MANY PROPERTY INVESTORS are increasingly using a limited company to hold properties for the perceived tax advantages. However, there are certain tax traps which the investor needs to be wary of in these situations.
One of these is the Annual Tax on Enveloped Dwellings (“ATED”) charge. The ATED is an annual tax on certain high-value residential properties that are held within an “envelope”, such as company or a partnership with at least one corporate partner.
The annual tax on enveloped dwellings (ATED) was introduced as part of a package of measures aimed at making it less attractive to hold high-value UK residential property indirectly, i.e. through a company etc, in order to avoid or minimise taxes such as stamp duty land tax (SDLT) on a subsequent disposal of the property.
In today’s Shipleys Tax brief we look into the rates and exemptions you need to know if the ATED tax applies to you and how you can avoid the charge.
The charge may potentially apply where a property in the UK which is valued at more than £500,000 is owned completely or partly by a company, a partnership with at least one corporate partner or a collective investment scheme (such as a unit trust or an open-ended investment company).
The charge is payable annually in advance. Where a property is within the scope of the ATED on 1 April, an ATED return must be made online by 30 April and the tax for the period from 1 April to the following 31 March must be paid by the same date. The table below shows the rates of ATED that applies for the period from 1 April 2022 to 31 March 2023.
|Value of property||ATED (2022/23)|
|More than £500,000 to up to £1 million||£3,800|
|More than £1 million up to £2 million||£7,700|
|More than £2 million up to £5 million||£26,050|
|More than £5 million up to £10 million||£60,900|
|More than £10 million up to £20 million||£122,250|
|More than £20 million||£244,750|
You can avoid the tax charge by claiming an exemption.There are a number of exemptions from the ATED charge. One of these is the letting exemption.
The ATED charge does not apply if the property is let on a commercial basis and is not, at any time, occupied (or available for occupation) by anyone connected with the owner.
Provided that this test is met, relief will be available. The relief must be claimed through HMRC’s ATED online forms service. If the claim reduces the ATED charge to nil (which will be the case if all high-value residential properties owned by the company are let on a commercial basis), a Relief Declaration Return needs to be completed.
Once this form is correctly completed and submitted, the property is exempt from paying the ATED charge.
If you are affected by any of the issues above and would like more information, please call 0114 272 4984 or email firstname.lastname@example.org.
Please note that Shipleys Tax do not give free advice by email or telephone.