Annual Tax on Enveloped Dwellings (“ATED”) Print

This anti-avoidance measure was introduced in 2012 to deter the purchase of residential property in the UK by what is described as non-natural persons (“NNPs”). The target here is companies and similar structures used to purchase an interest in single high value residential property valued at more than £2m. This came into effect for properties owned by NNPs on or after 1 April 2013.
Part of the package of measures was an increase in the rate of Stamp Duty Land Tax (“SDLT”) to 15% on high value residential property acquired by NNPs, and this took effect from 21 March 2012. At the time this charge was introduced the SDLT payable was 7% if such a property was acquired by a “natural person”. With the SDLT reforms from 4 December 2014, the rate of SDLT applied to residential property in excess of £2m has now become less of a deterrent to acquiring property by NNPs.
For these purposes an NNP is:

  • A company or other body corporate;
  • A partnership where one or more members of the partnership is a company;
  • A collective investment scheme.

The original proposals were that all NNPs would be caught by this legislation, but following consultation various reliefs have been introduced so that the ATED charge, and the 15% rate of SDLT will not apply in most situations where the dwelling is being used for commercial purposes. These reliefs are discussed in detail later in this section.
Certain safeguards have been effected so that if within 3 years of the date of the transaction the property is no longer held for a purpose for which the relief was claimed, or is kept for personal or family occupation, then additional SDLT will be charged as if the acquisition was chargeable at 15%.
In addition to the increase in SDLT to 15%, the legislation provides for:

  • An annual tax charge based on the value of the property at the time of purchase, or if already owned on 1 April 2013, the value of the property on that date; and
  • A CGT charge on disposals by all NNPs.

The ATED came into effect from 1 April 2013, and is based on the market value of the property on 1 April 2012, or on the date of purchase if that is after 1 April 2012. Thereafter the properties must be re-valued every 5 years. For properties owned at 1 April 2012 the next valuation will be required at 1 April 2017, and that will form the basis of the ATED charge for the 5 years commencing 1 April 2018.
The ATED payable depends upon which of the four bands of values into which the relevant property falls, and the amount payable is index-linked in line with the Consumer Prices Index (“CPI”). The amounts chargeable for the period 1 April 2014 to 31 March 2015 are as follows:

Property Value, £ ATED Payable, £
2,000,001 to 5,000,000 15,400
5,000,001 to 10,000,000 35,900
10,000,001 to 20,000,000 71,850
Over 20,000,000 143,750

The government has announced in the Autumn Statement that the rates of ATED are to increase substantially for the period 1 April 2015 to 31 March 2016. One reason for this, presumably being that the SDLT deterrent has been significantly reduced as a result of the changes to SDLT.
The threshold at which the ATED is charged is being reduced from £2m to £500,000 over two years. From 1 April 2015 a new band will be introduced for properties valued at more than £1m, but less than £2m with an annual charge of £7,000. Transitional provisions similar to the introduction of ATED will apply so that the first self-assessment ATED return for properties within this band will not be due until 1 October 2015, and payment should be made by 31 October 2015.
The amounts chargeable for the period 1 April 2015 to 31 March 2016 are as follows:

Property Value, £ ATED Payable, £
1,000,001 to 2,000,000 7,000
2,000,001 to 5,000,000 23,350
5,000,001 to 10,000,000 54,450
10,000,001 to 20,000,000 109,050
Over 20,000,000 218,200


From 1 April 2016 a further new band will come into effect for properties valued at more than £500,000, but less than £1m, and the annual charge will be £3,500. For future years these amounts will also be increased in line with the CPI. At this stage HMRC have not announced the filing deadline, or due date for payment of this band.
The ATED is charged at the beginning of each year, and is time apportioned on a daily basis if the property is acquired or disposed of during the relevant year.
Relief from ATED is due if the dwelling:

