Annual Tax on Enveloped Dwellings (ATED)

ATED is an annual tax payable mainly by companies that own UK residential property valued at more than £500,000 for returns from 2016-2017 onwards.

For the purposes of this tax a property is a “dwelling” if all part of it is used, or could be used, as a residence, for example a house or flat, and includes any gardens and grounds, and buildings within them. The statutory definition is found in sections 112 – 119 of the Finance Act 2013.

With effect from 1 April 2020 dwellings which fall within the scope of the provisions and are valued at between £500,000 and £1m face an annual charge of £3,700; for those with a value of more than £1m up to £2m the tax rises to £7,500; for those valued at more than £2m and up to £5m the increase is to £25,200 and for those worth between £5m and £10m the annual charge is £58,250; with higher charges applying above this up to £236,250.

The ATED tax year runs from 1 April to 30 March each year and affected taxpayers are required to submit their return by 30 April for each year during which they hold a qualifying UK dwelling.

A dwelling that falls within the relevant definition does not require a new valuation every year as the statutory provisions provide the relevant valuation dates which are:

  1. If the interest in the property was owned on or before 1 April 2012 then the initial valuation date is 1 April 2012.
  2. If the interest in the property is acquired after 1 April 2012 then the initial valuation date is the date of completion of the purchase or, if earlier, substantial performance of the contract.
  3. If the property is built after 1 April 2012 then the initial valuation date is the date when the property is first occupied, or the ‘completion day’ whichever is the earliest. The ‘completion day’ is the day on which the new dwelling is treated as having come into existence for the purposes of Council Tax.

All properties within ATED will be revalued at 5 yearly intervals from 1 April 2012 with the first revaluation date being 1 April 2017 and then 1 April 2022 and so on. The value of the property for any chargeable period is therefore the later of:

  • its initial valuation date, or
  • the revaluation date.

Crucial to working out the amount of tax payable is knowing the value of the property at the relevant valuation date. Correctly establishing the value is potentially a route to a significant saving in the annual tax charge, as where the relevant figure falls at/around the margins of the tax bands it is essential for it to be properly researched and evidenced, as depending on which side of the line the value falls there can be significant tax savings over a five-year period.

Full details concerning the statutory provisions can be accessed via HMRC and we recommend that legal advice is taken as to the application of the regulations to your particular circumstances.

However, for valuation advice please do not hesitate to contact Lloyd Smale FRICS, RICS Registered Valuer at Carter Geering on 01363 773757, mob. 07535 099660  or by email at: lloyd@cartergeering.com .