Everything you need to know about ATED

If your company owns property worth more than £500,000, then the likelihood is that you will be required to pay the Annual Tax on Enveloped Dwellings (‘ATED’) each year on your investment.

The decision to tax properties owned by limited companies was an attempt to deter corporate ownership of residential property in the UK and, at the same time, to encourage more personal ownership of homes and apartments.

The Government’s belief in making this decision was that buy-to-let landlords and companies purchasing residential property were crowding first-time buyers out of the market as well as people who wanted a property to live in rather than as an investment.

Black and White Accounting work with private and commercial landlords across the UK, ensuring that our clients pay no more tax than they need to.

In this article, we share a brief rundown of ATED with you. If you have any questions or comments, please call us on 0800 140 464 or email us by clicking here.

What is the ATED?

The ATED is an annual tax paid by corporate owners of residential property in the UK on individual properties with a value greater than £500,000.

What does dwelling mean?

For ATED purposes, the definition of a dwelling is a UK residential property – a property designed for people to live in full time.

The following types of property are not considered as dwellings:

• hotels;
• guest houses;
• boarding school accommodation;
• hospitals;
• student halls of residence;
• military accommodation;
• care homes; and
• prisons.

If you wish to speak with us for greater certainty and clarity about whether property you own qualifies for ATED, please call us on 0800 140 464 or email us by clicking here.

Chargeable amounts for the current tax year

The ATED year runs from 1 April to 31 March and companies subject to the tax must file their ATED return and make payment by 30 April in that year. For example, for the ATED year 1 April 2021 to 31 March 2022, your ATED return must be submitted and the tax paid on or by 30 April 2022.

The ATED charge is as follows on UK residential properties valued at:

• £500,000 up to £1 million band – £3,700;
• £1 million up to £2 million – £7,500;
• £2 million up to £5 million – £25,300;
• £5 million up to £10 million – £59,100;
• £10 million up to £20 million – £118,600; and
• £20 million or more – £237,400.

The charges shown above are for the year 1 April 2021 to 31 March 2022.

If part of the property you own is used as a residence and other parts for other purposes, the ATED tax payable will only be judged on the value of the parts of the property used for residential purposes.

Who needs to complete an ATED return?

You need to complete an ATED return if your property is a dwelling based in the UK and the property is owned by a:

• collective investment scheme;
• company;
• open ended investment vehicle;
• partnership containing one or more partners which is a company; and
• unit trust.

For tax years starting 1 April 2016, 1 April 2017, 1 April 2018, 1 April 2019, 1 April 2020, and 1 April 2021, ATED returns had/have to be completed and submitted for any property whose value is £500,000 or greater.

For the tax year beginning 1 April 2015, a return had to be completed and submitted for any property owned whose value is £1 million or greater. For the tax years beginning April 2013 and April 2014, a return had to be completed and submitted for any property owned whose value is £2 million or greater.

ATED and property value

To work out how much you’ll have to pay in ATED, you’ll also have to work out what your relevant and qualifying properties are valued at.

Under current HMRC rules, you’re allowed to decide the value of the property yourself or bring in a professional to value it for you. The price your property is valued at is on an “open-market willing buyer, willing seller basis”. If your company doesn’t have an unencumbered freehold interest in the property, the value you attach to the property does not have to be the “vacant possession valuation.”

You are required to revalue the property every five years. The first two revaluation dates under the scheme were the 1 April 2012 and 1 April 2017. The next valuation date is due on 1 April 2022.

Even if you buy a property a few weeks or months before one of these dates, you must follow the five-yearly revaluation schedule set out by HMRC.

The date of the substantial acquisition of a dwelling

Your ATED return will be due 30 days after your company or commercial vehicle has purchased the dwelling.

Newly-constructed dwellings or property adapted to contain new dwellings

You have to complete an ATED form for any newly-built dwellings or any new dwellings which come into existence through conversion within 90 days of the date on which your local authority included it on its council tax roll.

The date of the substantial disposal of a part of its ownership of a dwelling

If a company sells part of a property for more than £40,000, this is likely to require you to carry out a new valuation which you must then report to HMRC.

ATED interest and penalties

If your ATED form is not submitted and the tax not paid to HMRC on time (within 30 days of the end of March), penalties will apply. This also applies to the requirement to complete an ATED form within 30 days of purchase of a new property or within 90 days of a new build property.

Interest may also be charged on both if they’ve not been paid on or by the due date and on penalties as a result of late payments.

ATED relief

You may claim relief for the property you own if one or more of the following circumstances apply:

• you own a farmhouse occupied by a farm worker or a former long-serving farm worker;
• this is a development intended for resale and you are a property developer;
• the property is a financial institution repossession where it has lent the money (with or without interest) to a borrower to purchase the property;
• your property is open to the public for at least 28 days of the year or more;
• the property is owned by a qualifying housing co-operative or a registered provider of social housing;
• the property is part of property trader business stock where the intent is eventual resale of the property;
• the property is for provision of living accommodation to certain qualifying employees by a trading business;
• the property qualified as a regulated home reversion plan acquisition; and/or
• you have let the property to a third party on a commercial basis and it is not occupied (or available for occupation) by any person or company connected with the owner at any time.

Further guidance is available here on the HMRC website (sections 30 to 41). You can submit your Relief Declaration Return with HMRC’s the ATED online service if the claim you’re making will reduce your ATED charge to zero.

Working with Black and White Accounting

Black and White Accounting works with landlords large and small across the UK to ensure they are meeting all their obligations, without paying more tax than they need to. Please get in touch with us about any outstanding or upcoming ATED issues that you may have.

To find out more, please get in touch with us today, by contacting Black and White Chartered Certified Accountants, populating the “Got a Question” form on the right, or calling us on 0800 140 464.