With the intention of it being a deterrent for corporate ownership, HMRC introduced ATED in 2013

What is it?

ATED is a type of property tax, payable mainly by companies that own residential property in the UK valued at £500,000 or above.

The tax was introduced in 2013 by HMRC with the aim of making it less attractive to purchase a residential property through a company. At the time, many people were doing so to dramatically reduce the amount of stamp duty they paid, or as a way of hiding the true ownership.

If your company or LLP owns such property, you could be subject to the Annual Tax on Enveloped Dwellings (ATED). The ATED tax rules also apply to:

  • A partnership with a corporate member(s)
  • A collective investment scheme, such as a unit trust or open-ended investment company.

Are there any exemptions to ATED? 

  • Let to a third party on a commercial basis and isn’t, at any time, occupied (or available for occupation) by anyone connected with the business
  • Open to the public for at least 28 days per annum
  • Part of a property trading business which isn’t, at any time, occupied (or available for occupation) by anyone connected with the business
  • Part of a property development business, purchased with the intention to re-develop and sell, and isn’t, at any time, occupied (or available for occupation) by anyone connected with the business
  • For the use of the employees of the business (for business purposes) and the employees or partners of the employees do not have an interest (directly or indirectly) of more than 10% in the company
  • A farmhouse occupied by a farmer/farm worker who farms the associated farmland, a former long-serving farm worker or their surviving spouse or civil partner.
  • Owned by the provider of social housing

The following properties are also exempt, because they are not classed as a dwelling:

  • Hotels
  • Guest houses
  • Boarding school accommodation
  • Hospitals
  • Student halls of residence
  • Military accommodation
  • Care homes
  • Prisons

What does it mean for you? 

If you’re subject to ATED, you’ll be completing an ATED return annually to be submitted by 30th April. If you don’t meet the criteria for exemption, a fixed sum payment will need to be made, which increases depending on the property value. You can find out the relevant amount on our current Tax Rates.

The value of your property is taken at 1st April 2012, 1st April 2017, or at acquisition if purchased later. A revaluation must be done every 5 years, so this should have been carried out in April 2017 and will next update in April 2022.

If a property is purchased during a tax year

The first ATED return will be due 30 days after purchase.

Where a property is newly constructed or adapted to residential use between the valuation dates

An ATED return will be due 90 days either after the date it is deemed to come into existence for council tax/domestic rating purposes, or the date it is occupied – whichever of the two comes first.

If your company owns several properties separate ATED returns must be completed for each exemption that you need to claim.

What you need to do:

1. Check whether you are within the scope of this regime

Though you may not have been caught by this before, the increasing value of UK property combined with the valuation thresholds for ATED decreasing over the past few years, means that you really should check whether you now fall within the ATED valuation bands.

2. Complete your return

Make sure you compile and file your return by the required deadline.  Even if you the property in question is exempt from charge, you must still complete a return by 30th April each year to claim the exemption, but you won’t have to pay the associated charge.

3. Consider a transfer

You may also want to consider taking the property out of corporate ownership ad transferring it to personal ownership. This only applied for those subject to ATED, not those who are exempt, as private ownership may be very costly tax wise.

Don’t struggle with this one alone

You want to be sure that you’re compliant, but also paying the least tax possible. We can review your properties and determine whether the charge affects you and explore the possibilities of changing your ownership structure.

Want to find out more?

Call us on (01474) 853856 and we will put you in contact with one of our advisers, or send us an enquiry by clicking below.

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