Annual Tax on Enveloped Dwellings (“ATED”) Print
This anti-avoidance measure was introduced to deter the purchase of residential property in the UK by what is described as non-natural persons (“NNPs”). The target is companies and similar structures used to purchase an interest in single residential property valued at more than £0.5m.
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.
Various reliefs are available so that the ATED charge does not apply in most situations where the dwelling is being used for commercial purposes. These reliefs are discussed in detail later in this section.
The ATED came into effect from 1 April 2013 and is initially 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 a revaluation was required as at 1 April 2017, and that revalued amount forms the basis of the ATED charge for the 5 years from 1 April 2018.
When originally introduced the ATED charge applied to properties valued at more than £2m. From 1 April 2015 properties valued at more than £1m were brought within the charge, and from 1 April 2016 the charging threshold was reduced to £0.5m
The ATED payable depends upon which of the bands of values the relevant property falls into. The amount payable is index-linked in line with the Consumer Prices Index (“CPI”). The amounts chargeable for the period 1 April 2021 to 31 March 2022 are as follows (comparative amounts for the year 1 April 2020 to 31 March 2021 are in parenthesis):
|Property Value, £||ATED Payable, £||£|
|500,001 to £1,000,000||3,700||(3,700)|
|1,000,001 to 2,000,000||7,500||(7,500)|
|2,000,001 to 5,000,000||25,300||(25,200)|
|5,000,001 to 10,000,000||59,100||(58,850)|
|10,000,001 to 20,000,000||118,600||(118,050)|
The ATED is charged at the beginning of each year, and the ATED for 2021/22 is payable by 30 April 2021.
The charge 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;
- Is owned by a housing co-operative. This is a new relief from 1 April 2020.
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 within this anti-avoidance package 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. There was no need to extend the ATED CGT charge to the lower value properties which came within the ATED charging provisions from April 2015, and April 2016 because all UK residential property came within the charge to CGT from April 2015.
The ATED CGT charge has been abolished for disposals after April 2019, being part of the expansion of the CGT regime to include disposals of UK commercial property as well as UK residential property by non-UK residents. (See CGT section on Non- Residents owning UK Property).
With the new CGT rules combined with ATED, and the IHT changes from April 2017, the holding of UK property through offshore structures is far less advantageous than in prior years, and in many cases the tax charge will be greater than if the property is owned by the individual directly.