ATED, or Annual Tax on Enveloped Dwellings, is an annual tax on companies and certain other entities that hold 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’.
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.
According to HMRC, ATED receipts in 2019-20 were £128 million.
£500,000 or more
ATED applies to dwellings worth more than £500,000. Dwellings worth less than £500,000 are exempt, meaning no return is required and no charge is payable.
Each property is assessed individually. This means that a company owning 3 London flats worth £600,000 each should file 3 ATED returns. A company owning 10 houses in Sheffield worth £200,000 each is outside ATED entirely.
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.
From 1 April 2018, all online ATED returns will have to be filed using the new ATED online digital service.
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.
ATED is a fixed annual charge based on the value of the enveloped property. The ATED annual charges for the period 1 April 2018 to 31 March 2019 are:
|Property Value||Annual ATED Charge
|£500,000 to £1m||£3,650|
|£1m to £2m||£7,400|
|£2m to £5m||£24,800|
|£5m to £10m||£57,900|
|£10m to £20m||£116,100|
Properties are valued as at their 2017 value or if purchased after this date as at the date of purchase. HMRC require properties to then be valued every five years.
ATED uses the self-assessment penalty regime. A late return has £100 penalty immediately applied, with further fixed charges stacking up after 3 months, 6 months, up to a maximum of £1,600 at the 12 months mark.