ATED return deadline looming for affected properties

ATED return deadline looming for affected properties

Since 1 April 2016, the Annual Tax on Enveloped Dwellings (ATED) regime has applied to all UK residential properties worth over £500,000 owned by UK or non-UK companies, partnerships with one or more corporate members, and collective investment vehicles – all of which are referred to as Non-Natural Persons (NNPs).

So, when is annual tax on enveloped dwellings applicable?

NNPs with a beneficial interest in UK residential property worth over £500,000 need to submit a 2024/25 ATED Return and pay the 2024/25 ATED due (if applicable) for the chargeable period 1 April 2024 to 31 March 2025 by 30 April 2024. As this date is fast approaching, it is important NNPs take action, otherwise penalties will apply:

• Penalties apply for both late submission and late payment, and penalties can accumulate quickly if ATED filing obligations are overlooked (even if relief from the ATED charge is claimable).
• Interest will be charged on late paid ATED.

It is important to note that ATED can also apply even if the NNP only owns a partial interest in the UK residential property.

If a UK residential property falling within ATED is acquired part-way through a year (or the use of the property changes to bring it in to ATED), an ATED return must be submitted within 30 days of acquisition/change of use. This deadline can be extended to 90 days in some limited circumstances.

Valuation date

The ATED regime, which originally commenced in 2013/14 and applied an initial valuation date of 1 April 2012, requires five-yearly property revaluations.

The current five-yearly revaluation date of 1 April 2022 (or, if later, the date of the property’s acquisition) came into effect from the 2023/24 chargeable period and will apply through to the 2027/28 chargeable period.

If not already obtained, it should be a matter of priority to obtain a retrospective 1 April 2022 valuation (if required) for properties falling within the ATED regime - in advance of the 30 April 2024 submission deadline for 2024/25 ATED Returns.

HMRC’s guidance on valuing properties for ATED purposes can be found here:

Annual Tax on Enveloped Dwellings: work out the value of your property - GOV.UK (www.gov.uk)

The valuation must be based on the open-market value of the property, i.e. the price between a willing buyer and seller. Whilst a formal valuation is not strictly required, it is advisable to use a property professional (for example, a surveyor or estate agent) in order to ensure that the figure is robust and reasonable. HMRC guidance also confirms that the valuation must be a specific amount rather than a ‘within the range of’ type valuation.

ATED online service

In order to submit an Annual Tax on Enveloped Dwellings return to HM Revenue & Customs (HMRC), it is first necessary for a NNP to register to  GOV.UK’s ATED online service: Submit your Annual Tax on Enveloped Dwellings return - GOV.UK (www.gov.uk).

As tax advisors, we have our own ATED Online Service account and can be appointed as agent to act on behalf of a NNP.

An appointed ATED agent can submit ATED returns on behalf of a NNP, and communicate with HMRC on the NNP’s behalf in relation to ATED matters.

Please get in touch with your local Azets advisor if you would like to find out more.

Reliefs and exemptions for ATED

In some circumstances, it may be possible to either claim relief or be exempt from the ATED charge (the relief is not automatic – it must be claimed via an ATED Return). The main reliefs and exemptions being if the NNP uses the property:

• in a commercial letting business, provided no connected parties are in occupation.
• in a bona fide property development business.
• for charitable purposes.
• for public use on at least 28 days per annum.

Where a NNP is a property developer (and at the beginning of an ATED year it holds no dwellings in existence): if it subsequently completes development of a dwelling with a value of more than £500k during the relevant ATED year, consideration should be given to submitting an advance, protective relief declaration for that ATED year (i.e. ahead of completion). A dwelling for this purpose would be deemed to come into existence based upon the earliest of occupation and being registered for Council Tax (or domestic rating) purposes.

Relief Declaration Returns

For NNPs that hold multiple properties eligible for ATED relief, it is possible to submit a single simplified Relief Declaration Return for all properties for which the same type of relief is claimed. The effect of this is to claim full relief from the ATED charge.

Breakdown of the ATED Charge (when ATED relief is unavailable)

For NNPs who will be required to pay the ATED charge, the 2024/25 ATED charges are as follows:

* the ATED charges for 2024/25 are calculated based upon the Consumer Price Index increase in the year ended September 2023 (6.7%), rounded down to the nearest £50, which HM Revenue & Customs published confirmation of on 22 November 2023.

Capital Gains

Non-resident companies disposing of UK residential property are assessable to Corporation Tax on the Capital Gain/(loss) following disposal.

We are here to help

If there are any areas of ATED you are unsure about or you would like to find out more, please get in touch with a member of our tax team or your usual Azets advisor.