete an ATED return if your property is a dwelling in the UK, which is owned either:

  1. Completely or partly by a company
  2. By a partnership where any of the partners is a company
  3. By a collective investment scheme such as a unit trust or open-ended investment vehicle (known as non-natural persons)

What is classed as a ‘dwelling’?

For the purposes of ATED a dwelling is a residence (usually a house or flat) and includes any gardens, grounds and buildings within them. Certain properties are excluded from being a dwelling for ATED purposes. These include hotels, guest houses, boarding school accommodation/student halls of residence, hospitals, military accommodation, prisons and care homes.

In addition to these a number of other instances are, subject to detailed conditions, exempt from ATED and not required to file returns. These include charitable companies which are using the dwelling for charitable purposes, certain public bodies and national bodies.

In addition to these exemptions, there are a range of tax reliefs which can reduce or even eliminate ATED charges. These can be used if a property is:

  • Let to a third party on a commercial basis
  • Held as trading stock of a property development or trading business
  • Open to the public for at least 28 days a year
  • Used by a trading business to provide living accommodation for certain qualifying employees
  • A farmhouse occupied by a farm worker or a former long-serving farm worker
  • Owned by a registered provider of social housing

All of these reliefs and allowances are subject to exclusions and detailed conditions, so it’s important to have a complete understanding of the rules surrounding them. If you do want to claim a relief, a Relief Declaration Return (RDR) needs to be submitted.

How much am I required to pay?

For the year ending 31 March 2021, you will need to pay the following charges:

Dwelling value Annual charge
£500K – £1million £3,700
£1million – £2million £7,500
£2million – £5million £25,200
£5million – £10million £58,850
£10million – £20million £118,050
£20million + £236,250

Key considerations of ATED

ATED applies to corporate bodies or companies (legally referred to as non-natural persons) which are incorporated in the UK and overseas. Any properties owned on or before 1 April 2017 were revalued as at 1 April 2017, with the value at that point being the one used to calculate ATED. If the property was acquired after 1 April 2017, the later date is the one used to make any ATED calculation.

What changes were brought into ATED in April 2018?

Aside from the introduction of the revised valuation date of 1 April 2017, from 1 April 2018, all online ATED returns needed to be filed using the new ATED online digital service. This new service also has to be used to appoint an agent.

If you are concerned about ATED, or any other element of property tax, please contact your nearest office.

Would you like to find out more?

We are here to help with your tax planning requirements. For more information, whatever your circumstances, please contact us today.

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