Annual Tax on Enveloped Dwellings (ATED) is an annual tax that the government charges on UK residential properties valued at more than £500,000 and owned by Non-Natural Persons (NNPs). An NNP can either be:
- A company
- A partnership with at least one corporate partner/member
- A collective investment scheme
ATED was introduced on 1st April 2013 to discourage the indirect holding of residential properties (e.g., through a company) to avoid or minimize taxes like stamp duty land tax (SDLT) upon property disposal.
ATED legislation requires you to revalue your property every five years to calculate your returns. The 2023 -2024 chargeable period is a revaluation year. A chargeable period begins from 1st April to 31st March.
What is the ATED Threshold?
The current ATED threshold is £500,000 or above as of 1st April 2016. The threshold for returns for previous periods is as follows:
- 2015-2016: £1 million
- 2013-2014: £2 million
What are Enveloped ‘Dwellings’?
An enveloped dwelling is a corporate-owned residential property. According to the UK government, a dwelling can be part of a residential property and includes grounds, gardens, and buildings within the property. The ATED applies to the value of that part of the property that’s residential for mixed-use properties. Separate self-contained flats in a property are taxed individually according to their different values. A dwelling also includes:
- Property in the process of being constructed or adapted as a residence
- Undeveloped land in certain circumstances
Dwellings do not include some residential properties like:
- Hotels and guest houses
- Boarding school accommodations and student halls of residences
- Hospitals and care homes
- Military accommodations
- Prisons
Section 19 of the ATED technical guidance provides more information on what a dwelling is.
ATED Filing Deadline
Normally, you are required to submit your return in advance for the chargeable period if your property falls within the scope of the ATED scheme on 1st April. For example, for the 1st April 2023 – 31st March 2024 period, your return must be filed between 1st April 2023 and 30th April 2023
If your property falls within the scope of the ATED scheme after 1st April, you must submit your return within 30 days of the acquisition of the property.
For a newly built property, you must submit your return within 90 days of the earliest date that the property either:
- Becomes a dwelling for Council Tax purposes
- Is first occupied
Who is Affected by ATED payments?
ATED payments affect Non-Natural Persons (NNPs) with properties valued at over £500,000. Chargeable persons for different NNPs are as follows:
- Company: The company
- Partnership: All partnership members
- Unit trust: Unit trust trustees
- Open-ended investment company (OEIC): The body corporate
- Collective investment scheme: The person with day-to-day control and management of the scheme’s property
Is ATED Deductible for Corporation Tax?
In limited circumstances, like when there is a genuine property business, but the tenant is not a qualifying person, ATED is deductible. The ATED should come within the scope of “wholly and /or exclusively” for the business.
Who Is Excluded from ATED Payments?
Some companies are exempt from ATED payments, including:
- Charitable companies holding property for charitable courses
- Public bodies
- Bodies established for national purposes
If you don’t fall under the above categories, you can potentially claim relief. Some of the circumstances when you may get ATED relief include, but are not limited to:
- When developing or reselling a dwelling as part of the property development trade
- Dwelling owned by a property trader as stock for resale purposes only
- Dwellings held by a property rental business and let out on a commercial basis
- Dwellings held by trading companies to provide living accommodation to certain qualifying employees
- Farmhouses where working farmers live
How Is the Amount of ATED Assessed?
The ATED tax amount is based on the valuation band into which the qualifying dwelling falls for the given tax year. You need to know how to calculate the value of mixed-use, multiple dwelling, and multiple interest properties correctly for accurate returns. It’s best to use professional valuation to ensure your figures are right.
The ATED chargeable amounts by property price threshold are shown below:
| Valuation | ATED Chargeable Amount | |||
|---|---|---|---|---|
| £500k-£1m | £4,400 | |||
| £1m-£2m | £9,000 | |||
| £2m-£5m | £30,550 | |||
| £5m-£10m | £71,500 | |||
| £10m-£20m | £143,550 | |||
| £20m+ | £287,500 |
| Valuation | ATED Chargeable Amount | |||
|---|---|---|---|---|
| £500k-£1m | £4,150 | |||
| £1m-£2m | £8,450 | |||
| £2m-£5m | £28,650 | |||
| £5m-£10m | £67,050 | |||
| £10m-£20m | £134,550 | |||
| £20m+ | £269,450 |
| Valuation | ATED Chargeable Amount | |||
|---|---|---|---|---|
| £500k-£1m | £3,800 | |||
| £1m-£2m | £7,700 | |||
| £2m-£5m | £26,050 | |||
| £5m-£10m | £60,900 | |||
| £10m-£20m | £122,250 | |||
| £20m+ | £244,750 |
| Valuation | ATED Chargeable Amount | |||
|---|---|---|---|---|
| £500k-£1m | £3,700 | |||
| £1m-£2m | £7,500 | |||
| £2m-£5m | £25,300 | |||
| £5m-£10m | £59,100 | |||
| £10m-£20m | £118,600 | |||
| £20m+ | £237,400 |
The chargeable amount can be lower if you acquired the dwelling part-way through a chargeable period. Your return will also be different if you are eligible for relief.
ATED Valuation Dates and Chargeable Periods
The property revaluation dates and chargeable periods from 1st April 2012 are shown below:
| Revaluation Dates | Chargeable Periods | |||
|---|---|---|---|---|
| 1st April 2012 | 2013 to 2014 2014 to 2015 2015 to 2016 2016 to 2017 2017 to 2018 | |||
| 1st April 2017 | 2018 to 2019 2019 to 2020 2020 to 2021 2021 to 2022 2022 to 2023 | |||
| 1st April 2022 | 2023 to 2024 2024 to 2025 2025 to 2026 2026 to 2027 2027 to 2028 |
How To Submit and Pay Your ATED Returns
You can use the ATED online service to submit your return for all years from 1st April 2015. A separate ATED return needs to be completed for each additional property if you have more than one. If you cannot access the online service or need to file returns for a year before 1st April 2015, you can contact HRMC to get a paper version of the return. In order to submit and pay your returns, you can contact HMRC directly, but At DS Burge & Co, we can help to manage this process on your behalf to ensure it is as quick and easy as possible.
ATED Penalties & Appeals
You can get an ATED penalty for:
- Late filing
- Late payment
- Errors and inaccurate returns
How to Appeal
You can appeal within 30 days from the date of the decision, by stating your grounds for the appeal if you disagree with the HMRCs decision about your return. Grounds for appeal include:
- Reasonable excuse for any failure by the taxpayer
- Failure of penalty on technical grounds or where the HMRC didn’t consider mitigating circumstances
- Amount of the penalty, where you may get penalties for errors suspended
Hire Certified Accountants to Help You File ATED Returns and Reduce Your Tax Liability
ATED rules can be complex and technical. It’s easy to misvalue your property and file incorrect returns if you are not familiar with the process. Filing late returns is also likely when you’re trying to figure everything out on your own. Penalties for late payment cost as much £100 a day after the return date is due, followed by daily penalties.
Hiring a chartered accountant like DS Burge & Co. ensures that you file accurate and timely ATED returns. For over 40 years, we have been helping businesses with their tax and accounting needs. Get in touch with us and let our experienced business tax advisors help you with your ATED returns today.