Despite the ATED (Annual Tax on Enveloped Dwellings) charge only being brought in with effect from April 2013, HMRC does not appear to be averse to making some major changes to the tax.
At the Budget 2014 it was announced that new ATED charges would apply to properties worth between £1 million and £2 million1 from 1st April 2015 and properties worth between £500,000 and £1 million2 from 1 April 2016. In addition, HMRC has announced two new changes in the Finance Bill which will apply from 1 April 2015.
Increased ATED Charges
Quite unexpectedly, HMRC has announced new Annual Chargeable Amounts for the 2015/16 chargeable period. The chargeable amounts are usually indexed in line with the previous September's CPI (Consumer Prices Index). Despite the indexation being linked to the CPI in September HMRC did not publish the 2014/15 Annual Chargeable Amounts until late March 2014.
However, the reason for the Government publishing the new Annual Chargeable Amounts in the Autumn Statement is not to give ATED payers due warning of the amounts but because the Government has decided substantially to increase the Annual Chargeable Amounts in excess of the CPI increase provided for in the 2013 Finance Act.
The Government has already announced that it raised 5 times the amount forecast for 2013/14 from ATED and ATED related CGT (£100 million3) and so it does not appear that it needed to increase the chargeable amounts to recover lost revenue. Rather, it appears the Government is increasing the amounts to provide a further disincentive to keeping properties in corporate 'wrappers' and such a large increase within 24 months of the original tax suggest that the costs of ATED may be set to increase substantially in the future as well.
The Government's analysis of the operational impact is that it may see an increase in ATED-related capital gains tax returns as a result. A cynic may suggest that the Government is bringing in this increase two years after the original ATED charge to encourage de-enveloping at a time when there will potentially be two years' worth of growth to tax at 28 per cent at the point of re-structuring.
The Autumn Statement states that the Annual Chargeable Amounts will increase by 50 per cent above inflation4. We have set out the new amounts together with the increase in the table below.
| Property value |
Annual chargeable amount 2014 to 2015 |
Annual chargeable amount 2015 to 2016 |
Increase |
| More than £2 million but not more than £5 million |
£15,400 |
£23,350 |
£7,950 |
| More than £5 million but not more than £10 million |
£35,900 |
£54,450 |
£18,550 |
| More than £10 million but not more than £20 million |
£71,850 |
£109,050 |
£37,200 |
| More than £20 million |
£143,750 |
£218,200 |
£74,450 |
The Annual Chargeable Amounts for the new bands remain unchanged and so properties within the £1 million to £2 million band will be subject to a charge at £7,000 and properties within the £500,000 to £1 million band will be subject to a £3,500 charge. It remains to be seen whether or not these charges will be increased in excess of the CPI increase in due course.
ATED Relief Declaration Returns
In its consultation 'ATED: Reducing the Administrative Burden for Business'5 HMRC sought responses on how to make ATED less administratively complex for businesses. This was done in anticipation of the reduction in the ATED threshold as this reduction will mean far more properties fall within ATED.
The changes will be brought in from the 2015/16 chargeable period (1st April 2015 to 31st March 2016) and from that chargeable period onwards chargeable persons who hold properties eligible for a relief will submit a 'relief declaration return'. The filing deadline for relief declaration returns in 2015 will be 1st October which will allow HMRC to synchronise the changes with its new IT system which will be launched during 2015 (presumably after 30th April 2015). For future chargeable periods the normal filing date of 30th April will apply.
Relief declaration returns will be submitted for each type of relief which applies to the chargeable person. Unlike a standard ATED return these returns will not include details6 of the property or properties which are eligible for the relief. This will mean that businesses holding portfolios of properties entitled to the same relief should be required to submit one simple return a year rather than multiple detailed returns.
Whilst this amendment is targeted at property businesses, it will also impact on personal investment companies which are entitled to a relief. From the 2015/16 chargeable period, rather than submitting a normal ATED return for the property/ies, a simpler relief declaration return will be submitted. In addition, for the 2015/16 chargeable period only, the filing deadline will be 1st October 2015.
How we can help?
We have extensive experience of assisting clients with their ATED and ATED-related CGT returns and liabilities and liaising with HMRC in relation to the returns. In addition, we have advised numerous clients on how best to restructure in light of ATED and how to unwind structures in the most tax efficient way.
If you would like further information then please contact John Barnett or Suzanna Harvey or your current contact at Burges Salmon.
1on 1st April 2012 or later if applicable
2 on 1st April 2012 or later if applicable
3 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/370543/ATED_201314_Circ.pdf
4This is the Government's way of saying an increase of 50 per cent after accounting for the September CPI increase.
5 https://www.gov.uk/government/consultations/annual-tax-on-enveloped-dwellings-reducing-the-administrative-burden-for-business
6 Address, HM Land Registry title number and valuation.