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High Value Residential Property – ATED Regime Extended to £500k Properties

30th September 2014

Introduced in 2013, the Annual Tax on Enveloped Dwellings (“ATED”) currently applies to UK residential properties with a value of £2m or more, where the property is held by a company or other "non-natural person".

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The following charges may apply:

  • An annual charge of up to £143,750, depending on the property’s value; 
  • Stamp Duty Land Tax (SDLT) at 15%; and
  • Sales of residential properties by those subject to the ATED annual charge have been brought within the scope of Capital Gains Tax (CGT), with gains accruing on or after 6 April 2013 being subject to tax at 28%.

Following Budget 2014, the 15% SDLT rate for the purchase of residential properties worth more than £2m acquired by non-natural persons was expanded to cover all such properties valued at more than £500k. This applies to contracts entered into on or after 20 March 2014.

The ATED will also be extended to properties worth £500k or more, as follows:

  • From 1 April 2015 residential properties owned by non-natural persons (e.g. companies) valued at £1-2million will be liable to an annual charge of £7,000; and
  • From 1 April 2016 this will be expanded to properties valued at £500,000-£1million; those companies will pay £3,500 annually.

Exemptions from the taxes continue to apply for residential properties let to third parties on commercial terms, and for property development businesses. These reliefs must be claimed each year in the ATED return submitted to HM Revenue & Customs (HMRC).

2014/15 ATED Returns and tax payment

  Property value   Charge for tax year 2014-15 
  £2m - £5m  £15,400
  £5m - £10m £35,900
  £10m - £20m £71,850
  £20m+  £143,750

We expect further increases for 2015/16.

The ATED Returns for the year to 31 March 2016 are due by 30 April 2015 along with payment of the tax, if applicable. Penalties will be applied for late for non-submission of returns.

HMRC Consultation of Reducing the Administrative Burden

HMRC recognises the administrative burden for those who must comply with the regime. It issued a consultation paper in July 2014 with proposals to reduce the number/frequency of returns required for those companies eligible for relief, e.g. property rental and development businesses. We expect further announcements to be made in the coming months.

Please contact Katharine Arthur, Head of Tax, for advice on the ATED regime or any assistance with preparing ATED returns. We can agree fixed fees for these services.

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