ATED – tax returns due by 1 October 2013
The deadline is fast approaching for submission of your tax return if you own a property worth more than £2m.
The Annual Tax on Enveloped Dwellings or ATED (previously called the Annual Residential Property Tax) is a tax payable by any company that owns a high value residential property (a ‘dwelling’). It was introduced earlier this year and came into effect from 1 April 2013 and will be payable each year. The tax deadline for submission of your ATED return is 1 October 2013.
To follow is a brief summary of what ATED is and what to do if you are affected by it.
What is ATED?
ATED is an annual tax levied on enveloped dwellings, being any UK residential property valued at more than £2m owned by companies, partnerships with a corporate member and collective investment schemes.
Generally residential properties are owned directly by individuals, but if these are owned by a company then the dwelling is referred to as ‘enveloped’ as the ownership is considered to be part of a corporate ‘wrapper’ or ‘envelope’.
The ATED will apply if the high value residential property is owned by a company and is not being developed or rented commercially to an unconnected party.
Who needs to complete an ATED return?
You will need to complete an ATED return for your residential property if all of the following conditions are met:
- Your property is classified as a ‘dwelling’
- It is situated in the UK
- It is valued at more than £2m as at 1 April 2012 (or as at the date of acquisition, if later)
- It is owned by a company (this could be either wholly or partially owned and also includes partnerships and other collective investment schemes)
What are the ATED tax charges?
The ATED will depend on the value of the property as at 1 April 2012 and will be linked to inflation. This value will determine the ATED tax band for the first 5 years of ATED returns.
The tax charge to be levied for the 2013-14 year is illustrated in the table below:
| PROPERTY VALUE | ANNUAL TAX 2013/14 |
| £2,000,001 to £5,000,000 | £15,000 |
| £5,000,001 to £10,000,000 | £35,000 |
| £10,000,001 to £20,000,000 | £70,000 |
| £20,000,001 and over | £140,000 |
You may be eligible for a proportional rebate on the charges if your company has only owned the property for part of the year.
There are also a variety of reliefs available which may reduce or eliminate an ATED charge. For example, if you own a property rental and property trading company, you may be eligible for relief, however you will still be required to submit the ATED tax return in order to claim any relief.
In certain circumstances you may also be exempt from the tax, for example a charitable company which uses the dwelling for charitable purposes, in which case you may not have to file a return.
When must the return be submitted?
If your company owns a residential property valued above £2m a tax return must be submitted by 1 October 2013. The ATED legislation is applicable to the tax period from 1 April 2013 to 31 March 2014 and once your return has been submitted on 1 October, any taxes are to be paid by 31 October 2013. Any late returns or payments may attract interest and penalties.
Going forward, the return and payment are both due within 30 days of the start of the ATED tax period. In other words for the next tax period of 1 April 2014 to 31 March 2015, both the return and payment will be due by 30 April 2014.
However if your company has acquired a property part way through the tax period, then both the return and payment must be made within 30 days of the property purchase.
What to do next?
If your property was valued above £2m at 1 April 2012, then you may be impacted by ATED. Regardless of any reliefs that may be due, you will need to complete a return.
The return can be completed online or submitted by post as long as it is received by HMRC by 1 October 2013.
The return needs to include the following key details:
- Property title number
- Original cost of the property
- Date of acquisition of the property
- Indication of whether a professional valuation has been completed
It may be worth considering getting a professional valuation completed, as although this is not a mandatory requirement for the return, it stands to reason that the HMRC will look more closely at returns without one.
If you prefer, we can complete and submit the return on your behalf and would be happy to discuss any queries you may have.
If you think you may be impacted by ATED or require assistance in determining whether an ATED charge may apply, please contact us on 020 8780 2349.
This blog is a general summary. It should not replace professional advice tailored to your specific circumstances.