QUESTION: Our family company invested in a new build residential property based in England around 10 years ago. Luckily the area has prospered, and we recently discovered that similar houses in the same development were selling for more than £500,000 – a significant increase in value. We declare our rental income on our company’s tax return each year and have no immediate plans to sell. However, our estate agent has mentioned that we may have to file another, separate annual return for the property?
A: Annual Tax on Enveloped Dwellings (ATED) has been around since 2013 but it still catches many out unawares. It is an annual tax payable by companies and other non-natural persons (including partnerships with corporate members) who own an interest in UK residential property valued at over £500,000.
The charge applies to houses, self-contained flats, gardens, and mixed-use properties. ATED can apply to a property which is suitable for use as a dwelling, not just a property which is so used. However, certain properties such as hotels, guest houses and care homes are specifically excluded.
An ATED return for relevant properties owned between April 1 2023 to March 31 2024 period is required to be filed along with any tax payment in advance by April 30 2023. While we are used to paying taxes after a period, this tax is due at the start of the period. Should it transpire that you do not own the property for the full year, you can amend your return during the year to claim repayment due.
Also, should you buy a relevant property within the year, an ATED return is required to be filed within 30 days of acquisition to cover the remainder of the year to March 31 2023.
While you may not have needed to complete an ATED return in the past, you can now fall into the ATED regime if the dwelling’s value has increased in recent years and its market value exceeds £500,000 from April 1 2022.
The ATED charge depends on which valuation band the property falls into, with the minimum charge being £4,150 increasing to £269,450 for properties valued more than £20million.
There are reliefs from the ATED charge the most common being for properties that are always let to unconnected third parties at full market rent and unavailable for anyone connected with the owner. Another common exemption is for properties held for development or as trading stock by builders/developers. Properties can also be being used by a trading business to provide living accommodation to certain qualifying employees and escape the ATED charge.
It is important to remember that returns must still be filed for relevant properties even where no ATED is due because a relief is available, the return should be filed, and the appropriate relief claimed. As with other tax returns, HMRC can impose penalties if the ATED return is filed late, therefore it is important to engage early with your accountant to ensure there are no delays in filing a return and in obtaining a valuation if required.
:: KellyAnne Murtagh (k.murtagh@fpmaab.com) is senior manager at FPM Accountants Ltd (www.fpmaab.com). The advice in this column is specific to the facts surrounding the question posed. Neither the Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.
