Annual Tax on Enveloped Dwellings (ATED): New Valuation Date

By Kate | March 21, 2023

Do you need to file a return for Annual Tax on Enveloped Dwellings (ATED) by 30^th April? In line with legislation, companies must revalue their properties every five years, and this coming tax year (2023-24) is a revaluation period. So, you must use a new valuation date of 1^st April 2022 (or the date of acquisition if later) for the property value in your 2023-24 returns. Carry on reading to find out more about ATED, or contact us today for further advice.

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What is ATED?

ATED is a tax paid annually by companies that own UK residential property (classed as a ‘dwelling’) worth £500,000 and over. It can also apply to partnerships (with at least one corporate member) and certain collective investment vehicles (including unit trusts).

A property is a ‘dwelling’ if all or part of it is used (or could be used), as a residence, e.g., a house or flat, as well as the buildings, gardens or grounds within them. Other properties, such as hotels, hospitals, care homes and more, are not classed as dwellings for ATED purposes.

The ATED Revaluation Period

For 2023-24 returns, and the five chargeable periods afterwards, you must revalue the properties you own. The valuation date is 1^st April 2022, or the date of acquisition if it falls afterwards. We recommend your valuation is obtained from a reputable surveyor, in case it is challenged by an HMRC enquiry, but this isn’t a legal requirement.

Please also be aware that the five-year period doesn’t always apply. If there is a substantial acquisition or disposal where the chargeable consideration is more than £40,000, a revaluation will be triggered at the relevant date.

When to File ATED Returns

The ATED year starts on 1^st April – and unlike other taxes in the UK, you file returns and pay tax at the beginning of the period, not retrospectively. For example, from 1^st April 2023 to 31^st March 2024, you must file your return by 30^th April 2023.

If you buy a property during the year, you must file the return within 30 days of acquisition. Or, if it’s a new-build, within 90 days of it either being first occupied, or becoming eligible for Council Tax – whichever falls earlier.

How is ATED Calculated?

Your ATED liability is based on the value of each dwelling. For 2023-24 returns, the annual charge is calculated with the following banding system:

Property value of:

More than £500,000 up to £1 million – £4,150 annual charge
More than £1 million up to £2 million – £8,450
More than £2 million up to £5 million – £28,650
More than £5 million up to £10 million – £67,050
More than £10 million up to £20 million – £134,550
More than £20 million – £269,450

The annual charge for each band will increase in line with inflation (CPI) each year, and so is lower for previous years, and higher for future years.

If your new valuation falls within 10% of one of the ATED thresholds, you may consider applying to HMRC for a pre-return banding check (PRBC) in advance of submitting your 2023-24 return. HMRC will either agree, disagree, or request further information to confirm your dwelling’s banding, but a response can take 30 days and more, so we suggest starting the process as early as possible.

You may also have to pay Stamp Duty Land Tax when you buy a property, and ATED-related Capital Gains Tax or Corporation Tax if you sell it. Please seek professional advice if you are unsure.

ATED Reliefs and Exemptions

There are several reliefs and exemptions from ATED available, which may reduce your tax owed up to 100%. Reliefs can apply if your property is:

Let to a third party on a commercial basis (if never available for occupation),
In development for resale by a property developer,
A farmhouse lived in by a farm worker or former long-serving farm worker,
And many more.

Even if there is no tax due, you must still file an annual ATED return to claim any applicable relief(s) – unless you are exempt from ATED. Exemptions include (and must meet the conditions in the ATED technical guidance):

Charitable companies using a dwelling for the purpose of charity
Public bodies
Bodies established for national purposes

Please also be aware that some ATED reliefs may be lost if the residential property has been used to house people as part of the Homes for Ukraine sponsorship scheme.

ATED Penalties and Appeals

If you don’t file or pay your ATED return on time, or you submit an inaccurate return, you could be charged a penalty and interest, starting at £100. However, if you disagree with HMRC, you have 30 days from the decision date to write an appeal.

Need Advice on ATED Returns?

We can help you with ATED compliance, from preparing and amending ATED returns, to advising on relief availability, and relevant valuation dates of your dwellings. Please contact us today through our online form, call 01743 562430, or email hello@mercianaccountants.co.uk.