The Annual Tax on Enveloped Dwellings (ATED) was introduced nearly 10 years ago. Before April 2022 though, the legislation will require important revaluations to be carried out.

The ATED charge was established as part of a package of tax measures to tackle perceived Stamp Duty Land Tax (SDLT) avoidance, however it potentially impacts all limited companies owning high-value UK residential property.

Properties valued below £500,000 are not currently taxable, but those valued above this figure are subject to a banded annual tax – starting at £3,700 and running to £237,400 for properties valued in excess of £20m. These bands are expected to increase before next charge falls due.

Significantly, the legislation requires revaluations to be conducted on every fifth anniversary of the introduction of the tax, and although the position will vary dependent on its region, most rural property, particularly, will have risen in value significantly over the last five years.

What are the potential risks?

  • Businesses that have forgotten about the revaluation rules may use the same figures from 2017 and could under declare tax
  • Businesses with properties worth slightly less than £500,000 in 2017 may be unaware of the tax and fail to submit a return on time (or at all). Even if an exemption is applicable, it must be claimed, and late submissions will be penalised
  • Businesses that have shifted into a higher band may face a substantial increase in tax. For instance, a property which has increased in value by 11% from £1.9m to £2.1m will see its tax charge (at current rates) rise by over 300% from £7,500 to £25,300
Get in touch

Limited companies now need to be reviewing their tax exposure on UK residential property, firstly to ensure correct reporting.   Then, secondly, to consider whether property should be extracted or retained within an “enveloped” structure. For further information and advice relating to ATED and tax compliance matters in general, please contact us on 01788 539000 or 0116 261 0061.

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