Corporate entities that own residential property in the UK which are valued at more than £500,000 on acquisition or a later valuation date, are required to file annual ATED returns and may have to pay an annual ATED charge. These corporate entities include partnerships with one or more corporate members.
A new valuation date of 1st April 2022 will form the basis of the next five ATED returns, commencing on 1st April 2023.
Relevant entities should review their position now and consider whether formal valuations are required to:
Where an ATED charge is due, consideration should also be given to suitable restructuring to ‘de-envelope’ the property to remove the liability going forwards. Although this can raise other tax issues, a more efficient structure may be available over the medium to long term.
ATED was brought into legislation in April 2013 and is applicable to ’non-natural persons’. This includes companies, partnerships with corporate members or collective investment schemes that own high value ‘dwellings’ in the UK.
A property is classed as a dwelling if all or part of it is used, or could be used, as a residence, for example a house or flat. Any related gardens, grounds, and buildings are included.
In essence, it’s an annual tax that currently applies to properties worth more than £500,000 at the relevant valuation date.
ATED is payable in advance within 30 days of the start of each tax year to 31 March. Thus, this year’s 2022/23 ATED returns and payments were due by 30 April 2022.
For the previous 5 chargeable periods, up to the most recent chargeable period which ends on 31st March 2023, this valuation date was 5 April 2017. Therefore, if your enveloped residential property was valued at more than £500,000 at this date, the entity would be required to file a return and either pay the tax or claim an appropriate relief (see below).
The tax arising is based on the value of the property which determines the applicable ATED band.
For the year leading up to 31st March 2023, the valuation bands and associated tax charges are:
Property value | Annual charge* |
More than £500,000 up to £1 million: | £3,800 |
More than £1 million up to £2 million: | £7,700 |
More than £2 million up to £5 million: | £26,050 |
More than £5 million up to £10 million: | £60,900 |
More than £10 million up to £20 million: | £122,250 |
More than £20 million: | £244,750 |
*These amounts change each chargeable period.
Going forward, all ATED returns will be based on a new valuation date, 1st April 2022. This will be relevant for the next five chargeable periods, starting with the 2023/24 ATED return due for filing by 30th April 2023.
Corporate entities need to assess the open market value of their existing residential properties as of 1st April 2022. Although the ATED charge is based on the above bands, the returns require a precise valuation to be declared unless a relief claim is made.
Whilst a professional valuation is not always required, this may be advisable. This may be particularly relevant if there have been few recent sales of similar properties, or it is likely that the valuation will be near to one of the band thresholds.
It will often be advisable for ATED taxpayers to have on file property valuations at other key dates, usually being 6th April 2015 and 6th April 2019, as these may be required for other tax purposes such as future capital gains on disposal of the property or entity or de-enveloping (see below). It may be efficient to obtain these now if they are not already on hand.
For properties acquired, or completed, after 1st April 2022 the ATED value will be based on the value at the acquisition date.
With UK house prices having increased significantly since 2017, albeit with some variations in certain sections of the market, more companies may now come within the scope of the ATED.
If the corporate entity is able to claim relief, meaning that no ATED charge is payable, then a valuation will not be required.
You may be able to claim relief for your property if it is:
When ATED was first introduced the additional cost was accepted by many international families as:
The second incentive above to maintain any structure no longer applies due to ‘look through’ provisions introduced for IHT in 2017. While the first issue may still be relevant, some parts of the property market – particularly the very high end – have shown signs of cooling in recent years, which may make restructuring more cost effective.
Certainly, we would suggest that now is an opportune time to evaluate any plans for residential property holdings and ensure an appropriate structure is established in light of all relevant factors, including the various tax issues.
If you need help determining how this affects you or require assistance with issues relating to ATED, please contact our Tax Partner Phil Moss (philmoss@lubbockfine.co.uk), or Tax Director Aidan Meade (aidanmeade@lubbockfine.co.uk), or your usual Lubbock Fine contact.
