ATED is a tax (s.94 Finance Act 2013) charged on ‘non-natural persons’ (a company, a partnership with a company member, or a collective investment scheme) that hold an interest in one or more UK residential dwelling(s) known as (a ‘single-dwelling interest’) and where that single dwelling interest is worth a certain value threshold as follows:
- above £500,000 (but not more than £1 m) — tax charge £3,500 (from 1 April 2016 – s.110 Finance Act 2014)
- above £1 million (but not more than £2 m) — tax charge £7,000 (from 1 April 2015 – s.109 Finance Act 2014)
- above £2 million (but not more than £5 m) — tax charge £23,350 (from 1 April 2015; for chargeable periods beginning 1 April 2014, the charge was £15,400; for chargeable periods beginning 1 April 2013, the charge was £15,000 – s.70 Finance Act 2015)
- above £5 million (but not more than £10 m) — tax charge £54,450 (from 1 April 2015; for chargeable periods beginning 1 April 2014, the charge was £35,900; for chargeable periods beginning 1 April 2013, the charge was £35,000 – s.70 Finance Act 2015)
- above £10 million (but not more than £20 m) — tax charge £109,050 (from 1 April 2015; for chargeable periods beginning 1 April 2014, the charge was £71,850; for chargeable periods beginning 1 April 2013, the charge was £70,000 – s.70 Finance Act 2015)
- above £20 million — tax charge £218,200 (from 1 April 2015; for chargeable periods beginning 1 April 2014, the charge was £143,750; for chargeable periods beginning 1 April 2013, the charge was £140,000 – s.70 Finance Act 2015)
It does not apply where an individual alone, or with other individuals, owns a residential property. ATED is an annual tax and is charged in respect of ‘chargeable periods’ running from 1 April to 31 March. The first chargeable period was 1 April 2013 to 31 March 2014. Where a person owns a single-dwelling interest for a shorter period then its chargeable period will be 1 April to the date it no longer owns the interest (for example 1 April 2015 – 28 January 2016). Furthermore, where a liability arises in only part of the year then a proportion of the annual amount payable will need to be paid.
In order for ATED to apply all of the following conditions must be met:
- The ownership condition
- Beneficial entitlement, either alone or with others, to a single-dwelling interest
- The single dwelling interest has a value that fits the band above
- None of the exemptions apply, and the person is
- Unable to claim any relief
The ownership condition is met if the single dwelling interest is held by a company (otherwise than as a member of a partnership or for the purposes of a collective investment scheme), or by a company which is a member of a partnership, or for the purposes of a collective investment scheme.
Beneficial entitlement in a single-dwelling interest means an interest which a person is entitled to or in which the person has an interest for its own benefit.
Single dwelling interest is an important definition and to understand that meaning of ‘dwelling’ will need to be understood first. A ‘dwelling’ has its normal meaning and will comprise a distinct unit of residential property (i.e. a house or flat which is considered as one residence). Non-residential properties are not within the charge to ATED. A dwelling not only includes a property that is used as a dwelling but also one that is suitable for use as a dwelling. The ‘dwelling’ may extend beyond the actual building. It will include land which comprises the grounds or gardens to a dwelling and any other land that is, or is at any time, intended to be occupied or enjoyed with a dwelling. A dwelling also includes land which subsists (or is intended at any time to subsist for the benefit of the dwelling). This ensures that any land which would naturally be associated with a particular house is treated as part of that dwelling. The most obvious example is a garden, but a tennis court, drive, garage, swimming pool and changing room, summerhouses etc would all be included as part of the dwelling for the purposes of ATED.
Exemptions apply to charitable companies provided the interest is held by that charitable company for qualifying charitable purposes, and the necessary conditions for the exemption from the charge are met. A charitable company is charity that is a body of persons and is distinct from a charitable trust. A ‘charity’ is defined as: ‘a body of persons or trust that: (a) is established for charitable purposes only (b) meets the jurisdiction condition (c) meets the registration condition, and (d) meets the management condition. Exemption also applies to public bodies which are not regarded as companies for the purposes of ATED and they will therefore not meet the ownership condition in section 94(4) FA 2013. As well as the bodies themselves, any company in which all the shares are owned by a listed public body, as well as any wholly owned subsidiary of such a company, will also be exempt. Certain bodies established for national purposes (e.g. The Historic Buildings and Monuments Commission for England) and certain dwelling conditionally exempt from inheritance tax are also not hit by the charge.
Reliefs are available and can be claimed against ATED which being an annual tax must be paid if the conditions for a liability are met at the beginning of a chargeable period. Reliefs must be claimed on the ATED. The reliefs are:
- Qualifying property rental businesses including preparation for sale etc carried on a commercial basis and with a view to a profit.
- Dwellings opened to the public where a single-dwelling interest is exploited as a source of income in a qualifying trade which offers the public the opportunity to make use of, stay in or otherwise enjoy the dwelling as customers of the trade on at least 28 days of the year. Relief will also be available where a single-dwelling interest is not yet being exploited provided there is an intention to do so and steps are being taken so that the trade can begin without delay (except so far as any delay is justified by commercial considerations or cannot be avoided). This is the case even if the trade in question has not commenced. Furnished holiday letting is an example.
- Property developers including exchange of dwellings where a single-dwelling interest is held by a person carrying on a property development trade (the ‘property developer’), and the interest is held so that it will be developed and resold as part of the property development trade.
- Property traders where a single-dwelling interest is held by a person carrying on a property trading business (the ‘property trader’), and the interest is held as the stock of the business and for the sole purpose of resale in the course of that property trading business.
- Financial institutions where repossesses a property as a result of its business of lending money.
- Occupation by employees or partners where a dwelling may be owned by a trading business to provide living accommodation to employees or where a trading business is structured as a partnership, providing accommodation to certain partners may also be relievable (as well as to employees of the partnership).
- Farmhouses occupied by a ‘farm worker’ or a ‘former long-serving farm worker’ may qualify for relief. The farmhouse, however, must form part of the land that is occupied for the purposes of a qualifying trade.
- Providers of social housing where the providers must be either a ‘profit making registered provider of social housing’ or a ‘relevant housing provider
Filing return and payment of tax
The ATED return must be made by a person for a chargeable period in respect of any single-dwelling interests within 30 days of the date on which the person first comes within the charge to ATED. A person who owns a single dwelling interest on the first day of the chargeable period (1 April each year) will have a filing date for the return of 30 April. For a newly built property the return should be filed within 90 days of the earliest of the date your property becomes a dwelling for Council Tax purposes or the date it was first occupied. However if your property was valued between £1 million and £2 million for the chargeable period 1 April 2015 to 31 March 2016 you need to submit your return a) by 1 October 2015 if your property is within the scope of ATED on 1 April, or b) by the later of 1 October 2015 or within 30 days of acquisition if your property comes within the scope of ATED after 1 April. The return could be filed using this form. A taxpayer can make an amendment to its return, or its return of adjusted chargeable amount, at any point within 12 months of the end of the chargeable period to which the amendment relates. The paper form of the return could be sent to HMRC, ATED, Crown House, Birch Street, Wolverhampton, West Midlands, WV1 4JX. HMRC will send you a reference number by letter or email, within 10 days of receiving your ATED return which could be used for making the payment.
