ATED stands for Annual Tax on Enveloped Dwellings and was introduced on 1 April 2013. It imposes a fixed annual charge based on the value of residential property held by Companies and Partnerships subject to various exemptions. An annual return or relief declaration return must be filed by 30 April each year if the entity falls within the charge. Penalties apply for late filing.
ATED applies where:
- companies, partnerships with a corporate partner or collective investment schemes (collectively referred to as non-natural persons)
- hold an interest in a UK dwelling, and
- that interest is valued at over £500,000
For these purposes, a property will be a dwelling if all or part of it is used, or could be used, as a residence. Certain properties are excluded from being a dwelling for ATED purposes, including:
- guest houses
- boarding school accommodation and student halls of residence
- military accommodation
- care homes
The following entities are, subject to detailed conditions, exempt from ATED and not required to file returns:
- charitable companies using the dwelling for charitable purposes
In addition to these exemptions, there are a number of reliefs which can reduce the ATED charge in a period to nil. These include where a property is:
- let to a third party on a commercial basis
- held as trading stock of a property development or trading business
- open to the public for at least 28 days a year
- used by a trading business to provide living accommodation for certain qualifying employees
- a farmhouse occupied by a farm worker or a former long-serving farm worker
- owned by a register provider of social housing
- public bodies and national bodies
Calculating the ATED charge and property valuation
ATED is a fixed annual charge based on the value of the enveloped property. It is charged by reference to financial years i.e. an annual period running from 1 April to 31 March.
The ATED annual charges for the period 1 April 2018 to 31 March 2019 are:
|Property value at 1 April 2017||Annual charge|
|£500,000 – £1m||£3,600|
|£1m – £2m||£7,250|
|£2m – £5m||£24,250|
|£5m – £10m||£56,550|
|£10m – £20m||£113,400|
|More than £20m||£226,950|
These annual charges increase each year in line with inflation. Rates for previous years can be found here.
For these purposes, the value of a property is measured on the later of:
- the valuation date, and
- the date of acquisition
The valuation date is set by legislation, with fixed revaluation dates for all properties every five years regardless of the date the property was acquired. The initial valuation date was 1 April 2012. However, from 1 April 2018 this is superseded by the valuation at 1 April 2017.
As a result, for the period from 1 April 2018 to 31 March 2019:
- UK dwellings held by non-natural persons on 1 April 2017 need to be revalued at that date to establish whether ATED applies and, if so, what the charge will be
any property purchased by non-natural persons after 1 April 2017 will be valued using its acquisition cost
Where a property qualifies for one of the ATED reliefs set out above, and is expected to do so for the whole period of ownership, it should not be necessary to revalue it at April 2017. However, if there is the possibility that a relief could cease to apply in the future it may be advisable to have the property revalued at that date.
Filing and payment
Where a property is within the scope of ATED a return needs to be submitted for each annual period together with payment of any ATED charge.
In contrast to most other taxes, ATED returns need to be submitted at the beginning of each annual period and not following the end of the period. Returns must be filed for a period, and any ATED charges paid:
by 30 April if the property was held on 1 April
within 30 days of acquisition if a property within the scope of ATED is acquired after 1 April
for new build properties, within 90 days of the earliest of first occupation or first becoming a dwelling for Council Tax purposes
However, ATED returns cannot be submitted before the start of the period (i.e. before 1 April).
This means that, for example, returns for the period ending 31 March 2019 have to be submitted and payments made between 1 and 30 April 2018 if the property was held on 1 April 2018.
Penalties and interest can be charged if a return or payment is late or an incorrect return is submitted.
As noted above, where a relief applies to reduce the ATED charge in any period to nil, a full ATED return is not required. Instead an RDR must be filed within the same deadlines set out above.
ATED returns should be submitted online, although HMRC may provide paper returns where this is not possible.
From 1 April 2018, all online ATED returns must be filed using the ATED online service. This replaces the previous online forms, which will no longer be available from 31 March 2018.
What to do next
We are here to help and if you are an existing or prospective client we can assist you if ATED applies to you. Please contact Philip Abbott, Paul Norris or Ben Savage in our tax team who will be happy to deal with your enquiry.