Return deadline approaching for Annual Tax on Enveloped Dwellings

Laura Ritchie

Laura Ritchie

Tax Senior Manager

Relevant entities that hold residential properties valued in excess of £500,000 at 1 April 2022, will need to take action.  2024/25 ATED returns are due to be submitted to HMRC by 30 April 2024.

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. ATED is a forward-looking tax, with the potential to obtain a relief in specific cases, but you need to submit an annual return to claim this, even if there is no tax to pay.

Property developers – take note!

A topical area that has created some confusion recently is in relation to ATED property developers’ relief.

ATED property developer relief may be available if the dwelling is held for development and resold as part of the property development trade.

A property development trade is defined as one that consists of or includes buying, and developing or redeveloping for resale, land and property. This will cover a range of activities from the refurbishment of substantially the whole of a property prior to resale, extensive works on the property including extensions etc, or the demolition of the property and replacement with one or more new residential units or a commercial property. It will also include the sale of land interests out of the land acquired, for example, smaller parcels of land or the granting of leases.

ATED relief however will not be available if the property is, at any time, occupied (or available for occupation) by anyone connected with the owner e.g., a director or spouse/relative of a director.

When should an ATED return be filed for a newly constructed property?

When properties, that fall within the ATED regime are newly constructed an ATED return will be required within 90 days of completion. Completion is regarded as the earlier of when the property is deemed to come into existence for Council Tax purposes or it is first occupied.  The ATED return for a newly constructed property will cover the period from completion to 31 March. 

What is ATED?

ATED is an annual tax payable mainly by companies (UK, non-UK incorporated and overseas companies) that own UK residential property valued at more than £500,000 on 1 April 2022 (or acquisition/completion date if later). 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 falls within the ATED regime if it is a dwelling and 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 (e.g. a garden).

Non-residential properties, such as factories or shops, are outside the scope of ATED.  Non-UK properties are also out with the scope of ATED.

ATED returns are completed in advance of the upcoming tax year along with payment of any ATED charge due. Upcoming ATED returns for the period 1 April 2024 to 31 March 2025, are due to HMRC by 30 April 2024.

If a company acquires residential property part way through the period, the company will have 30 days, from the date of purchase to submit the ATED return covering the period from acquisition to 31 March, claiming any relief, or pay the ATED charge that falls due for the period. It is worth noting that any associated ATED charge will be pro-rated from the date of purchase to 31 March.

If a company disposes of residential property where an ATED return has been submitted and ATED charge paid, then an amended ATED return can be submitted allowing the company to reclaim a pro-rated amount of the ATED charge paid.

The ATED charge due will be dependent on the value of the property, which is principally  based on a 1 April 2022 valuation.  A revaluation date may however be triggered for ATED purposes where substantial works have been carried out since 1 April 2022. If this is found to be the case, the property should be revalued for ATED purposes at the date the works are complete, and this value is instead used when determining the valuation banding the dwelling falls within.

The chargeable amounts for the 2024/2025 ATED period are as follows:

Property valueAnnual charge
More than £500,000 up to £1 million£4,400
More than £1 million up to £2 million£9,000
More than £2 million up to £5 million£30,550
More than £5 million up to £10 million£71,500
More than £10 million up to £20 million£143,550
More than £20 million£287,500

Penalties will be levied by HMRC for the non-compliance and can be as much as £1,600 per ATED return.

Exemptions and reliefs

There are valuable reliefs available if specific facts are present, but an ATED return will need to be completed and relief claimed on the ATED return. If no relief is claimed, an ATED charge will be due.  Relief may be available for:

  • Farmhouses
  • Property rental businesses (e.g. FHL’s including those rented via Airbnb/equivalent)
  • Properties opened to the public
  • Properties occupied by employees, in the normal course of their duties
  • Property developers and traders.
  • Financial institutions acquiring properties in the course of lending;
  • Providers of social housing.

Special rules also apply from 1 April 2022 where the dwelling is provided as part of the Homes for Ukraine sponsorship scheme.

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 meaning no ATED return is required.

Get in touch

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

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