All companies (whether UK or not) holding UK residential property valued at over £500,000 are subject to the Annual Tax on Enveloped Dwellings (ATED).
The ATED year runs from 1 April to 31 March and companies must file an ATED return by 30 April for each ATED year during which they hold a UK residential property. If any reliefs are available (the most common being property rental business relief) then an ATED relief return must be submitted in order to claim them.
If a relief does not apply then the company will be liable to pay an annual chargeable amount based on the value of the property at the most recent valuation date.
ATED chargeable amounts for 2018/19
The ATED bands and chargeable amounts for the 2018/19 ATED year are set out in the table below:
| Property value bands based on the last valuation date |
Annual chargeable amount for 2018 to 2019 |
| More than £500,000 but not more than £1 million |
£3,600 |
| More than £1 million but not more than £2 million |
£7,250 |
| More than £2 million but not more than £5 million |
£24,250 |
| More than £5 million but not more than £10 million |
£56,550 |
| More than £10 million but not more than £20 million |
£113,400 |
| More than £20 million |
£226,950 |
The annual chargeable amounts are usually increased annually in line with the previous September's consumer price index (CPI). However, in 2015 the government unexpectedly decided to increase the annual chargeable amounts by a further 50%.
As the property value bands are not index-linked, more and more properties will come within ATED and become liable to larger annual charge amounts as time goes on.
The new ATED valuation date
The ATED chargeable amount for each property is determined by the band into which the property's market value falls on its most recent valuation date.
The default position for ATED is that 1 April 2012 and each 1 April falling five years after 1 April 2012 (i.e. 1 April 2017, 1 April 2022, 1 April 2027 etc.) will be valuation dates for ATED purposes. However, the new 1 April valuation date only applies for the following ATED year and for the next four ATED years.
As a result, the new 1 April 2017 valuation date will apply for the 2018/19 ATED year and all ATED years up to and including the 2022/23 ATED year.
Taxpayers will need to consider whether to obtain a new 1 April 2017 ATED valuation in order to determine whether they have moved into a different ATED band. In certain instances a decision may be taken that a new valuation is not needed – for instance if the property currently qualifies for a relief and it is expected to qualify for a relief throughout the entire ownership period. However, it would seem sensible to consider obtaining a 1 April 2017 valuation if substantial works have been carried out on the property since it was last valued, if the property’s current ATED value is near an ATED band threshold or if when the property was last valued it was below £500,000
In addition to the 1 April 2017 valuation date there are two other valuation dates that can apply under the legislation; these apply where there is a substantial acquisition or a substantial disposal. These are considered further in our briefing from October 2017 – "ATED valuation dates: what you need to know".
Filing deadline
ATED returns for the 2018/2019 period must be submitted by 30 April 2018 and any ATED due should also be paid by that date. However, it is not possible to submit 2018/19 ATED returns before 1 April 2018.
ATED online system
The ATED online system was launched for the 2017/18 ATED year and HMRC will expect all ATED returns for the 2018/19 ATED year to be submitted using this new ATED online system. Although this can involve more input from clients (who often need to create an online profile themselves in order to appoint their ATED agent) we have found the ATED online system to be more efficient than the old system for simple reporting.
Unfortunately, we have found the new system to have some issues where further detail needs to be provided or where the ATED position has changed so that an amendment needs to be made. It is hoped that these issues will be rectified in time for the 2018/19 ATED reporting.
Non-resident CGT (NRCGT) changes
Currently NRCGT only applies to tax gains realised by non-residents on the disposal of UK residential property (this is aligned with ATED which also only applies to UK residential property interests). However, it was announced at the 2017 Autumn Budget that, with effect from April 2019 NRCGT will be extended to also tax:
- gains arising from disposals of UK commercial properties
- disposals of interests in property rich entities where the non-resident person holds or has held a 25% or greater interest in the company. Property rich entities include any company that derives 75% or more of its gross asset value from UK property (whether residential or commercial).
Rebasing will be available to the April 2019 value where the taxable property is only brought into charge for capital gains tax as a result of these new rules.
In addition, at the 2017 Autumn Budget it was also announced that from April 2020 non-resident companies will be liable to corporation tax rather than capital gains tax (as is currently the case) on taxable disposals of UK property interests. This will change not only the rate of tax but also the method for calculating the chargeable gain.
ATED-related CGT changes
ATED-related CGT currently applies to any post April 2013 gains on UK residential property to the extent that the taxpayer has been liable to ATED (i.e. no ATED relief has applied).
With the introduction and interaction of ATED, ATED-related CGT, NRCGT, the proposal to tax disposals of shares in property rich companies and the proposal to make non-resident companies liable to corporation tax, the position for companies holding UK residential property has become very complex. As a result, the government has announced that it will consider reforming ATED-related CGT in an effort to simplify the position and opinions are sought in their 22 November 2017 consultation document on Taxing gains made by non-residents on UK immovable property (PDF).
It is hoped that much needed simplification in this area will be forthcoming as a result of this consultation.
How can Burges Salmon help?
We have extensive experience of assisting clients with their ATED, ATED-related CGT and NRCGT returns and liabilities and liaising with HMRC in relation to such returns and taxes. In addition, we have advised numerous clients on how best to restructure their affairs in light of ATED and the inheritance tax changes which apply from April 2017 (including advising on how to unwind structures in the most tax efficient way).
If you or your client would like further guidance on your ATED or UK tax obligations then please contact John Barnett in our private client team.