Changes to ATED: how might the sharp rise in residential property values affect your company?

Gemma Hanrahan of the Knill James tax department considers the change in reporting requirements under ATED (Annual Charge for Enveloped Dwellings) for companies that own residential property. 

What is ATED?

Where residential property valued at £500,000 or more is owned by a company or a partnership that has a corporate member, then ATED returns must be completed and submitted to HMRC. These returns are prepared in advance for the coming year, covering the period from 1 April to the following 31 March.

Why was ATED introduced?

This tax came into force from 1 April 2013 as the UK government was concerned that non-resident individuals were escaping UK tax, including Stamp Duty Land Tax. It was originally aimed at residential property with a value of £2million or more, held in registered companies. However, the threshold was quickly reduced and is now £500,000.

How could the revaluation on 1 April 2022 affect you?

The ATED charge is based on the value of the residential property and is rebased every five years. The most recent valuation date was 1 April 2022 which will affect ATED returns for 1/4/23 – 31/3/24. These returns will need to be submitted to HMRC by 30 April 2023.

Due to the significant increase in residential property prices between 1 April 2017 and 1 April 2022, a lot more properties will now be caught within the net and therefore an ATED return will need to be completed when perhaps it was not needed before.

What do companies owning residential property need to do?

If your company or partnership owns any residential properties, these will need to be revalued as at 1 April 2022. You can do it yourself using Zoopla or another similar website, but these valuations must be based on an open market value. Alternatively, you can request a formal valuation through an estate agent or surveyor.

If the valuation is within 10% of the threshold for ATED, a pre-banding check can be requested by HMRC. You might consider getting a more formal valuation undertaken if you are close to one of the bands. 

If property is valued at £500,000 or more, then you will be required to complete an ATED return for the period 1/4/23 – 31/3/24, which will be due for submission to HMRC by 30 April 2023.

What reliefs are available?

If your business or the residential property falls into any of the following categories you may qualify for a relief claim which means that there will be no charge:

• Property rental business
• Public buildings
• Property developers and traders
• Financial institutions
• Qualifying employees
• Farmhouses
• Registered provider of social housing

However, there are certain conditions that must be met to qualify, so you should seek advice to confirm that the relief can be applied in your circumstances.

What happens if you are not covered by the reliefs?

If your business or residential property is not covered by one of the reliefs, you will be subject to the ATED charge and an ATED return will need to be submitted.

The charges for the 2022-23 year range from £3,800 for a property valued at £500,000 up to £244,750 for a property valued at more than £20million.

What happens if you buy or sell a property during the year?

ATED returns are completed in advance for the period 1 April to 31 March. If a property is then purchased during that year, a return needs to be submitted to HMRC within 30 days of completion. If a property is sold within the year, a refund can be claimed on any annual charge paid on a time-apportioned basis.

What are the next steps?

If you think the residential property your company or partnership owns is worth at least £500,000 you should obtain a valuation. If this confirms a value above £500,000 then an ATED return will need to be completed, even if a relief can be claimed.

If you would like any further advice or help in setting up an ATED account and completing an ATED return, please get in touch with Gemma Hanrahan on GemmaH@KnillJames.co.uk or 01273 485093.