The annual tax on enveloped dwelling applies in the main to companies that own residential property in the UK. The amount of the tax depends on the value of the property, and only applies where the property is valued at more than £500,000.
Scope of the ATED
A liability to the ATED arises where a property that is classed as a ‘dwelling’ is owned completely or partly by a company, a partnership where any of the partners is a company, or by a collective investment scheme (for example, a unit trust or an open-ended investment vehicle), and that property is worth more than £500,000.
A property is classed as a dwelling if all or part of it is used, or could be used, as a residence. The definition of dwelling includes houses and flats. Where the property has a garden or grounds, these too form part of the dwelling.
However, the definition of ‘dwelling’ excludes hotels, guest house, boarding house accommodation, student halls of residents, care homes, hospitals, military accommodation and prisons.
In some circumstances it may be possible to claim relief from the charge, for example if it is let to a third party on a commercial basis or open to the public for at least 28 days a year. Details of the reliefs and exemptions can be found on the Gov.uk website.
Valuing the property
To ascertain whether the ATED applies and if it does, the amount of the tax, the property’s value must be known. For ATED purposes, properties are revalued every five years; from 1 April 2018 the charge is based on the value as at 1 April 2017. The next revaluation date is 1 April 2022.
The value of the property is the price that it would fetch in the open market with a willing buyer and a willing seller. If help is needed in working out how much ATED is due, HMRC can provide a pre-return banding check. Applications can be made on the Gov.uk website using the PRBC form.
The chargeable period for the ATED runs from 1 April to the following 31 March.
Where the property in respect of which a liability to the ATED is held on 1 April, a return for the period that commences on that date must be filed by 30 April in that year. Thus, where a property within the ATED is held on 1 April 2020, a return for the chargeable period that runs from 1 April 2020 to 30 March 2021 must be filed by 30 April 2020. Returns must be filed online.
Amount of the charge
The amount that charged depends on the value of the property. The charge for the period from 1 April 2020 to 31 March 2021 is shown in the table below. It must be paid by 30 April 2020.
More than £500,000 up to £1 million
More than £1 million up to £2 million
More than £2 million up to £5 million
More than £5 million up to £10 million
More than £10 million up to £20 million
More than £20 million