TT255: Annual tax on enveloped dwellings

It’s that time of the year again!

What is ATED?

We are all familiar with the term annual tax on enveloped dwellings (“ATED”) which has been with us since the Finance Act 2013 introduced detailed provisions to deter, what was perceived, as avoidance activity using corporate structures to hold high value residential property. The measures involving the charging of a special tax known as the ATED where high-value residential property is owned by a company, a partnership with a corporate member or a collective investment scheme.

Who is it targetted at?

The regime originally was targeted at single dwelling interests (that is a defined term in the legislation which effectively means a property for a single household) with a value in excess of £2m (as valued at 1 April 2012). However, the £2m threshold has been declining and on 1 April 2016 the threshold was reduced again, this time to £500,000. This means that a high percentage of properties are now be caught by ATED.

The latest statistics released on 31 January 2017, show that ATED raised £178m in 2015-16 when the threshold was £1m or more (not £500k!) and 97% of the receipts arose in London and the South East!

What are the reliefs?

There are a number of reliefs available so that for normal business activity there is no charge to ATED. Nevertheless even when there is no charge, a return needs to be made so that the appropriate relief can be claimed. There are penalties levied where a return was due to be made (even if only to claim relief because no tax was due), but the return was not in fact made. Failing to appreciate the nuance ATED distinction between ‘exempt’ and ‘in charge but relievable’ could result in penalties of £1,600 even when no tax is due.

What are the deadlines?

A return claiming the relief is relatively simple but the deadline for its submission is tight being 30 April 2017 for the year 1 April 2017 to 31 March 2018.

The deadline for filing an ATED return where no relief can be claimed and making the associated payment is also 30 April 2017 for the year 1 April 2017 to 31 March 2018.

If a singe dwelling interest is purchased during the chargeable period 1 April 2017 to 31 March 2018 and its value is in excess of £500k then the ATED return and payment is due 30 days following completion date or 90 days following completion date if the dwelling is newly built. Again, penalties are levied where a return was due to be made (even if only to claim relief because no tax was due), but the return was not in fact made.

Valuation as at 1st April 2017

 The valuation as at 1 April 2012 or acquisition date if acquired after 1 April 2012 lasts for 5 years. 2018-19 ATED Returns will require a revised valuation as at 1 April 2017. A formal valuation is not required but HMRC will expect the valuation to be robust and reasonable.

Changes to filing system

 HMRC have also changed the filing system from April 2017. For 2017-18, Barnes Roffe LLP must register in advance for the new online ATED service and have received a unique authorisation number to give to our clients. Our clients then have to confirm appointment of us using HMRC’s authorisation number. Form 64-8 does not apply in these circumstances.

Let’s get filing!

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