ATED – the often forgotten tax

Wed 17 Apr 2019

For companies, the preparation and filing of the annual corporation tax return is usually what springs to mind when the word tax is mentioned.

However, the Annual Tax on Enveloped Dwellings (‘ATED’) is often forgotten and can catch out companies that hold UK residential property.

What is ATED?

ATED is an annual tax that is payable by companies, both UK and overseas resident, who own high value residential properties in the UK. Initially when ATED was introduced in 2013, ‘high value’ was defined as over £2 million but this threshold has since been reduced to £500k.

The ATED charge works on a banding system based on the value of the property: currently ranging from £3,650 up to £232,350, the charge will increase each year in line with RPI.

What value do you need to look at?

The value that needs to be considered for ATED purposes this year is the value at April 2017 (or acquisition if later). Every property needs to be revalued every 5 years on anniversaries of April 2012, i.e. the next revaluation will be in April 2022.  So a property that was under the £500k threshold previously now may fall within the charge.

If a property has been acquired since April 2017, it is the value at acquisition that matters and there are special rules for newly-constructed dwellings to take account of.

Is there any relief from the ATED charge?

Residential properties may be held for a genuine commercial reason, such as a rental property and so it seems unfair that companies would need to pay an additional tax as a result.

There is a series of reliefs from ATED, which include:

• property rental
• property development
• open to the public
• occupied by certain employees.

Where a company qualifies for relief, it is required to file an ATED Relief Declaration Return to claim the applicable relief. This needs to be claimed every year.

When do you need to file this return?

Unlike most other tax returns in the UK, the ATED return (both chargeable and relief) must be filed by 30 April following the start of each ATED period. E.g. for the period 1 April 2019 – 31 March 2020, this return needs to be filed by 30 April 2019, which is also the normal due date for paying the ATED charge (if required).

Is any planning possible?

Companies who qualify for relief should review their compliance processes and monitor when there are any changes to their circumstances.

Companies who are not exempt should evaluate whether the benefits of the existing structure outweigh the ATED charge. It may be that it is decided to suffer the charge rather than incur additional costs of ‘de-enveloping’.

Those who want to ‘de-envelope’ the property so that they are no longer within the scope of ATED should take advice on how best to achieve this, if possible without crystallising a significant tax charge. There are many options available, including holding the property directly and the best option will vary depending on the circumstances.

If you would like to discuss your ATED position or would like assistance in de-enveloping please contact Sadie Harrison on sadie.harrison@mazars.co.uk.