In this article:

• What is ATED?
• The valuation cycle and 30 April 2023 filing deadline
• The ATED bandings
• HMRC’s warning
• Can we help?

What is ATED?

Annual Tax on Enveloped Dwellings (ATED) is an annual tax paid mainly by companies that own UK residential property valued at more than £500,000 and where none of the various reliefs apply.

The tax is usually calculated from the property’s value from the most recent valuation date (or when the property was acquired if that is later).

Companies need to complete an ATED return if their property:

1. is a dwelling — ie if all or part of it is used, or could be used, as a residence (for example a house or flat). A dwelling also includes any gardens, grounds and buildings within the property.

2. is in the UK.

3. was valued at more than:

• £2 million (for returns from 2013 to 2014 onwards).
• £1 million (for returns from 2015 to 2016 onwards).
• £500,000 (for returns from 2016 to 2017 onwards).

4. is owned completely or partly by a:
• company.
• partnership where any of the partners is a company.
• collective investment scheme — for example, a unit trust or an open-ended investment vehicle.

Returns have to be submitted on or after 1 April and no later 30 April in any chargeable period.

There are some exemptions which mean companies do not need to pay any ATED on a property, or the amount to pay is reduced.  Many of the exemptions relate to the use of the property.  Click here for latest list of reliefs and exemptions on Gov.uk.

The valuation cycle and 30 April 2023 filing deadline

Companies must revalue their property every 5 years in line with ATED legislation. Recent valuation dates were 1 April 2012, 1 April 2017, and 1 April 2022.

Revaluations take effect for the first ATED chargeable period beginning after the valuation date. So, the 1 April 2017 valuation is used to calculate the tax liabilities for 2018/19 and the following four ATED chargeable periods.

For the 2023 to 2024 chargeable period, companies must therefore use:

– the market valuation date at 1 April 2022, or
– the acquisition cost of the property (if acquired after that date)

to calculate the tax charge for all years until the next revaluation on 1 April 2027.

Any companies that have not carried out or commissioned revaluations of their properties at 1 April 2022 should do so urgently.  This is to ensure that their future ATED liabilities are based on the correct valuation.

ATED returns are due within 30 days of the start of the relevant chargeable period. In 2023 that means 30 April 2023 is the deadline for the 2023/24 period.

ATED bandings

Here is a reminder of the ATED bandings and chargeable amounts for recent years.

Note that a revaluation may cause a property to jump to a higher or lower band than it was previously.

Taxpayers holding property with a value falling within 10% of a banding threshold can request a pre-return banding check from HMRC. HMRC typically responds within 30 working days of receiving the form however this is currently taking longer.

HMRC’s warning

HMRC has recently said that according to its records, the bands used by taxpayers for the chargeable periods 2018/19 to 2022/23 may have been used incorrectly.

It is writing to companies to ask them to report any additional tax due via a disclosure. To begin this process, companies need to complete and return an notice of intention and certificate enclosed in HMRC’s letter. HMRC has also requested recipients give a reason if they think they do not need to make a disclosure.

Can we help?

If you have received a letter from HMRC or need help understanding your company’s ATED liabilities, please contact one of our team of specialists shown on this page.

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Specific advice should be obtained before taking action or refraining from taking action, in relation to this summary. If you would like advice or further information, please speak to your usual Shipleys contact.

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