Understanding the ATED Regime: A Guide for Limited Companies

Written by AJN Accountants
10 October 2024

The Annual Tax on Enveloped Dwellings (ATED) is a tax that applies to companies and other entities that own UK residential properties valued above a certain threshold.

Introduced by the UK government to address the issue of property ownership through companies and similar entities, ATED aims to ensure that such ownership structures contribute their fair share of tax. Here’s a quick guide for limited companies on what ATED is and who needs to comply.

What is ATED?

ATED is a yearly tax payable by companies, partnerships with corporate partners, and collective investment schemes that own UK residential properties worth more than £500,000. The tax is based on the value of the property and is intended to discourage the use of corporate entities to own high-value residential properties, thereby ensuring such properties are subject to appropriate tax charges.

Who Needs to Comply?

Companies Owning High-Value Residential Property: Any limited company owning a UK residential property worth over £500,000 is subject to ATED. This includes properties used as homes or dwellings, but excludes hotels, guest houses, boarding schools, hospitals, student halls of residence, and military accommodation.

Partnerships with Corporate Partners: If your partnership includes a corporate partner and owns a residential property valued over the threshold, ATED applies.

Collective Investment Schemes: These entities must also comply with ATED if they hold residential properties above the valuation threshold.

Valuation

The property value for ATED purposes is based on the market value at specific valuation dates set by HMRC. The most recent revaluation date was April 1, 2022, or the date of acquisition if later. Subsequent revaluations occur every five years.

Reliefs and Exemptions

While many companies need to pay ATED, there are reliefs and exemptions available:

  • Property Rental Businesses: Relief is available for companies using the property for rental purposes.
  • Property Development: Reliefs are also available for developers holding properties as trading stock.
  • Charitable Companies: Companies holding properties for charitable purposes may also qualify for relief.

Filing and Payment

Companies liable for ATED must submit an ATED return annually, even if a relief applies and no tax is due. The return must be filed by April 30th each year, and payment is due by the same date.

Penalties for Non-Compliance

Failure to file an ATED return or pay the tax on time can result in significant penalties and interest charges. Therefore, it’s crucial for companies to understand their obligations and comply promptly.

Understanding and complying with the ATED regime is crucial for limited companies owning high-value residential properties. By ensuring you meet the filing deadlines and correctly assess any reliefs or exemptions, you can avoid penalties and ensure compliance with UK tax laws. If you’re uncertain about your obligations, consider consulting a tax professional to navigate the complexities of ATED.

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