The annual tax on enveloped dwellings (ATED) is a tax on certain entities holding ‘high-value’ residential property, although reliefs can be claimed. Finance Act 2015 has introduced a number of changes, including a new form of ATED return.
ATED applies an annual tax charge based on the capital value of the residential property. Additionally, onerous filing requirements and, potentially, ATED-related gains can arise on the disposal of the underlying property, although reliefs are available in some circumstances. Any element of the gain realised on a disposal which is not subject to an ATED-related capital gains tax (CGT) charge may be taxed under anti-avoidance legislation or under the new CGT charge for non-UK residents which was introduced from April 2015.
Finance Act 2015 included provisions for ATED filing requirements to be simplified for chargeable periods beginning on or after 1 April 2015. This coincides with the ATED £2m threshold being reduced to £1m from 1 April 2015: the threshold falls to £0.5m on 1 April 2016.
The table sets out the new ATED annual charges from 1 April 2015.
ATED imposes a significant administrative burden on businesses which will only increase as its scope extends. Following public consultation, Finance Act 2015 introduced the relief declaration return (RDR), the aim of which is to reduce this burden.
This is to be achieved by allowing entities to submit RDRs (instead of ATED returns) in respect of all qualifying residential properties held by that entity where relief from ATED can be claimed.
The first annual RDRs will be due by 1 October 2015 but, thereafter, will be due on 30 April each year.
Although the RDR has not yet been released, unlike ATED returns, HMRC has advised that it does not need to include information identifying the properties, meaning property valuations are not necessarily required. While the RDR can be in respect of multiple residential properties, a different RDR submission will need to be made in respect of each type of relief being claimed.
Where a residential property is newly acquired or constructed and an RDR has previously been submitted, the existing return will suffice for the newly acquired or constructed property, providing the same relief is claimed.
An RDR needs to be submitted in respect of each property owner as there is no ‘group’ RDR. From a practical perspective, this will mean that groups of companies consisting of special purpose vehicles, each holding high-value residential property, will face a disproportionate administration burden when compared with companies holding multiple properties.
Time to review your position
It is important that an entity’s eligibility for relief from the ATED charge is reviewed prior to 30 April 2015. While RDRs for 2014/15 do not have to be submitted until 1 October 2015, if an entity cannot claim relief, it will still be necessary to submit an ATED return by 30 April 2015 (unless the transitional rules for properties valued at £1m–£2m apply). Penalties will be charged for non-compliance.