Companies and collective investment vehicles must be aware of the implications of the new Annual Tax on Enveloped Dwellings (ATED), for which the first deadline is 1 October.
Companies and collective investment vehicles must be aware of the implications of the new Annual Tax on Enveloped Dwellings (ATED), for which the first deadline is 1 October.
The new tax, which came into being on 1 April this year, is payable on high value residential properties owned through companies or collective investment vehicles. It is designed to kerb the use of companies as a way of avoiding paying taxes on residential properties.
It will be levied on properties with a value of more than £2 million as at 1 April 2012 – or upon purchase if acquisition took place after this date – and will be calculated using a banding system. It is self-assessed and the value must be a specific price, which will then be used for the next five taxation periods.
The taxable property includes gardens, grounds, secondary dwellings and buildings but excludes non-residential parts of a property and those that qualify for a relief.
For 2013, all returns must be submitted by 1 October with payments due by 31 October. From 2014 onwards, the return and payment will both be due by 30 April.
The tax is a fixed amount based on the band into which the value of the property falls. The ATED bands are as follows:
| Property Value | Tax 2013-2014 |
| £2m to £5m+ | £15,000 |
| £5m to £10m+ | £35,000 |
| £10m to £20m+ | £70,000 |
| £20m+ | £140,000 |
Ian Bowler, Partner in Strutt & Parker’s Salisbury office, said: "Certain reliefs are available but they can only be claimed after the annual submission of ATED returns. Reliefs are available for 'character appropriate' farmhouses if they are occupied by a farmer who farms the land on a full-time basis. Reliefs are also available for properties held for charitable purposes, historic buildings open to the fee-paying public for at least 28 days a year and properties let on a commercial basis to third parties not connected to the owner. In all cases, documentary evidence of qualifications must be provided.
"In most cases it is obvious in which ATED bands properties sit but those close to boundaries may present more challenges; HMRC will look closely at properties within 10% of a threshold and will apply penalties if they successfully challenge a valuation. Property owners with assets valued on or near boundary thresholds would be best advised to submit expert valuations well in advance of the deadline for approval by HMRC. It would be wise to ensure the valuation is right from the start because it will be used for the next five ATED returns. A property worth £4,995,000 will cost £75,000 over the next five years whereas one worth £5,025,000 will cost £175,000."
Mr Bowler added: "There are still grey areas and it is important to take advice from qualified and experienced valuers."