What is the Annual Tax on Enveloped Dwellings (ATED)?

The Annual Tax on Enveloped Dwellings (ATED) was introduced on 1 April 2013 and although it has been with us for several years, many people are unaware that there are mandatory filing requirements.

ATED is an annual tax payable mainly by companies that own UK residential property valued at more than £500,000, subject to any available reliefs.

Even where reliefs do apply (for example, where a residential property is let to a third party) there is a requirement to file an ATED return and claim the relevant relief.

The last date for filing returns is 30 April.

What do I need to consider before filing an ATED return?

When reviewing your property portfolio ahead of the 30 April 2020 deadline it is important to consider the following points:

  1. While the charge applies to UK residential properties held by “non-natural persons”, it is subject to some reliefs and exemptions for buildings used for commercial, charitable or public purposes. One example is for properties held as investments rented to third parties or held as trading stock for dealing or development.

  2. Even where no ATED is due and a relief is being claimed, a return must still be filed for relevant properties.

  3. Where a relief applies, it needs to be claimed every year and the appropriate ATED Relief Declaration Return needs to be filed.

  4. If you are claiming relief for multiple properties, you only need to submit one ATED Relief Declaration Return to cover all of them.

  5. Failure to submit a return and claim the appropriate relief could lead to an ATED charge arising under the discovery rules, with the taxpayer being time barred from making a claim for relief. A failure to submit a return can therefore lead to an ATED charge arising where relief would otherwise have been available.

  6. For properties already owned, the ATED charge is based on the property’s value as at 1 April 2017 (note this valuation will be updated every five years, and the next valuation should be at 1 April 2022). If, however, a property is acquired during the year or expenditure on a property results in its value increasing above £500,000, these properties will also be caught by the ATED rules; ATED returns and partial ATED charges can apply.

  7. If you acquire a property part way through a chargeable period, an ATED return must be filed by the end of the period of 30 days beginning from the date of acquisition or transaction. For new builds, the deadline is 90 days from the date of becoming a dwelling for Council Tax purposes or the date that it is first occupied, whichever is earlier.

  8. Likewise, if a property that was subject to an ATED charge is disposed of, an amended return will be needed during the year to reclaim part of the ATED charge already paid. Therefore, the ATED charge must be paid up front and in full, even if you know the property will be sold shortly after 30 April 2020.

  9. Because ATED returns are submitted in advance and circumstances change (for example when renting properties) you may wish to consider paying more than the tax due to cover any charge that may become payable in the future. This will help to avoid penalties and charges if you need to submit an amended return. If an amended return is not required, there will be a credit on account which can be used towards next year’s liability.

  10. It is easier to submit your ATED return or relief return using the online system, or an agent can arrange this for you.

How we can help

The ATED rules can be complicated and if you are having difficulties it is recommended you seek professional advice. For further advice, please speak to your usual Druces contact or to Alice Johnson or Paul Levy from our Private Client team:

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