What is ATED
and when does it apply?
Introduced by the Finance Act 2013 and coming into effect on 1 April 2013, the Annual Tax on Enveloped Dwellings (ATED) is a tax payable by non-natural persons (NNPs) owning, or part-owning, residential properties.
It aims to make it less attractive for residential properties to be owned indirectly. NNPs include companies, whether UK-based or overseas, and partnerships (where one of the partners is a company).
Under s.112 of the Finance Act 2013, a property is eligible to be taxed under ATED if it is used, or could be used, as a dwelling, for example a house or a flat. All land and associated property intended to be used for the enjoyment of the dwelling, such as gardens, driveways, garages and outbuildings, is to be included as part of the dwelling.
Valuation and Bands
The ATED levies a charge which is related to the market value of the property in question. The market value is currently assessed as at 1 April 2012 or the date of acquisition (whichever is the latter). This is a self-assessment valuation and, as such, there is no requirement for a formal valuation. However, it is important to ensure that the valuation is correct as it can affect the level of tax payable. HMRC has said that it “will normally be able to accept valuations prepared by a professional property valuer”.
Whilst initially only properties valued at £2 million or more were caught, from 1 April 2015 properties valued at £1 million or more were included, and from 1 April 2016 properties valued £500,000 or more were also subject to this tax. The latest chargeable amounts, being for the period 1 April 2016 to 31 March 2017, are detailed in the table below.
|Property Value||Annual Charge|
|More than £500,000 but not more than £1m||£3,500|
|More than £1 million but not more than £2m||£7,000|
|More than £2 million but not more than £5m||£23,350|
|More than £5 million but not more than £10m||£54,450|
|More than £10 million but not more than £20m||£109,050|
|More than £20m||£218,200|
The annual charge is recalculated based on inflation. Although the expectation had been that the charge would increase in line with inflation, the last increase was 50% above inflation.
Reliefs and Exemptions
There are a variety of reliefs that can be claimed which reduce, or eliminate, the ATED annual charge. These include, but are not limited to, properties let on a commercial basis to anyone not connected with the owner, properties being developed for a resale by a property developer, and farmhouses occupied by a farm worker or a former long-standing farm worker.
In order to claim these reliefs a return must be made. If you are not sure whether your property is eligible for an exemption, it is worth taking some advice on this.
Exemptions include charitable bodies, where the property is being used for charitable purposes, and public bodies. In these cases there is no need for a return to be made.
The valuation date has, until now, been 1 April 2012 (or the date of acquisition if later). However, from 1 April 2018, the valuation date will be reset to 1 April 2017. Given the rate of increase in residential property prices since 2012, with a national average increase of around 24% and a South East average increase of around 40%, it is likely that properties may fall into different valuation bands. Where properties are located in different parts of the country, it is necessary to consider the local residential market trends.
It is also probable that properties which fell just under the £500,000 band will now fall within this and thus become chargeable where they were previously not. As such, it is important to consider whether properties owned by NNPs will become chargeable and, where necessary, obtain a valuation to confirm this.