If you own a UK based property through a limited company, you may have to file an ATED return and pay an ATED charge. The deadline for doing this is incredibly short, and if you miss it, you may face paying penalty charges and interest on what is owed.

What is ATED?

Annual Tax on Enveloped Dwellings (ATED) is an annual tax that is payable by companies which own UK based residential dwellings.  ATED applies to companies, partnerships or collective investment schemes that partly or wholly own a residential property which is valued at more than £500,000.

What is meant by ‘dwellings’?

The term, ‘enveloped dwelling’ can be confusing, but in simple terms, a property is deemed ‘enveloped’ if it is owned within a corporate wrapper and not by an individual e.g. owned by a limited company for instance.

The term dwelling is far-reaching and applies to a building and its grounds (including gardens) which can be used as a residence. More often than not, it will relate to houses and flats. If the property is mixed in with others which do not have residential use, then ATED will only apply to the portion that is used for residential purposes.

Certain types of buildings aren’t classed as dwellings, these include:

  • hotels
  • guesthouses
  • boarding school accommodation
  • hospitals
  • military accommodation
  • care homes
  • prisons
  • student halls of residence

Source: HMRC

How much ATED is due?

The amount payable is calculated depending on the value bracket the residential property falls into:

Value bracket ATED payable
£500k to £1m £3,600
£1m to £2m £7,250
£2m to £5m £24,250
£5m to £10m £56,550
£10m to £20m £113,400
£20m plus £226,950

 

Source: HMRC

The ATED charge is calculated on the 2017 property valuation, or if it was purchased after this date, it’s based on the purchase price. HMRC then requires properties to be revalued every five years.

How to file your ATED return

You file your ATED return online with HMRC and pay anything that is due. The ATED period runs from 31st March to 1st April. The return (including nil returns) must be completed, filed and payment made by 30th April. This only gives you 30 days to get everything sorted!

Tax relief available on ATED

There is some good news as tax relief may be available which means ATED is not payable. However, you can only claim this by filing an ATED return. You may be able to claim tax relief if the dwelling meets certain criteria, such as:

  • it’s let to a third party on a commercial basis, and isn’t at any time occupied (or available for occupation) by someone connected to the owner
  • it’s open to the public for at least 28 days a year
  • it’s part of a property trading business and isn’t (at any time) occupied by someone connected to the owner

For a full breakdown on the tax relief available, please speak to one of our Directors on 01962 820375.

ATED penalties

You may face penalty charges and interest if you do not file your ATED return on time, do not pay what you owe on time or make a mistake on your return. The penalties for ATED are in line with self-assessment tax return penalties and as such are:

  • immediate £100 fine
  • after three months a £10 daily charge is applied, up to a total of £900
  • after three months a £300 penalty is charged
  • after 12 months another £300 penalty is added

If you go past this period, further penalties will be added. Additionally, if tax is due, then interest will be added as a percentage to the amount owed over this period.

If you own a property through a company or partnership and are concerned you will have to file an ATED return or need advice on how to file an ATED return, get in touch with us on 01962 820375, or send us a message via our website.