Updated March 2023
What is ATED?
In short, ATED is a tax payable each year by companies (or other corporate structures) on high value residential property (dwellings).
The vast majority of residential properties (dwellings) are owned by individuals, but there are an increasing number of properties (particularly buy-to-lets) owned by companies.
In cases where a dwelling is owned by a company, a partnership with a corporate member or other collective investment vehicle, the dwelling is said to be 'enveloped' because the ownership sits within a corporate 'wrapper' or 'envelope'.
Who is affected by ATED?
Corporate entities (the types listed above) that hold UK residential properties, which are each valued over £500k are affected.
Corporate entities that have a property portfolio which exceeds the threshold, but no single dwelling is valued above the threshold at the relevant time, will not be liable to ATED.
How is ATED reported to HM Revenue & Customs?
ATED is reported to HM Revenue & Customs (HMRC) via an ATED tax return. An ATED tax return will need to be completed and payment made by 30th April each year. ATED periods run from 1st April to 31st March each year. An ATED return will need to be submitted within 30 days of acquisition for properties acquired after 1 April.
How much tax is payable under ATED?
The amount payable is worked out using a banding system based on the value of the property at the latest relevant valuation date.
Chargeable amounts for 1 April 2023 to 31 March 2024
ATED payable will be calculated by reference to the number of days in the year the property falls within ATED. If the property is only owned for part of a year or if the use of the property changes so that it moves into or out of ATED, the ATED charge is pro-rated.
Properties must be revalued every five years. For 2023/24 to 2027/28 inclusive, the value of the property is taken as at 1 April 2022. For properties purchased after this date, the value is taken as at the date of purchase.
Please also note that disposals of ATED property are potentially subject to capital gains tax at 28%.
Are there any exemptions or reliefs from ATED available?
There are a number of exemptions from ATED, such as charitable companies using the dwelling for charitable purposes, which means a return will not need to be filed.
There are also reliefs that may eliminate the tax charge but you need to complete and send in a return to claim the relief each year. Relief is available in a number of different circumstances such as when the property is let to a third party on a commercial basis, is being developed for resale or is open to the public for at least 28 days a year.
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Please contact us to find out how the above applies in your circumstances, how you can reduce your tax liabilities and maximise your tax efficiency.
Please note that the above is for general information only and does not constitute financial or tax advice. You should not rely on this information to make or refrain from making any decisions. You should always obtain independent professional advice in respect of your own situation.
