If you own a residential property in the UK that is valued over the threshold and is held within a corporate structure, you may be subject to Annual Tax on Enveloped Dwellings. This annual tax is designed to discourage the use of “enveloped dwellings” as a way to avoid paying taxes on high-value residential properties.
In this guide, we’ll cover everything you need to know about ATED, including who needs to pay it, how it’s calculated, and what the deadlines are for filing your tax return.
So, whether you’re a homeowner, a landlord, or a corporate entity, read on to learn more about ATED and how it could impact you.
Steps to Calculate your Annual Tax on Enveloped Dwellings
1. Determine if Your Property is Within The Scope of ATED
ATED (Annual Tax on Enveloped Dwellings) is a UK tax that applies to residential properties owned by companies, partnerships with corporate members, or collective investment schemes that are valued at over £500,000.
2. Are There any ATED Reliefs?
There are certain exemptions and reliefs available that can reduce the amount of ATED payable.
This includes properties used for charitable purposes, properties held as part of a property rental business, and properties that are occupied by employees.
It’s important to note that even if a property is exempt from ATED, an ATED return may still need to be filed with HMRC.
3. Determine the Value of The Property
To work out what you need to pay you’ll need to value your property using a valuation date. There are revaluation dates every 5 years from 1 April 2012.
The revaluation date for the 5 chargeable periods from 2023 is 1 April 2022.
You must use that date to revalue the properties you owned on or before 1 April 2022. If you acquire property after 1 April 2022, use the acquisition date.
4. Determine the Appropriate Band
The tax is calculated based on the value of the property. There are seven bands, ranging from £500,000 to over £20 million.
Chargeable amounts for 1 April 2023 to 31 March 2024
| Property Value | Annual Charge |
|---|---|
| £500,001 to £1 million | £4,150 |
| £1,000,001 to £2,000,000 | £8,450 |
| £2,000,001 to £5,000,000 | £28,650 |
| £5,000,001 to £10,000,000 | £67,050 |
| £10,000,001 to £20,000,000 | £134,550 |
| More than £20,000,000 | £269,450 |
5. Calculate the Annual Tax
Once you know the appropriate band, you can calculate the annual tax by multiplying the tax rate by the number of days the property falls within that band during the year.
UK Property Accountants can help you evaluate your Annual Tax based on your Property value for year 2023/24 and take the burden off your shoulders. Added to the convenience is our General Guide to Annual Tax on Enveloped Dwellings that covers the subject with more detail, so you can file your returns with confidence.
6. Submit Your ATED Return
If your property is within the scope of ATED, you’ll need to submit ATED return to HM Revenue and Customs (HMRC).
Additionally you’ll need to pay any tax due by April 30 each year.
Please note that you will have to file the ATED Return even if no tax is due by claiming any relief.
Summary
It is important to verify whether you are under the scope of the Annual Tax on Enveloped Dwellings (ATED). If you are, please ensure necessary steps are taken to be compliant with ATED.
Failure to comply with ATED regulations may result in heavy fines and penalties.
Please contact us if you are still confused about whether you are subject to ATED. Our team of professionals can help you navigate the complexity of ATED.
Frequently Asked Question
Who pays Annual tax on Enveloped Dwelling (ATED)?
This is an annual tax charge payable by companies, a partnership with a company memeber or a collective investment scheme owning a residential property in the UK.
ATED return is due if :
- The property acquired is a dwelling (i.e., can be used for residence)
- Property has a value of more than £500,000
- No ATED Reliefs are available
Annual charge on ATED has to be paid only if all the above criteria are met.
Is ATED return filing based on the company’s year end?
No. It is completed for the period April to March regardless of the year end date of companies.
For example, ATED period 2022/23 covers April 2022 to March 2023. A company should file ATED return only if ATED conditions are met.
When is ATED return and ATED charge due?
| New Acquisition | Within 30 days of acquisition, if it comes within the regime after 1 April |
| Newly Built Property | Within 90 days of:‘The property becoming dwelling for Council tax purpose,’ or ‘its first occupancy’Whichever is earlier. |
| Any Other Case | 30th April |
Does ATED apply to rented properties?
ATED applies to rented properties if the property value is above £500,000 and is acquired by company and owned by companies, partnerships with corporate members, or collective investment schemes.
Generally, the relief can be claimed if the property under question is let to a third party on a commercial basis and is not, at any time, occupied (or available for occupation) by anyone connected with the owner.
How do I file an ATED return online?
To file an ATED return online, you will need to register for an online account with HM Revenue and Customs (HMRC). Here are the steps you can follow:
- Go to the HMRC website and click on the “Register for and use the online service” link.
- Enter your personal details, including your name, address, and National Insurance number, to create an account.
- Once you have registered, log in to your online account and select the option to file an ATED return.
- Enter the property details, including the address, value, and ownership details.
- Determine if any reliefs or exemptions apply and enter those details if applicable.
- Confirm the ATED charge due, and pay the tax online, if applicable.
- Submit the completed return to HMRC.
Is ATED paid in advance?
The ATED charge is payable in advance within 30 days of the start of the tax year, which runs from April 1 to March 31 of the following year. The tax is then due by April 30th of the same year.
For the 2022/23 tax year, the ATED returns and payments were due by April 30, 2022. The ATED charge for the 2022/23 tax year is based on the value of the property as of the relevant valuation date, which is April 1, 2022.
What fine/penalty is payable for non-compliance with ATED?
Penalty is charged by HMRC for:
- Non-filing or late filing or inaccurate filing and
- Non-payment or late payment of ATED charges
Penalty is payable even for a delay by one day. The amount of penalty starts from £100 but can be up-to 5% of the tax payable when return is late by 6 months or more.
Penalty might be reduced depending on behaviour of the taxpayer (whether delay or incorrect return was intentional or not and how supportive the taxpayer is towards the enquiry of HMRC).
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