The Annual Tax on Enveloped Dwellings (ATED) seeks to penalise those who choose to hold UK residential property via a corporate entity (UK or otherwise) rather than in their personal name. ATED can also apply in situations where shares in a property holding company are held via a trust structure. UK commercial property is not within scope.
The ATED charging structure from 1 April 2016 will be as follows:
|Value of Property
(as at April 2012)
|Level of Annual Charge||Note|
|£500,000 to £1m||£3,500||From 1 April 2016|
|£1m to £2m||£7,000||From 1 April 2015|
|£2m to £5m||£23,350||From 1 April 2013
|£5m to £10m||£54,450||From 1 April 2013
|£10m to £20m||£109,050||From 1 April 2013
|£20m plus||£218,200||From 1 April 2013
Note: The ATED charges may increase annually
There are a number of reliefs, e.g. where property is let to a third party on a commercial basis and is not at any time available for occupation by anyone connected to the owner. Where the property falls within the scope of ATED (even if full relief is available), a UK filing obligation arises.
The ATED period starts on 1 April. For the ATED period 1 April 2016 to 31 March 2017 the return must be submitted and any payment made by 30 April 2016, therefore action needs to be taken now to ensure you meet the deadline.
For properties acquired before 1 April 2012, the valuation relates to the value of the property as at 1 April 2012. The property must be revalued at 5 yearly intervals, the next relevant valuation dates are 1 April 2017 and then 1 April 2022. Advice and historic valuations may be required before 1 April 2016 to ensure that any properties held by corporate entities are not within the scope of the legislation.
If a property is acquired after 1 April 2015, then the ATED return and payment (if any) are due within 30 days of purchase, or 90 days, if it is a new build.
Disposals of properties within the scope of ATED may also be subject to ATED-related Capital Gains Tax (CGT) at a rate of 28%.
Other notable changes to the tax landscape that are set to be introduced in April 2016:
- The rate of income tax on dividends will increase (the current system of notional tax credits will be removed, and a £5,000 ‘dividend allowance’ will be introduced). These changes are likely to adversely affect owner-managers looking to extract funds from their companies and wealthy individuals with significant portfolio income.
- A 3% surcharge on Stamp Duty Land Tax (SDLT) for purchasers of buy-to-let residential properties in the UK to be introduced
- Landlord’s ‘wear and tear allowance’ for letting furnished UK residential property to be removed
- HM Revenue & Customs’ CEO Lin Homer has announced that she will be stepping down from her position in April.
Please do not hesitate to contact any of the Tax team if you would like to learn more or should have any questions.
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Please note that this blog is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this blog.
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