Don’t fall foul of ATED

Since its introduction in 2013, HMRC have collected £390m in ATED.

Annual Tax on Enveloped Dwellings is a tax payable mainly by companies owning UK residential property. It was first introduced in April 2013 to tackle the avoidance of Stamp Duty Land Tax and was originally set up to catch the most expensive homes valued at more than £2m.

Since its introduction however, as is often the case, the threshold has been decreasing. First by including properties worth more than £1m (since 2015/2016), and from 1 April 2016 to any property worth in excess of £500,000. Given the increasing value of UK residential properties, this lower limit will bring more properties held through corporate vehicles within the charge.

There are however several reliefs and exemptions which may mean you don’t have to pay, but the vast majority will still need to file a Relief Declaration Return for each relief claimed. If ATED is payable, an ATED return must be completed for each qualifying property.

Under ATED, properties must be revalued once every five years, with the next revaluation date being 1 April 2017, which will fix the tax bands for the ATED period 1 April 2018 to 31 March 2019.

If you do hold property in any way other than your own name, it could be worth contacting our specialist tax team who can advise what if anything you should be submitting to HMRC, before the penalty notice turns up.  The penalties for non-compliance are a combination of fixed penalties and tax geared penalties.

Consideration could also be given to ‘de-enveloping’. This a grand term for removing property from ownership of the company into personal ownership and could mitigate the ATED charge.

However, certain transfers of property will be subject to substantial tax charges, and planning can be complicated therefore we recommend getting professional advice to make sure you comply with legislation and get the best result for you and your business.

The best course of action will depend on the circumstances surrounding the transaction, the relevant property, its ownership structure and the proposals overall.