Background Note
11.The Annual Tax on Enveloped Dwellings (ATED) was introduced in Finance Act 2013 and came into effect on 1 April 2013. It is payable by companies, partnerships with a corporate member and collective investments schemes that own interests in UK residential property valued at more than £2 million.
12.Most residential properties are owned directly by individuals. But in some cases they may be owned by a company, a partnership with a corporate member or other collective investment vehicle. In these circumstances the dwelling is said to be 'enveloped' because the ownership sits within a corporate 'wrapper' or 'envelope'.
13.ATED is an annual tax and is charged in respect of “chargeable periods” running from 1 April to 31 March. The amount of tax charged is based on the value of the dwelling as at 1 April 2012. Thereafter revaluation occurs at each 1 April at intervals of 5 years. Where a dwelling is acquired the valuation date is the effective date of acquisition. Where there is a substantial disposal of part (but not the whole) interest, the valuation date is the date of disposal.
14.Returns and payments are usually due by 30 April in the chargeable period. The amount of tax charged is calculated using a banding system based on the value of the property. The charges are increased in line with the previous September's Consumer Prices Index (CPI) (rounded down to the nearest £50).
15.There are a number of reliefs available, for example for the purposes of letting, trading or property development. There are also a number of exemptions from the tax, most significantly, charitable companies using the dwelling for charitable purposes.
16.Budget 2014 announced a reduction in the threshold from £2 million to £500,000 to be introduced over 2 years. From 1 April 2015 a new band will come into effect for properties with a value greater than £1 million but not more than £2m million with an annual charge of £7,000. For those persons who fall into this new threshold there is a transitional rule where returns will be due by 1 October 2015 and payment by 31 October 2015. From 1 April 2016 a further new band will come into effect for properties with a value greater than £500,000 but not more than £1 million with an annual charge of £3,500. For future years these charges will be indexed in line with the previous September CPI.
17.This section and the related changes to the 15% SDLT threshold (section 111) are part of a package of measures intended to tackle tax avoidance and to ensure that those wrapping residential property into corporate and other ‘envelopes”, and not using them for commercial purposes, such as renting them out, pay their fair share of tax.
