A copy of the letter seen by Jeffreys Henry LLP states: “We hold information that suggests you may have had an interest in the above property”, and “The Annual Tax on Enveloped Dwellings” (ATED) may be due on your interest in this property”.
The Annual Tax on Enveloped Dwellings (ATED) is an annual tax payable by a non-natural person “NNP” (e.g. a company, collective investment scheme or LLP with a corporate partner) that holds UK residential property valued at over £500,000. In these circumstances, the dwelling is said to be ‘enveloped’ because the ownership sits within a corporate ‘wrapper’ or ‘envelope’. It does not apply to residential property owned by individuals.
ATED was originally introduced in 2013 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.
For the 2020/21 tax year, dwellings worth more than £500,000 attract a fixed annual charge based on the value of the property as set out in the table below:
The ATED year runs from 1 April to 31 March and companies must file an ATED return by 30 April for each ATED year during which they hold a UK residential property. A late return has £100 penalty immediately applied, with further fixed charges stacking up after 3 months, 6 months and up to a maximum of £1,600 at the 12 month mark. Failing to pay ATED in full and on time will result in a penalty of 5% of tax due if 30 days late, a further 5% if 6 months late and a further 5% if 12 months late.
There are a number of reliefs from the annual charge (the most common being property rental business relief) but the reliefs do not apply automatically – an ATED relief return must be submitted in order to claim them.
Senior Tax Manager (ex-HMRC)