If you’re due to submit an Annual Tax on Enveloped Dwellings (ATED) return, then now is the time to speak to your trusted business adviser at Johnston Carmichael and prepare your return. You'll need to submit one whether you're due to make a payment or not. This annual return, for the period 1 April 2020 to 31 March 2021, is due to HMRC by 30 April 2020.

What is the ATED?

ATED is an annual tax payable mainly by companies (both UK and non-UK incorporated) that own UK residential property valued at more than £500,000 on 1 April 2017 (or acquisition/completion date if later) and five years thereafter.

The ATED regime also applies to:

• A partnership with a corporate member(s), and
•  A collective investment scheme, such as a unit trust or open-ended investment company.

A property is a dwelling if all, or part of it, is used or could be used as a residence and includes any land that is occupied or enjoyed as part of the dwelling (eg a garden).

Non-residential properties are outside the scope of ATED. There are also other properties that are not classed as dwellings; such as hotels, guest houses, boarding school accommodation, hospitals, student halls of residence, military accommodation, care homes and prisons.

ATED charge and penalties

The annual charge payable for 2020/21 has been confirmed by HMRC. 

Penalties will be levied by HMRC for non-compliance. There is an initial penalty of £100 if you do not submit an ATED return by the due date, followed by £10 daily penalties if the return is more than three months late. If your return is six months late, a further penalty of £300, or 5% of HMRC estimation of your liability to the ATED tax (whichever is higher) will apply. A second further penalty of £300, or 5% of HMRC estimation of your liability to the ATED tax, (again, whichever is higher) will apply if your return is 12 months late.

Exemptions and reliefs

Reliefs are available if specific facts are present but an ATED return will still need to be completed and then relief claimed on the ATED return. Relief may be available for:

• Property Rental businesses;
• Properties opened to the public;
• Property developers and traders;
• Financial institutions acquiring properties in the course of lending;
• The occupation of employees or partners;
• Farmhouses; and
• Providers of social housing.

There are also exemptions for residential property owned by a charity and held for charitable purposes, properties held by public bodies and bodies established for national purposes, and properties conditionally exempt from inheritance tax.

If you would like to discuss whether you have an ATED filing requirement then please get in touch with your usual Johnston Carmichael contact or me, Laura Ritchie.