What is ATED?
- From 1 April 2013, a new annual tax charge has applied to “high-value” UK residential property owned by certain “non-natural persons”. This is known as the Annual Tax on Enveloped Dwellings (“ATED”) charge.
- From 1 April 2013, UK residential properties which were worth more than £2m as at 1 April 2012 have been within the scope of this charge.
- The regime was extended with effect from 1 April 2015 to properties valued at more than £1m as at 1 April 2012, and from 1 April 2016 will also apply to properties worth more than £0.5m as at 1 April 2012.
- A non-natural person within the charge to the ATED is also liable to UK Capital Gains Tax ("CGT") applies in certain cases when an asset is sold for more than it was originally purchased. The taxable gain (profit) may be triggered following the transfer of an asset, although commonly this would follow a sale. A number of tax reliefs are available to exempt or reduce the tax that may apply. Basic tax planning may... (“Capital Gains Tax ("CGT") applies in certain cases when an asset is sold for more than it was originally purchased. The taxable gain (profit) may be triggered following the transfer of an asset, although commonly this would follow a sale. A number of tax reliefs are available to exempt or reduce the tax that may apply. Basic tax planning may...”) on disposal of high-value UK property at a gain. This is known as an “ATED-related CGT charge”.
- From 6 April 2015, a CGT charge also applies more generally to non-resident persons (including e.g. trusts/companies) disposing of UK residential property, but properties will be rebased to their 6 April 2015 value for these purposes.
Returns and payment
Where an ATED charge applies, a Tax Return and the associated payment will be usually required by 30 April in the year for which the charge applies, i.e. 30 April 2015 for the period 1 April 2015 to 31 March 2016. Different rules apply where e.g. a property is acquired part-way through a year, however. Penalties and interest apply where payment and or filing dates are missed.
Certain categories of buildings, e.g. hotels, guest houses and care homes are not classified as dwellings, so don’t fall within the ATED regime, and a number of further reliefs (most notably for commercial lettings and development activity) may be claimed. At present, these can only by completing and submitting an ATED Tax Return.
The current ATED charges for £2m+ properties are set out below. The rates shown for 2015-16 were increased significantly as part of the government’s measures in the 2014 Autumn Statement.
|£2,000,001 to £5,000,000||£15,000||£15,400||£23,350|
|£5,000,001 to £10,000,000||£35,000||£35,900||£54,450|
|£10,000,001 to £20,000,000||£70,000||£71,850||£109,050|
|£20,000,001 and over||£140,000||£143,750||£218,200|
From 1 April 2015, the regime is extended to properties valued at more than £1m as at 1 April 2012, and from 6 April 2016 to properties worth more than £0.5m as at 1 April 2012.
The annual charge applying to residential properties worth more than £1 million and not more than £2 million will be £7,000 for the 2015-16 chargeable period. The 2015-16 for properties in this band is required by 1 October 2015 with payment required by 31 October 2015.
An additional ATED band for residential properties worth more than £500,000 and not more than £1 million, will apply from 1 April 2016 with an annual charge of £3,500.
Valuation of property
The valuation used for the first 5 ATED return periods beginning 1 April 2013 will usually be the valuation at 1 April 2012, or at the date when the property was acquired it, if later. All properties which are subject to ATED will need to be revalued again at 1 April 2017, and this valuation will then apply for to ATED returns for the five year periods starting on 1 April 2018.
Valuation is a principally a matter of self-assessment, although a professional valuation can of course be sought as appropriate. Her Majesty's Revenue and Customs (HM Revenue and Customs or HMRC) is a non-ministerial department of the UK Government responsible for the collection of taxes, the payment of some forms of state support and the administration of other regulatory regimes including the national minimum wage.... will also to confirm the banding they will accept the property via a Pre-Return Banding Check (PRBC). A PRBC will only be available to those who reasonably believe that their property valuation falls within a 10 per cent variance of a banding threshold.
How we can help
We can help with the following:
- Assessing whether your dwelling is subject to ATED
- Registration and filing of ATED returns
- Advising on possible restructuring to take a property out of the ATED charge
- Tax efficient structures for acquiring UK property interests and for UK property businesses
Please contact us to speak to an advisor about the ATED regime and how it may affect you.