ATED is an annual tax payable mainly by companies that own High Value UK residential property– Single-Dwelling Interest (SDI), which is valued more than £500,000. There are other situations where partnerships and collective investment scheme would be liable to ATED.

A person would need to complete an ATED return for the property if it owns a SDI in the United Kingdom and was valued more than –

• £2 million (for returns from 2013 to 2014 onwards)
• £1 million (for returns from 2015 to 2016 onwards)
• £500,000 (for returns from 2016 to 2017 onwards)

A “dwelling” is a property if all or part of it is used or could be used as a residence for example a house or a flat. It also includes any gardens, grounds, and buildings within them.

The definition of “person”, owning the single-dwelling interest (SDI), in part or completely, is a –

• Company; or
• Partnership where any of the partners is a company; or
• Collective investment scheme – for example a unit trust or an open-ended investment vehicle or unit trust scheme.

Year ended 31 March 2025

The ATED returns must be submitted on or after 1 April in any chargeable period. The tab to prepare ATED Returns for year ended 31 March 2025 is already available on HMRC portal for ATED. Agents will be able to prepare the ATED return and email the client for signatures but will only be able to file the ATED return from 1 April 2025 onwards.

The Annual Tax on Enveloped Dwellings (ATED) return for the year ended 31 March 2025 will need to be filed on or before 30 April 2024. Should any ATED tax charge liability arisesit would also need to be paid before 30 April 2024.

The following is the ATED charge for year ended 31 March 2025 –

Chargeable amounts for 1 April 2024 to 31 March 2025

For ATED the valuation date is on the latest of – date of acquisition or 1 April 2012 or 1 April every 5 years after 1 April 2012 (1 April 2017, 1 April 2022)

Also, if there has been a substantial acquisition or disposal it could trigger a ATED valuation requirement and submission of an ATED return. Substantial acquisitionmeans £40,000 or more.

For year ended 31 March 2025 the valuation date for ATED is 1 April 2022 or acquisition date if post 1 April 2022.

Pre-return Banding Check

HMRC do providean ATED pre-return banding check (PRBC) facility. This checking opportunity is a good service provided by HMRC as it agrees with HMRC the value of the SDI for ATED and which band the SDI falls within. It is advisable to use the PRBC facility where the value of the SDI is within 10% variance of another band as it may save some ATED liability and alsogives a level of comfort that the value is agreed with HMRC.

Normally within 30 working days of receiving PRBC request HMRC will either –

• agree the banding you’ve chosen is the right one
• ask you for more information to help make a decision
• tell you they do not agree with your value banding and let you know what the right banding should be
• tell you they need to look at the inside of the building to complete their check

Reliefs from ATED charge

If certain conditions are met the company will qualify for relief from the ATED charge. Relief from the ATED charge may be claimed for –

1. Property Rental Businesses.
2. Property developers.
3. Property traders.
4. Occupation by certain employees or partners.
5. Farmhouses.
6. Financial institutions acquiring dwellings in the course of lending.
7. Dwellings opened to the public.
8. Providers of social housing.

ATED Relief claim

To claim relief from the ATED charge the specific ATED relief return must be submitted. The relief is not automatic and an ATED relief return must be submitted. Care must be taken to ensure that the correct ATED relief return is being submitted. For example when there is a change in activity of the company – from a property investment company which is letting its high value residential properties to a property trading company which is involved in buying and selling high value UK residential properties. To consider the legislation in FA2003 and HMRC guidance on ATED to ensure that the company meets the necessary conditions to qualify for ATED relief. Also keep necessary documents on file to show that the company qualified for ATED relief.

Most Accountants and tax practitioners would come across the rental relief. To be eligible for this relief the single dwelling interest –

1. is exploited as a source of rents or other receipts in the course of a qualifying property rental business;
2. relief will also be available, however, where the single-dwelling interest is not currently generating receipts from business if steps are being taken to rent the property without undue delay: and
3. the property must not be occupied by a “non-qualifying individual” which would include an individual who is a beneficial owner of the entity or his or her spouse or any member of his or her family, even if such an individual pays a full market rent.

More information and guidance on above reliefs can be found with FA 2013, Part 3, ss133-150 and HMRC technical guidance on ATED. HMRC guidance is a good starting point to work out the ATED complexities. For point 3 above do refer to HMRC guidance for more detail as the definition for “non-qualifying individual”, is widely drafted.

Refer to HMRC manual PIM1020 for more information on what is a UK property business.

Penalties

The penalty legislation for ATED for late submission of ATED return and for the late payment of ATED liability is within FA2003

The penalties for any late return are:

• An initialpenalty of £100 missing deadline of 30 April.
• daily penalties of £10 per day once the return is three months late–1 August.
• tax-geared penalty of 5% of the liability (or £300 if higher) where the return is six months late– 31 October.
• a further 5% tax geared penalty (or £300 if higher) if 12 months late– 30 April.

The penalties for late payment of the ATED charge are –

• 30 days late – 1 May - £5% of tax due – 31 May
• 6 months date –5% of tax outstanding at that date – 31 October
• 12 months late –5% of tax outstanding at that date – 30 April
• More than 12 months late – information withheld deliberately – the penalty will be based on behaviourof the company in submitting the ATED return late.

It is very easyto rake up ATED penalties for late filing and late payment.Also HMRC are not required to issue a notice to file an ATED return. Therefore, in everyone’s interest to identifyany UK residential propertywhich falls within the ATED regime and submit ATED returns and pay the ATED liability on a timely basis.

ATED is a complex area and some of technicalities are not straight forward for example where the SDI has been empty,we have the look back and look forward tests to consider before claiming the ATED rental relief claim for vacant period. The article above is only general guidance and should not be taken as ATED advice as the ATED position may changing depending on facts and circumstances of the individual case. The author excepts no liability for any loss arising by relying on the above. 

-

The contents of this article are meant as a guide only and are not a substitute for professional advice. The author/s accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article.