Annual Tax on Enveloped Dwellings (ATED) on £500,000+ Properties

Annual Tax on Enveloped Dwellings (ATED) was first introduced in 2013 on high-value UK residential properties worth over £2 million which are owned by companies, partnerships with corporate members and certain investment vehicles.

From 1 April 2016 the scope of ATED widened significantly. Every company or corporate entity owning UK residential properties worth over £500,000 must now file an ATED tax return and pay the appropriate ATED charge.

ATED was originally introduced to discourage ‘enveloping’ high-value residential properties within special purpose vehicles (SPVs), enabling an onward sale of the property via a sale of shares in the SPV, such that no stamp duty land tax is payable by the purchaser.

ATED Charge

The ATED tax liability depends on which banding the property falls into:

Property value at 1 April 2012 or acquisition ATED Charge
2016/17
ATED Charge
2017/18
More than £500,000 but not more than £1m £3,500 £3,500
More than £1m but not more than £2m £7,000 £7,050
More than £2m but not more than £5m £23,350 £23,550
More than £5m but not more than £10m £54,450 £54,950
More than £10m but not more than £20m £109,050 £111,100
More than 20m £218,200 £220,350

* The value of the property as of 1 April 2012, or its value when it was acquired, built or converted if later.

ATED Reliefs and Exemptions

There are a number of reliefs available that can eliminate or reduce the ATED charge but these are not automatically given. An ATED return must be filed to claim the appropriate relief.  You may be able to claim the following reliefs:

  • Companies which carry on a genuine property business and let the properties to third parties on commercial terms. The property must not at any time be occupied (or be available for occupation) by anyone connected with the beneficial owner.
  • Where a property (or land) is acquired as part of a property development business such that the property (or land) was purchased with the intention to re-develop and sell it on. 
  • Properties which are open to the public for at least 28 days per annum. 
  • Properties which are part of a property trading business.
  • Property acquired for the use by certain employees and partners. 
  • A farmhouse, if it is occupied by a qualifying farm worker who farms the associated farmland, a former long-serving farm worker
  • A property repossessed by a financial institution in the course of its business of lending money.
  • A property owned by a registered provider of social housing.
  • There are also a number of other exemptions from ATED notably charitable companies using the dwelling for charitable purposes, certain public bodies and certain bodies established for national purposes

ATED Returns and Assessments

An ATED return (with payment where applicable) must be submitted by 30 April for every company or corporate entity that owns residential property with a value over £500,000. 

Failure to notify promptly will result in late filing penalties even if no tax is payable due to a relief. Failure to pay tax promptly will also result in late payment penalties

Relief can only be claimed by completing an ATED return and submitting this to HMRC.

Further advice

Jeffreys Henry LLP is one of the UK’s leading Property Tax Specialists with clients including buy-to-let landlords, property investors, developers, housing associations and related businesses such as chartered surveyors, architects, consulting engineers and estate agents. For further information or advice on ATED, please contact Parminder Chattha on 0207 309 2222.