A few years ago, as part of an attempt to discourage buy-to-let investors purchase residential properties through limited companies, unit trusts, and other open-ended investment vehicles, the government introduced a new tax – the Annual Tax on Enveloped Dwellings (ATED).

Who pays ATED?

ATED is paid by limited companies, partnerships where any of the partners is a limited company, unit trusts, and other open-ended investment vehicles which:

• own a property and all or part of the property is used, or could be used, as a residence, for example a house or flat, including any gardens, grounds and buildings within them and
• that property is worth more than £500,000 on returns from 2016/2017 onwards)

To determine how to value your property, click here.

And then to actually value your property, HRMC provides an online valuation tool based on a valuation date – click here.

For the period beginning 1^st April 2018, you must use the 1^st April 2017 valuation date to calculate the value of the property and therefore the level of tax you need to pay on it.

There are reliefs available on ATED which mean your tax bill is either greatly reduced or that you do not have to pay any tax at all. These include:

• if it is let and occupied (or available to be occupied) on a commercial basis to a third party with whom there is no connection with the owner
• being open to the public for 28 days every year
• being redeveloped for resale
• owned by a property trader as part of their stock for the sole purpose of resale
• repossessed by a financial institution
• bought under a regulated Home Reversion Plan
• employees using the building as accommodation by a trading business
• a farmhouse being lived in by a farm worker or a former farm worker who was long-serving
• owned by a registered provider of social housing

ATED changes – new tax levels

The new annual tax payments for the 2018/2019 tax year are as follows (the increase from the previous year is in parentheses):

• More than £500,000 up to £1 million – £3,600 (+£100)
• More than £1 million up to £2 million – £7,250 (+£200)
• More than £2 million up to £5 million – £24,250 (+£700)
• More than £5 million up to £10 million – £56,550 (+£1,600)
• More than £10 million up to £20 million – £113,400 (+£3,300)
• More than £20 million – £226,950 (+£6,600)

ATED taxes have risen 3% across the board this year.

ATED changes – reporting

Starting with the 2018/2019 return, you will need to file your ATED return online. The old paper forms are no longer available.

HMRC noted that “taxpayers can prepare for the annual reporting period and appoint their agent if they haven’t already done so but should note that they will not be able to submit a return for the 2018/19 chargeable period until 1 April 2018”.

For help with your ATED tax and filing requirements, speak to the Burton Beavan team today on 01606 333 900 or email hello@burtonbeavan.co.uk.