Annual Tax on Enveloped Dwelling (ATED) rules – Don’t get caught out!

For those entities already with the ATED regime, the upcoming April 2022 deadline for filing returns will not be a surprise.  However, April 2022 is also the date for new valuations to be carried out, meaning many more entities may now be brought into the regime going forward and be required to submit a return and potentially pay the annual ATED charge.

ATED is the requirement for all chargeable non-natural persons (such as a company or a partnership with a company member) to submit a return for any UK residential property it owns that is within the scope of the rules.  Generally, where the value of a property is more than £500,000 it will be within the rules, with valuations being carried out every 5 years.

The previous statutory valuation date set by HMRC was 1 April 2017, meaning that for the previous five years, returns will have been completed based on the property valuation at that date. The statutory valuation date is reset every five years so returns due for the next five years, from 1 April 2023 onwards, will be completed based on the valuation of the property as at 1 April 2022.

There are reliefs and exemptions available that may reduce any potential liability down to nil that include the following:

  • If the property is let to a third party on a commercial basis and is not occupied by anyone connected to the property owner.
  • Owned as the stock of the business for the purpose of resale.
  • In the process of being developed for resale by a property developer.

Where these apply, the reliefs must still be claimed on an annual ATED relief return which is due by 30 April each year.

Given the significant increases we have seen to property values over the last 18 months, it is likely that many more entities will be brought into the regime when the April 2022 valuations are carried out, resulting in a new requirement to submit a return from 1 April 2023.  It is important that evidence is retained to document the valuation of the properties and further information regarding this requirement can be found by following the link below.

https://www.gov.uk/guidance/annual-tax-on-enveloped-dwellings-pre-return-banding-checks#how-to-value-your-property

If you think that this may apply to you and want assistance with meeting your obligations then please do not hesitate to get in touch and one of our team will be able to help.