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June 7, 2016
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Annual Tax on Enveloped Dwellings – Changes from 2016/17

Changes have come into effect on the Annual Tax on Enveloped Dwellings (ATED) from 1 April 2016 to include a new band for properties valued between £500k and £1m, thereby bringing more properties within the scope of ATED.

Updates have also been made to the scope of reliefs available from 2016/17 to include equity release schemes (home reversion plans), property development activities, and properties occupied by employees.

Overview

ATED is a tax paid annually by ‘non-natural persons’ who have an interest in one or more UK dwellings where any single dwelling is worth over £500,000. ‘Non-natural persons’ include companies, partnerships with a company members, and collective investment schemes.

Not all company owned dwellings will be liable for the annual tax. In order to be deemed a dwelling, the property must be used or partly used as a residence, for example as a house or flat.  The property will not be classed as a dwelling if it has a sole commercial purpose such as a hotel, care home, hospital, student accommodation etc.

Initially only properties valued at £2m or more were subject to the charge, however brackets were introduced in 2015/16 for dwellings over £1m, and then over £500,000 in 2016/17.  These values apply to applicable properties (reliefs and exemptions below) in excess of £500,000 on 1 April 2012 (or at the date of acquisition if this is later), for tax returns from 2016/17 onwards.

For 2016/17 the rates are:

Property Value Tax Charge (pa)
£500k≤£1m £3,500
£1m≤£2m £7,000
£2m≤£5m £23,350
£5m≤£10m £54,450
£10m≤£20m £109,050
£20m+ £218,200

For property owned before 1 April 2012, the appropriate figure will be the value at 1 April 2012.  For those owned after this date, the appropriate figure will be the value when the dwelling was acquired.  The valuation must be an objective open market value and will need to be reviewed at 5 yearly intervals e.g. for properties valued at 1 April 2012, a revaluation will be required on 1 April 2017.

Reliefs

Relief from ATED may be claimed in the following circumstances:

  • when the dwelling is let on a commercial basis and is at no point available to anyone connected to the owner
  • when it is open to the public for at least 28 days per year
  • when it is repossessed by a financial institutions as a result of its business lending money
  • when it is a farmhouse occupied by a current or former long serving farm worker
  • when it is owned by a registered provider of social housing

These reliefs have been extended in 2016/17 to the following situations:

  • when the property is being developed for resale by a developer
  • when it is owned by a trader as stock for the sole purpose of resale
  • when it is being used by a trading business to provide accommodation to employees
  • where the property is held exclusively for the purposes an Equity Release Scheme (home reversion plan)

The tax may be reduced if the dwelling was only owned for part of the tax year or its use changed such that it moved in or out of the scope of ATED during the tax year.

ATED Returns

A return must be filed with HMRC for all properties falling within the scope of ATED guidance.

The filing deadline for the return is 30 days following the acquisition of the dwelling. For example, a person who owns a single-dwelling interest on the first day of the chargeable period (1 April each year) will have a filing date for the return of 30 April.  This deadline is extended to 90 days on new build or improvement properties.

Contact us today to discuss your tax requirements.
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