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ANNUAL TAX ON ENVELOPED DWELLINGS
It’s that time of the year again!
What is ATED?
We are all familiar with the term annual tax on enveloped dwellings (“ATED”) which has been with us since the Finance Act 2013 introduced detailed provisions to deter, what was perceived, as avoidance activity using corporate structures to hold high value residential property. The measures involve the charging of a special tax, known as, ATED, where high-value residential property is owned by a company, a partnership with a corporate member or a collective investment scheme.
Who is it targeted at?
The regime originally was targeted at single dwelling interests (that is a defined term in the legislation which effectively means a property for a single household) with a value in excess of £2m (as valued at 1 April 2012). However, the £2m threshold has been declining and on 1 April 2016 the threshold was reduced again, to £500,000 and it currently remains at this level. This means that a high percentage of properties are now caught by ATED.
What are the reliefs?
There are a number of reliefs available so that for normal business activity there is no charge to ATED. Nevertheless even when there is no charge, a return needs to be made so that the appropriate relief can be claimed. There are penalties levied where a return was due to be made (even if only to claim relief because no tax was due), but the return was not in fact made. Failing to appreciate the nuance ATED distinction between ‘exempt’ and ‘in charge but relievable’ could result in punitive penalties even when no tax is due.
What are the deadlines?
A return claiming the relief is relatively simple but the deadline for its submission is tight being 30 April 2022 for the year 1 April 2022 to 31 March 2023.
The deadline for filing an ATED return where no relief can be claimed and making the associated payment is also 30 April 2022 for the year 1 April 2022 to 31 March 2023.
If a single dwelling interest is purchased during the chargeable period 1 April 2022 to 31 March 2023 and its value is in excess of £500k then the ATED return, and payment is due 30 days following completion date or 90 days following completion date if the dwelling is newly built. Again, penalties are levied where a return was due to be made (even if only to claim relief because no tax was due), but the return was not in fact made.
Valuation as at 1st April 2022
The valuation as at 1 April 2017 or acquisition date if acquired after 1 April 2017 lasts for 5 years. 2023-24 ATED Returns will require a revised valuation as at 1 April 2022 i.e. Now!.
A formal valuation is not required but HMRC will expect the valuation to be robust and reasonable. We encourage you to value your properties now and keep evidence of the valuation.
If you require any assistance in getting your ATED returns or relief returns filed, please let us know.
Let’s get filing!