  • Is held for a property rental business where it is let out to a third party on a commercial basis and is not at any time occupied by anyone connected with the owner;
  • Is open to the public for at least 28 days per annum. If part of the property is occupied as a dwelling in connection with running the property as a commercial business open to the public, the whole property is treated as one dwelling and relief applies to the whole property;
  • Is part of a property trading business and is not, at any time, occupied, or available for occupation by anyone connected with the owner;
  • Is part of a property developer’s trade where the dwelling is acquired as part of a property development business, and the property was purchased with the intention to re-develop it, and sell it on.
  • It must not, at any time be occupied or available for occupation by anyone connected with the owner.
  • Is held for the use of employees of the company, for the company’s commercial business provided the employee does not have an interest (directly or indirectly) of more than 10%. The employee’s duties must not include services for any present or future occupation of the property by someone connected with the company. The relief is extended to partners who do not have an interest of more than 10% in the partnership;
  • Is a farmhouse which is occupied by a qualifying farm-worker who farms the associated farmland; a former long-serving farm worker or their surviving spouse or civil partner;
  • Is a dwelling acquired by a financial institution in the course of lending;
  • Is owned by a provider of social housing.

Where relief is due, an annual ATED Return must still be made, and the relevant relief claimed.
In addition to the above reliefs certain NNPs are exempt from the ATED charge. These are:

  • Charitable companies where the interest in the dwelling is held for charitable purposes;
  • Public bodies, and
  • Bodies established for national purposes.

ATED Returns and payment of the ATED charge must be made by 30th April each year.
For dwellings acquired after 1 April in an ATED period, the first self-assessment of ATED and payment must be made within 30 days of acquisition. For dwellings that otherwise newly come within the ATED charge, for instance it has been newly constructed, or there is a change of use, the return, and payment must be made within 90 days.
Where relief is due against the ATED, for example because the dwelling is acquired as part of the non-natural person’s property business, a return must still be submitted, and the relief claimed.
The third measure was the introduction of a CGT charge from 6 April 2013 on gains made by all NNPs on the disposal of UK residential property with a value exceeding £2m. This includes UK companies as well as overseas companies. This is subject to the reliefs listed above in connection with the ATED. The rate at which CGT is charged is 28%. These rules do not appear to have been extended to the lower value properties which come within the ATED charging provisions from April 2015, and 2016. This may well be because of a further announcement made in March 2014 that the government intends to introduce a CGT charge on the disposal of residential property held by non-UK residents.
A tapering provision provides that the ATED gain is restricted to an amount equal to five-thirds of the proceeds in excess of the £2m threshold. This would only appear to be relevant in respect of dwellings which are acquired after 6 April 2013 for less than £2m, or valued at less than £2m on that date, which are subsequently sold for more than £2m.


Dwelling acquired by NNP in May 2013 for £1,500,000, and sold in October 2017 for £2,300,000.
The gain, without tapering would be £800,000
With taper the gain is restricted to:
Proceeds in excess of £2m (£300,000) x 5/3 = £500,000.
An offshore NNP is only taxable on the ATED part of the gain. Where an offshore NNP disposes of a dwelling on which the ATED has been charged, and the property was owned prior to 6 April 2013, the period of ownership should be split into two parts:

  • Period of ownership before 6 April 2013, and
  • Period of ownership after 5 April 2013

The pre 6 April 2013 part of the gain is based on the difference between the disposal proceeds and the value of the dwelling on 5 April 2013, and in the case of an offshore NNP there is unlikely to be any tax payable. The part of the gain arising after 5 April 2013 is calculated by reference to the disposal proceeds in excess of the value at 5 April 2013, or cost where the acquisition is after 5 April 2013. The gain is then time-apportioned between the period chargeable to ATED, and any period of ownership from 6 April 2013 during which ATED is not chargeable by reason of the reliefs available.
A UK NNP is taxable on the whole gain, and Indexation Relief is due in respect of the non-ATED period only. It should also be noted that the ATED gain is taxable at 28% whereas the non-ATED gain is charged at normal corporation tax rates.
For a UK NNP the following example sets out how the gain is calculated:


Residential dwelling bought in April 2006 for £3,000,000 and sold in April 2016 for £6,000,000. At 5 April 2013 the dwelling was valued at £5,000,000.
Estimated Indexation Factors:

  • April 2006 to April 2013 0.3
  • April 2006 to April 2016 0.4
  • April 2013 to April 2016 0.1

Total number of days chargeable to ATED 600
Total days April 2013 to disposal 1,100


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