Annual Tax on Enveloped Dwellings (ATED)

Please note: this memorandum is for guidance only and is not advice. It is not a comprehensive note on all aspects of ATED. You should seek specific advice if you think ATED might apply to your company or partnership or if you think you might need to claim relief from it.

ATED is an annual tax payable mainly by companies which own or lease residential property in the UK valued at more than £500,000. Prior to 1 April 2016 it applied to residential property valued at more than £1 million.

The ATED payable depends on the value of the property as at 1 April 2012 or what it cost if it was acquired after that date.

There are reliefs and exemptions from the tax, which might mean you don’t have to pay (see below).

Every five years (so from 1 April 2017) such properties will need to be revalued. It would be wise to arrange a revaluation well in advance of each revaluation date so that the relevant ATED return can be made on time.

If the company owns the property on 1 April a return must be made – and the ATED must be paid - by 30 April each year for the year in advance. If a company acquires a residential property during the course of a tax year (to 31 March), it has 30 days from when it acquired the property in which to make an ATED return and pay the tax.

Where a company builds a new dwelling which is a single-dwelling interest the filing date is 90 days after completion, even if a claim for relief can be made.

The tax payable is time-apportioned if a company owns the property for part of the tax year.

A property is a dwelling if all or part of it is used, or could be used, as a residence (for example a house or a flat). It includes any garden, grounds and buildings within them. Hotels, guest houses, boarding school accommodation, hospitals, student halls of residence and care homes are not classed as dwellings.

Generally, the amount of tax due depends on the value of the single-dwelling interest in question at certain fixed valuation points. In certain situations, however, the values of different interests in the same dwelling or of separate dwellings may be aggregated when determining the liability to ATED. Specific provision is made in the legislation to determine when a single-dwelling interest must be valued to determine any liability to ATED.

It does not matter whether the company holds the single-dwelling interest outright or if they are jointly entitled with others.

It is possible to file an amended return or an amended claim for relief provided this is done within 12 months of the end of the chargeable period. If you dispose of the dwelling during the course of a year and previously claimed a relief, you should still file an amended return to show the disposal.

Relief may be claimed for:

  • Property Rental Businesses run with a view to profit (but not where the property is occupied by a connected person);
  • Dwellings opened to the public;
  • Property developers (including exchange of dwellings);
  • Property traders;
  • Financial institutions acquiring dwellings in the course of lending;
  • Occupation by certain employees or partners (but excluding any employee who is entitled to 10 per cent of more of the income profits of the trade);
  • Farmhouses; and
  • Providers of social housing

Relief has to be claimed by completing a claim form.

Exemptions apply to:

  • Charitable companies
  • Public bodies
  • Bodies established for National Purposes
  • Dwellings which are conditionally exempt from Inheritance Tax

The tax payable for a full year of ownership for 2016/17 for each band is:

Value more than £500,000 but not more than £1m£3,500
Value more than £1m but not more than £2m£7,000
Value more than £2m but not more than £5m£23,350
Value more than £5m but not more than £10m£54,450
Value more than £10m but not more than £20m£109,050
Value more than £20m£218,200