Annual Tax on Enveloped Dwellings, also known as ATED is a tax charge that is applied annually and has to be paid mostly by those companies that own a UK residential property that has been valued at £500,000 or more.
This tax is also applicable to partnerships with corporate members and a collective investment scheme that could include the likes of a unit trust or an open-ended investment company.
Should a property fall within the threshold for Annual Tax on Enveloped Dwellings (ATED), then an annual return must be completed and returned HMRC along with the relevant tax payment. For those returns submitted between 1 April 2019 and 31 March 2020, then the return will be based on a property valuation that was true on 1 April 2017. As a result, all returns need to be submitted to HMRC between 1 April and 30 April during any chargeable period.
So, Annual Tax on Enveloped Dwellings (ATED) is applicable to those properties that are considered dwellings but what defines a dwelling?
A property is considered a dwelling if it is used or has the potential to be used as a residence and this can include the likes of a flat or a house, this also stands true for those properties that are suitable for use as a dwelling. Along with this, the property also has to be valued at more than £500,000. However, if a property is made up of flats, then each flat will be individually valued.
As far as the scope of ATED reaches, non-residential properties fall outside of it. There is also a number of other properties that are not considered to be dwelling and these include:
- Guest houses
- Boarding school accommodation
- Student halls of residence
- Military accommodation
- Care homes
Property Valuation and Charges
The value of your property has to reflect the respective valuation date. There is also a number of charges that are applicable, and this increase annually to reflect the Consumer Price Index. Below are the current chargeable amounts that stand true for the period of 1 April 2019 to 31 March 2020.
- More than £500k to £1 million – Charges of £3,650
- More than £1 million to £2 million – Charges of £7,400
- More than £2 million to £5 million – Charges of £24,800
- More than £5 million to £10 million – Charges of £57,900
- More than £10 million to £20 million – Charges of £116,100
- More than £20 million- Charges of £232,350
There are a number of reliefs available that can reduce the amount chargeable to nil. However, in order to be considered for relief, a Relief Declaration Return needs to be submitted to HMRC. There are reliefs available if 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 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;
- a farmhouse occupied by a farm worker or a former long-serving farm worker;
- owned by a registered provider of social housing.
Penalties and interest
If you fail to file your return and make your payment on time, then you could face penalties and interest. If a return is inaccurate then you could also face penalties.