The Annual Tax on Enveloped Dwellings (ATED) applies to Non-Natural Persons (NNPs) that own UK residential properties. These can include companies, corporate partnerships, and collective investment schemes. Furthermore, understanding the Annual Tax on Enveloped Dwellings is essential if your company owns high-value property
What is a Non-Natural Person (NNP)?
For the purposes of the tax rules, the following are considered Non Natural Persons
However, Trusts are not NNPs. Furthermore, ATED applies regardless of whether the NNP is UK-based or overseas.
Understanding the Annual Tax on Enveloped Dwellings - who needs to register?
You can register your company can register yourself or appoint an agent. However your agent must register for online services and obtain an authorisation number. What's more, they'll need this number for you to appoint them. Equally importantly, if an agent represents an overseas client without a UTR, it's also necessary to an ATED1 form to HMRC.
What counts as a dwelling?
A dwelling is considered to be a property which is used wholly or partly as a residence. Additionally, it also includes land, gardens, patios, and garages. Furthermore, a property in the process of being built or adapted for residence counts too.
However, some categories of property are not classed as dwellings. These include hotels, guest houses, care homes, student and military accommodation, and prisons.
Similarly, undeveloped land is not subject to the ATED unless it becomes part of the land occupied or enjoyed with a dwelling. However, land that subsists or is intended to subsist for the benefit of a dwelling is also subject to the ATED charge.
When is property owned?
As a general rule, property is owned when you hold a chargeable interest. In other words, any estate, interest, right or power in or over land in the UK.
Additionally, this includes the benefit of an obligation, restriction or condition affecting the value of any of the above. However, licenses to use or short-term tenancies are usually excluded.
What is the taxable value?
The taxable value is the value of the property at the applicable valuation date. Furthermore, the taxable value determines what the ATED charge is.
Currently, the ATED applies if a dwelling has a taxable value in excess of £500,000. Historically the valuation figure has been reduced periodically and this current value has been implemented since April 2016.
Valuation date
The most recent revaluation date was 1 April 2022. For 2023-24 and the following four years the taxable value of a property is it's value at 1 April 2022. However, if acquired after 1 April 2022, the taxable value of a property will be it's cost.
Pre-Return banding Checks (PRBC)
If your property value is close to a tax band threshold, you can request a PRBC. HMRC responds within 30 days. You cannot request this check if a relief reduces the charge to nil.
If your property value is close to a tax band threshold, you can request a PRBC. HMRC responds within 30 days. You cannot request this check if a relief reduces the charge to nil.
Moreover, HMRC will accept valuations prepared by a professional property valuer. Although they reserve the right to enquire into any subsequent ATED returns. Furthermore they can challenge valuations that are included in those returns where they consider there is a risk that the return or valuation is wrong.
What is the annual charge and Stamp Duty Land Tax?
The annual charge is calculated is a fixed charge based on the property's value and is payable in advance. You can see more details about the amounts payable here.
Where a property is purchased mid-year the charge is time apportioned. The ATED charge referred to above is multiplied by N/365 (or 366 for a leap year), where N is the number of days in the year that the property is within the ATED charge. ATED is payable annually in advance by 30 April for the chargeable period covered by the return.
A substantial acquisition or disposal will also trigger a revaluation date for ATED purposes. Broadly speaking, an acquisition or disposal is considered 'substantial' where the chargeable consideration for SDLT purposes is £40,000 or more. This can result in changes to the taxable value or ATED band:
If your company buys property for over £500,000 and subject to ATED it will pay a 15% SDLT rate.
When to file an ATED return
The ATED return must be filed on or after 1 April, for the following chargeable period. Therefore you only have a 30-day window to file the return as the deadline is 30 April.
For example ATED returns for the period 1 April 2025 to 31 March 2026 must be filed on or after 1 April 2025, and no later than 30 April 2025.
An ATED return must be filed within 30 days of the acquisition of a high-value property,
For example, if you purchase a property on 1 April 2026 you must file a return by 1 May 2026.
Amending an ATED return
You can amend an ATED return at any time within 12 months of the end of the relevant period. For example, if the change is for the period 1 April 2024 to 31 March 2025, you should submit it by 31 March 2026.
ATED Reliefs and Excluded Dwellings
An ATED return will still be required where a relief is being claimed and potentially no tax charge is payable. Furthermore all Reliefs under ATED should be reviewed annually and claimed in the ATED return as appropriate.
De-enveloping a property
It's possible to exit the ATED regime if your company decides to de-envelope a property. In other words return it to the shareholders, However, you should consider the SDLT and other tax consequences.
A voluntary liquidation may be the most desirable way to achieve this. Although, the property may also be distributed in specie.
Summary
By understanding the Annual Tax on Enveloped Dwellings you can ensure your business remains compliant. If your property is subject to ATED, filing on time, valuing correctly, and claiming any reliefs is essential.
For more useful information, check out our Ebooks here
And if you'd like to know how we can help you with all of this, or with anything else, feel free to give us a call on 01202 048696 or email us at [email protected].
Alternatively, please feel free to complete our Business Questionnaire here.