What is Annual Tax on Enveloped Dwellings (ATED)?

What is Annual Tax on Enveloped Dwellings (ATED) and when does it apply?

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 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 2022/23 ATED Return and pay the 2022/23 ATED due (if applicable) for the chargeable period 1 April 2022 to 31 March 2023 by 30 April 2022. 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.

Understand the valuation dates

The ATED regime, which originally came into effect from 1 April 2013 and applied an initial valuation date of 1 April 2012, requires five-yearly property revaluations. With reference to the upcoming ATED chargeable periods (“years”), this means:

• 2022/23 ATED year: a property revaluation date of 1 April 2017 (or, if later, the date of the property’s acquisition) came into effect from the 2018/19 ATED year and applies through to the 2022/23 ATED year.

If not already obtained, it should therefore be a matter of priority to obtain a 1 April 2017 valuation (if required) for properties falling within the ATED regime in advance of the 30 April 2022 submission deadline for 2022/23 ATED Returns.

• 2023/24 to 2027/28 ATED years: the next (five-yearly) property revaluation date of 1 April 2022 (or, if later, the date of the property’s acquisition) will come into effect from 2023/24 and will apply for all ATED years through to 2027/28.

It is strongly recommended that a 1 April 2022 valuation (if required) be obtained shortly (for accuracy purposes, as close as possible to the actual revaluation date) for properties falling within the ATED regime. Please note, the new 1 April 2022 valuation will apply to ATED Returns from 2023/24 (due for submission by 30 April 2023) and the following four ATED years.

The ATED Online Service

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

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

An appointed ATED agent can submit ATED returns on behalf of an 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 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.

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 2022/23 ATED charges are as follows:

*The ATED charges for 2022/23 are calculated based upon the Consumer Price Index increase in the year ended September 2021 (3.1%), rounded down to the nearest £50, which HM Revenue & Customs published confirmation of on 11 March 2022.

Capital Gains

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

Want to know more?

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