If you own residential property within a company or similar arrangement in the UK, you may be charged the Annual Tax on Enveloped Dwellings (ATED). While it can be very large, many homeowners are eligible for reliefs which can reduce or even abolish your charge altogether.
But to benefit from these reliefs, you must be aware of how and when to claim them upon filing your ATED return. This article offers valuable tips on how to get around ATED reliefs and stay in line with HMRC regulations.
What Is ATED and Who Needs to File?
ATED is payable on residential property in the UK worth over £500,000 and owned by companies, corporate members of partnerships, or collective investment schemes. ATED is intended to deter the “enveloping” of houses in corporate vehicles to escape other taxes.
Even if there is no tax to pay—because your property is eligible for relief—you must still submit ATED return if your property is within the charge.
Common Reliefs That Can Reduce Your Liability
There are certain reliefs available under ATED, and availing them can reduce your tax significantly or even remove it. Some common examples include:
- Property Rental Relief: In case the property is rented out on a commercial basis to a third party, you may not have to pay ATED.
- Property Development Relief: Properties being held for resale or redevelopment may also be eligible for relief.
- Farmhouse Relief: If your farmhouse is home to a working farmer and is part of a farming business, it can qualify for relief.
- Charitable Use Relief: If the property will be used for charitable activities, no ATED is payable.
Each relief has its own requirements, so be sure to find out if your property qualifies on all counts before claiming.
When and How to Claim Reliefs
You must complete an ATED return each year for qualifying property, usually by 30 April of the following year (from 1 April). If you qualify for relief, you will file a Relief Declaration Return instead of a standard ATED return.
This declaration guarantees your property qualifies for relief and you won’t have to pay the ATED charge. You’ll be charged, however, if you fail to declare in a timely manner even when no tax is due.
Ensure your return has all information required and hold documentation to support your claim, such as tenancy agreements, development plans, or charity documents.
Avoiding Common Mistakes
It’s unexpectedly easy to make mistakes on your ATED return. The most frequent are:
- Missing the Deadline: ATED returns are earlier than most other tax returns. Place a reminder for 30 April.
- Incorrect Valuation Band: Property values must be done using the current valuation date. If you’ve just hit a five-year anniversary, you may need a new valuation.
- Incomplete Relief Claims: Clicking the box isn’t enough. You must ensure that you completely meet each relief’s requirements.
Late or improper filing can lead to unnecessary penalties, so taking the time to double check if you qualify and have sufficient documentation is well worth it.
Why Professional Help Pays Off
To the extent possible, your ATED return may be prepared by you, but professional assistance can be a godsend—especially where your eligibility for relief is uncertain to you.
A property tax expert can help ensure that your return is accurate, timely, and optimised to claim all the reliefs to which you are entitled. Not only does this prevent penalties, but it can also unveil savings that otherwise would have been missed.
UK Property Accountants, for example, provides clients with both ATED return preparation and strategic advice on how best to structure their property investments.
Conclusion
If you have residential property held within a company, filing an ATED return will likely be a part of your yearly schedule. Fortunately, through the right know-how and forethought, taking reliefs will reduce your fiscal expenditure—and eradicate it completely as well.
Double-check that you are eligible, file the relevant forms before the deadline, and consult where necessary. Acting sooner rather than later will ultimately save you money and time in the long run.