ATED

ATED is the Annual Tax on Enveloped Dwellings.  It’s aimed at companies which own residential property.

The idea is to discourage people from owning their private houses through companies, but to do so the tax covers all residential property owned by “non-natural persons”.

The main problems for landlords – which catch quite a lot of people out – are:

  • You still need to do returns even if you’re not liable for the tax
  • The return is due at the start of the tax year, not at the end
  • If you buy a new property into a company, you need to do a return for it within 30 days of acquisition

You may have to do a return for ATED if you have:

  • A residence in the UK
  • Valued at £500k or more on acquisition (or at 1 April 2017)
  • Which is beneficially owned, completely or partly, by a non-natural person

If you have to do a return, the tax may be reduced to nil if you qualify for one of the reliefs (see below).

In theory you need to do a separate return for every property, every year.  This is due by 30 April in the year – that is, the return for the tax year 2018/19 is due on 30 April 2018.  There is a simplification that allows you to do one return (a “Relief Declaration Return”) for every property covered by a single exemption category.

At Fiander Tovell, we have considerable experience with the ATED system and can advise on whether it will apply, and how to ensure that you can obtain any relief which is due.  We can also act as your agent and file returns on your behalf, ensuring that you do not leave yourself open to penalties.

If you have any questions about ATED, please call your usual Fiander Tovell contact.  Alternatively, ask for Andrew Jackson, our Head of Tax, who will be happy to discuss your situation.

Definition of residence

A residence is a self-contained dwelling.  But:

  • A block of flats is lots of self-contained dwellings, but a building containing several dwellings with internal access to one another counts as one dwelling.
  • Communal things like halls of residence, care homes and barracks aren’t residences.
  • If it’s part residential and part not, you only look at the residential part.

There’s a lot of scope for judgement: the rules aren’t hard and fast.

Valuation

Value is fairly simple, and self-assessed, but there are penalties if you get it wrong.  The banding lasts for 5 years, so there needs be a revaluation at 1 April 2017 of all houses in the regime (this is used for 2018/19 onwards).

You can get HMRC to confirm your banding, if your value is within 10% of a threshold.

You need to lump together part interests to value the whole property.

Owner

The tax only applies if the property is owned by a non-natural person, defined for these specific purposes as:

  • A company, or other body corporate
  • A collective investment vehicle
  • A partnership which includes either of the above

Overseas companies etc. are caught as well as UK ones.

If the property is only part-owned by an non-natural person, the whole tax is still due.

Reliefs

Tax is reduced to nil if the house is:

  • Let on a commercial basis to a third party (no tenant is connected to the owner)
  • Held for charitable purposes
  • Open to the public for at least 28 days per annum
  • Part of a property trading business (and no interim tenant is connected to the owner)
  • Held for property development (and no interim tenant is connected to the owner)
  • For the use of employees of the company, for the company’s commercial business
  • An appropriate farmhouse occupied by the farmer

All these have strings attached, and you still need to submit a return to claim them.

Exemptions

In a few cases you are completely exempt from the regime, and don’t have to do a return.

The main exemption is for a charity using a property in the course of its charitable work.