Introduced in 2013, the Annual Tax on Enveloped Dwellings (ATED) was aimed at controlling the indirect ownership of residential properties in the UK.
Indirect ownership refers to a non-natural person owning property, such as a company or corporate body, as individuals hide their properties by transferring them to corporate entities to avoid or minimize taxes like Stamp Duty Land Tax (SDLT).
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Understanding Annual Tax on Enveloped Dwellings :
ATED is the acronym for Annual Tax on Enveloped Dwellings. It is a type of property tax that is levied on companies containing residential property in the UK.
This tax is only payable by companies possessing a residential property worth above £500,000. You have to pay tax on your residential property if you are:
- A company
- Partnerships having corporate members
- Collective investment schemes like; trust, unit, or open-ended investment company
You also need to submit returns on or after 1st April to 31st March within the chargeable period.
What is Dwelling?
Your property would be classified as a dwelling if you are using a part or whole of it for residence or personal use like for a flat or house, etc. You should remember that dwelling doesn’t include the following residence types:
- Hotels
- Cares Home
- Boarding school
- Guesthouses
- Hospitals
- Student halls
- Prison
- Military accommodation
Section 19 of ATED provides a detailed note on a dwelling.
How to Determine The Value of Property?
To file a return, you should know the value of your residential property. You can find out the value of your property based on the amount that you bought it for.
1 April 2012 is the initial valuation date if your residential property is owned on that date at a previous date or after that date. There is a fixed revaluation date for all properties after 5 years. E.g. 1st April 2012, then 1st April 2017, and 1st April 2022.
The valuation process of HMRC is quite strict. Interest or penalty may be charged by HMRC if the value of your property is incorrect.
How Much to Pay?
You need to pay ATED based on the value of your residential property. HMRC has divided the properties into different bands with the following chargeable amounts for 1 April 2023 to 31 March 2024:
- For properties worth more than £500,000 up to £1 million: £3,800
- For properties worth more than £1 million up to £2 million: £7,700
- For properties worth more than £2 million up to £5 million: £25,700
- For properties worth more than £5 million up to £10 million: £59,400
- For properties worth more than £10 million up to £20 million: £118,800
- For properties worth more than £20 million: £239,600
Key Takeaway: If you’re claiming relief on ATED, you must submit nil returns to HMRC by 30th April. You can obtain a relief claim declaration form to apply for the relief.
How to Submit ATED Returns?
You can submit your returns via the government website, with submissions required by 30 April each year. Alternatively, you may hire an agent or accountant to handle ATED returns for you.
Let Us Deal With it:
Paying the Annual Tax on Enveloped Dwellings and filing returns can be complex and exhausting. Therefore, we recommend seeking assistance from a qualified accountant before submitting ATED returns and making payments.
Accotax contains a team of certified chartered accountants in London. Our team will review your property’s value, and tax rates and will find the best relief suitable for you. We’ll explore the possibilities to reduce your ATED.
Are you looking for professional tech-savvy tax advisors and accountants in the UK to guide you? Contact us now!
