Annual Tax on Enveloped Dwellings (ATED)

FREQUENTLY ASKED BUSINESS QUESTION

Our company’s accountant has asked for the value of the residential property held in the company, why would they need to know this if they have already prepared last year’s Financial Statements?

TAX TIP

I would suspect they are asking ahead of the lessor known Annual Tax on Enveloped Dwellings (ATED) filing date. An ATED return for relevant properties owned between the 1st April 2022 to 31st March 2023 period is required to be filed by 30th April 2022.  

What is ATED?

ATED applies to residential dwellings in the UK valued in excess of £500,000, that are owned by a company or within a corporate wrapper. While you may not have needed to complete an ATED return in the past, you can now fall into the ATED regime if: – 

• the company recently bought a dwelling for over £500,000, an ATED return will be required within 30 days of acquisition to cover the remainder of the year to 31st March 2022. 

• the dwelling’s value has increased in recent years and its market value exceeds £500,000 from 1st April 2022. 

HMRC have set 5 yearly intervals on which properties must be revalued for ATED purposes; the next date for ATED valuations is upcoming on 1st April 2022 and following that 1st April 2027, etc. Valuations must be on an open-market willing buyer, willing seller basis and be a specific amount. There is no need for a formal valuation to be obtained each time, but of course HMRC can challenge a valuation which they believe to be significantly different from the open market value of the single dwelling interest. 

A ‘dwelling’ is defined as ‘a distinct unit of residential property (i.e. a house or flat which is considered as one residence)’. ATED can apply to a property which is suitable for use as a dwelling, not just a property which is actually so used.  

 The Annual Charges start at £3,650 for properties worth more than £500,000 and increase depending on the value of the dwelling. 

Properties that qualify for ATED

 There are various reliefs available for the ATED charge, including where the property is: 

• let to a third party on a commercial basis and isn’t, at any time, occupied (or available for occupation) by anyone connected with the owner 
• open to the public for at least 28 days a year as part of a trade 
• being developed for resale by a property developer 
• owned by a property trader as the stock of the business for the sole purpose of resale 
• repossessed by a financial institution as a result of its business of lending money 
• acquired under a regulated Home Reversion Plan 
• being used by a trading business to provide living accommodation to certain qualifying employees (provided they are entitled to less than 10% of the trade profits, the single dwelling interest and the company holding the single dwelling interest) 
• a farmhouse occupied by a farm worker or a former long-serving farm worker 
• owned by a registered provider of social housing 

It is important to remember that returns must still be filed for relevant properties even where no ATED is due. Relief is available, so the return should be filed, and the appropriate relief claimed. As with other tax returns, HMRC can impose penalties if the ATED return is filed late, therefore it is important to engage early with your accountant to ensure there are no delays in obtaining a valuation and filing a return if required. 

Here to Help

The team at FPM are here to help with all your finance and tax queries. If you would like more assistance in relation to ATED our team of tax specialists are on hand to help. Simply contact our Tax Team.