Annual Tax on Enveloped Dwellings (ATED): Are you prepared?

ATED returns have to be submitted each year, in April (or 30 days from acquiring a new property). The ATED charge must be paid by 30 April each year (or 30 days from acquisition), where a residential property that’s situated in the UK is held by a ‘non-natural person’ (NNP) and worth more than £500,000. An NNP is a company, partnership with a corporate member or a collective investment scheme.

The residential property must be worth at least £500,000, and it’s important to note that this is the value of the property and not the share owned by the NNP.

ATED charges are payable annually and for 2024/25, start from £4,400 for properties worth £500,001 and can be as much as £287,500 for properties worth over £20,000,000.

ATED will apply when, for example, a company owns a residential property where the shareholder or a close relative is living, even if it’s for just a short period of time.

Are there any exemptions?

There are tax reliefs and exemptions that may reduce the amount of ATED payable and may even mean there is no ATED charge at all. Even if reliefs or exemptions apply, a Relief Declaration Return (RDR) must still be submitted by 30 April. Reliefs may be available if the property is:

• Let to a third party on a commercial basis
• Open to the public
• Being developed for resale by a property developer
• Being held as stock for resale by a property trader
• Repossessed by a financial institution (i.e. bank or building society)
• 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 or a qualifying house co-operative

How to value a property

There’s no requirement to get a professional valuation; the directors can work out the value themselves if they wish. However, valuations must be based on the open-market values.

The valuation date for the ATED returns due by 30 April 2024 will be based on the valuation as of 1 April 2022 or purchase date if later. 

Stamp Duty Land Tax implications

In circumstances where an NNP acquires residential property, there’ll be a 15% Stamp Duty Land Tax charge, unless an exemption or relief applies. This is a flat rate and not the sliding scale rate that an individual receives when purchasing a residential property.

This can have a huge impact on the amount of SDLT payable on acquisition. For example, a property purchased by an NNP for £500,001 would have SDLT payable of £75,000 unless a relief or exemption applies.

Need help?

If you have any queries on the above or would like to discuss how we can help to manage your tax bill, please get in touch with your usual larking Gowen contact. You can find contact details on the Our People section of the website or email enquiry@larking-gowen.co.uk.

Vicky Craske and Alex Coghill