7 December 2023 by Bradley Ali

Annual Tax on Enveloped Dwellings

What is the Annual Tax on Enveloped Dwellings (ATED)?

On 22 November 2023, the Autumn Statement announced increases in ATED charges for the new financial year (from 1 April 2024). Most property owners know about stamp duty land tax but ATED is just as important to consider when buying a residential property in the name of a company.

Why is the Annual Tax on Enveloped Dwellings important for companies?

The ATED is an annual tax which is payable by companies (as well as partnerships and collective investment schemes) that own residential property in the UK valued at more than £500,000.

ATED applies to a ‘dwelling’, i.e. if all or part of the property is used or could be used as a residence. This includes houses and flats. Properties such as hotels, guest houses, hospitals, military accommodation, care homes and boarding schools are not classed as dwellings and therefore exempt from the ATED.

ATED applies to properties worth over £500,000. You must revalue your property every 5 years in line with the ATED legislation. If you acquire a property for the purpose of residential use, you should obtain a valuation on the date of acquisition. If you already owned a property before April 2022, then you must ensure the property is revalued.

The table below shows the Autumn Statement’s increase in the ATED chargeable for the 2024/2025 financial year compared to the 2023/2024 financial year. The increase is based on the Consumer Price Index (CPI) which was 6.7% in September 2023.

1 April 2023 – 31 March 2024 1 April 2024 – 31 March 2025
Over £500,000 – up to £1 million £4,150 Over £500,000 – up to £1 million £4,400
Over £1 million – up to £2 million £8,450 Over £1 million – up to £2 million £9,000
Over £2 million – up to £5 million £28,650 Over £2 million – up to £5 million £30,550
Over £5 million – up to £10 million £67,050 Over £5 million – up to £10 million £71,500
Over £10 million – up to £20 million £134,550 Over £10 million – up to £20 million £143,550
More than £20 million £269,450 More than £20 million £287,500

 

There are reliefs you may be able to claim, for example where the property is:

  • let to a third party on an arm’s length commercial basis
  • 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
  • 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 housing co-operative

There are also exemptions for charitable companies (using the dwelling for charitable purposes), public bodies and bodies established for national purposes.

It is therefore crucial that companies, partnerships and collective investment schemes submit a ATED tax return for the correct amount or claim the relevant relief. Penalties and interest can be charged if you fail to file the return, fail to pay on time or if the return is inaccurate. To submit your return, you can use the ATED online service or via your tax advisor. Should a company disagree with HMRC’s decision in relation to the return, the company may challenge the decision by appealing in writing within 30 days of the decision.

If you have any queries about ATED or any other commercial property matters, please contact our expert Commercial Real Estate team.

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