Dwellings within ATED (Annual Tax on Enveloped Dwellings) scope will be revalued on 1 April 2022 for ATED periods from 1 April 2023 onwards. Suitable valuations should be obtained in advance of 1 April 2023.
What is ATED?
ATED is a tax that applies to companies, partnerships (with at least one corporate member), and certain collective investment vehicles owning an interest in a UK dwelling worth at least £500,000.
The ATED year runs from 1 April and unlike most UK taxes, returns are filed and any tax payments due are made at the start of the period rather than retrospectively. For example, the returns and payments for the period from 1 April 2022 to 31 March 2023 must be made by 30 April 2022. Returns for properties acquired during the year are due within 30 days of acquisition, and in the case of newly-built properties, within 90 days of the earlier of it being first occupied or becoming a dwelling for Council Tax purposes.
Several ATED reliefs are available, which can relieve up to 100% of the tax payable. Please note that even if 100% relief is available and no tax is due, annual returns must still be made to claim the applicable relief(s).
How is ATED calculated?
ATED liability is calculated using a banding system based on the value of each dwelling. The rates applicable to the year starting 1 April 2022 are as follows:
|Value of Dwelling||ATED Due (before reliefs)|
|£500,001 – £1,000,000||£3,800|
|£1,000,001 – £2,000,000||£7,700|
|£2,000,001 – £5,000,000||£26,050|
|£5,000,001 – £10,000,000||£60,900|
|£10,000,001 – £20,000,000||£122,250|
The ATED due for each band increases in line with inflation (CPI) each year.
What is the valuation date for Annual Tax on Enveloped Dwellings?
ATED was introduced from 1 April 2013, with an initial valuation date of 1 April 2012 for properties held at that date. Every five years there is a revaluation of the dwellings for ATED, with the revaluation falling on 1 April 2022 for the 2023-24 ATED year and the four years following. This effectively gives taxpayers a year to obtain a new valuation, where necessary.
There are cases where the five-year valuation point is superseded. Either of the following will trigger a revaluation at the relevant date:
- A substantial acquisition – for example acquiring a new dwelling, renewing a lease, or adding a parcel of land to an existing dwelling where the chargeable consideration is more than £40,000.
- A substantial disposal of part of a dwelling where the chargeable consideration is more than £40,000.
For example, if a company owns a single dwelling worth £5.2 million, which has a large garden and does not qualify for any ATED reliefs, it will need to pay ATED of £60,900 by 30 April 2022. If on 1 July 2022, a portion of the garden is sold for £100,000, this is a substantial disposal of part of the dwelling and triggers a revaluation of the whole dwelling for ATED purposes. When considering the 2023-24 ATED return for this property, as the disposal took place after 1 April 2022, 1 July 2022 will be the relevant valuation date. This means there is no need to obtain a 1 April 2022 valuation for this property.
What action should I take?
If you hold a dwelling you believe will fall within ATED as of 1 April 2023 and you do not expect it to qualify for 100% relief, then you should obtain a new valuation as at 1 April 2022. We would recommend that the valuation is obtained from a reputable surveyor so that it could stand up to scrutiny in the event of a HM Revenue & Customs (HMRC) enquiry. However, there is no legislative requirement for a formal valuation to be undertaken.
If the new valuation falls within 10% of one of the ATED thresholds (for example, if your property is valued at £1.9 million, which is within 10% of the £2 million threshold), then you may wish to consider applying to HMRC for a pre-return banding check (PRBC) in advance of submitting your 2023-24 ATED return. A PRBC allows HMRC to agree, disagree or ask for further information to confirm that your dwelling is banded correctly before your return is submitted. HMRC will typically respond to a PRBC application within 30 working days, though this can take longer, so we would recommend that this process is started as early as possible if this will be relevant to you.
If you expect the property to qualify for 100% relief, then there is no need to obtain a valuation at this time. This is because relief claims do not require valuations. You may need to retrospectively obtain a 1 April 2022 valuation later if the property ceases to qualify for 100% relief in the future.
How we can help
Saffery can provide a full ATED compliance service, including the preparation or amendment of returns, and advising on the availability of reliefs and the relevant valuation dates of your dwellings for ATED purposes.
Please note that this briefing note is not comprehensive and we would always recommend taking professional advice, based on your particular circumstances, before taking any action with regard to annual tax on enveloped dwelling or taxation matters in general.
- Annual Tax on Enveloped Tax | The Basics – HM Revenue & Customs
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