Introduction to ATED
Introduced in 2013, Annual Tax on Enveloped Dwellings was aimed at controlling the indirect ownership of residential properties in the UK. Indirect ownership refers to owning a property by a non-natural person like a company or corporate body. As people used to hide their properties by transferring them to corporate bodies to avoid or minimize taxes like Stamp Duty Land Tax.
ATED Return
An ATED return is required to be completed where your company owns a dwelling in the UK that is valued at more than £500,000. Returns need to be submitted online to HMRC between 1 April and 30 April in any chargeable period.
Also, a partnership which has corporate members or collective investment schemes like a trust, unit, or open-ended investment company that owns a dwelling in the UK that is valued at more than £500,000 must complete an ATED return.
Definition of a dwelling regarding ATED
Your property is a dwelling if all or part of it is used, or could be used, as a residence, for example a house or flat. It includes any gardens, grounds, and buildings within them. Some properties are not classed as dwellings, such as hotels, guest houses, boarding school accommodation, hospitals, student halls of residence, military accommodation, care homes and prisons.
However, when you purchase a residential property that falls within the ATED regime, the return will need to be prepared and submitted online to HMRC within 30 days.
How to determine the value of property?
To file a return, you must know the value of your residential property. You can find out the value of your property based on the amount that you bought it for. 1 April 2012 is the initial valuation date if your residential property is owned on that date or at a previous date or after that date. There is a fixed revaluation date for all properties after the duration of 5 years. For e.g., 1st April 2012, then 1st April 2017, and 1st April 2022.
However, you must revalue the properties you owned on or before 1 April 2022 using that date. If you acquire property after 1 April 2022, use the acquisition date.
It is possible for the company making the return to use a director’s valuation of the property based on desk research, but it should be remembered that if HMRC challenges a return and the valuation proves to be inaccurate, penalties may be charged. HMRC applies a risk-based approach when dealing with ATED, and a formal robust revaluation from a property professional may be required if the market value of a dwelling is close to the ATED threshold limits mentioned below.
Charges
The annual chargeable amounts for ATED increase annually in line with the Consumer Price Index. The current chargeable amounts for 1 April 2024 to 31 March 2025 are set out below.
| Property value | Annual charge |
| More than £500,000 up to £1 million | £4,400 |
| More than £1 million up to £2 million | £9,000 |
| More than £2 million up to £5 million | £30,550 |
| More than £5 million up to £10 million | £71,500 |
| More than £10 million up to £20 million | £143,550 |
| More than £20 million | £287,500 |
Amounts are generally payable by 30 April in any chargeable period. Where a liability arises in only part of the year then only a proportion of the annual amount payable will need to be paid.
Reliefs available
There are reliefs available to reduce chargeable amounts to nil. However, a Relief Declaration Return needs to be prepared and submitted online to HMRC by the due date to claim the relief. Some examples of reliefs that are available are 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.
- 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 because of its business of lending money.
- acquired under a regulated Home Reversion Plan.
