Sometimes considered a ‘mansion tax’, ATED can affect any company owning residential properties. Here’s the latest, to make sure you are home and dry when it comes to taxes.
This annual charge came into effect in 2013 and subsequent legislative changes have meant it applies to many more property owners than before. It’s vital you know what is happening and what your liabilities are or will be.
Since 1 April 2013, if your company owns residential property that is worth £2m or more, or a share of such property, you may already be liable to annual charges. Later changes mean the charges now affect properties from £500,000 in value. PKF can help you to understand whether you are affected, identify your liabilities and make sure you stay compliant.
Who is affected?
The charge applies to UK and non-UK resident companies, as well as collective investment schemes and some partnerships (referred to as non-natural persons (NNPs)). In all cases, it is the value of the property that makes it liable to ATED. So if your company owns a property of a certain value (see below), even if you own it jointly with someone else, it still counts. It is the overall value, rather than the company’s interest, which is relevant.
What are the charges?
The charge for each property is based on its value, on a rising scale. This currently starts at £500,000.
Annual chargeable amount 2023/24
Annual chargeable amount 2022/23
£500,000+ to £1m
£1m+ to £2m
£2m+ to £5m
£5m+ to £10m
£10m+ to £20m
Before 2015/16, the lowest threshold was £2m. New bands were then introduced, reducing the minimum chargeable value to more than £1m (from April 2015) and more than £500,000 (from April 2016).
Which residential properties qualify?
ATED applies to residential properties located in the UK, including mixed use properties, gardens, grounds and buildings within them.
But some types of property are not affected. These include hotels, guest houses, boarding school accommodation, hospitals, student halls of residence, military accommodation, care homes and prisons.
Reliefs can also be claimed for:
property rental businesses
financial institutions acquiring dwellings in the course of lending
dwellings open to the public
occupation by certain employees or partners of a qualifying trade or a qualifying property rental business
housing co-operatives (from 1 April 2021).
When are the due dates?
An ATED return and payment is due within 30 days of the acquisition of a high value residential property by a company or other NNP. For existing properties, an annual ATED return and tax payment is due by 30 April during the tax year. For 2023/24 the return and payment will be due on 30 April 2023.
How and when to value a property
The owner company is responsible for assessing the property value. You can do this with the help of a professional valuer if you prefer. But HMRC has the right to challenge a value and enforce additional tax, interest and penalties if this value is found to be wrong.
A valuation at 1 April 2022 will be required for 2023/2024 and subsequent years, and at five-year intervals thereafter. The previous valuation date for properties was 1 April 2017, which applied for ATED returns up to 2022/2023.
So the next revaluation, on 1 April 2022, will apply for the 2023/24 ATED year and up to and including 2027/28.
If the property was not owned on any of the valuation dates, it will be calculated at the date it was acquired.
HMRC can confirm your view of the property’s banding if you submit your valuation for a pre-return banding check. This service is only available if you believe your property falls within a 10% margin of a different band.
Other changes to property taxes
If your company owns residential property, you also need to be aware of some other recent changes that may affect your tax liability.
Since 6 April 2019 property sales are liable to Corporation Tax. Companies not already registered for Corporation Tax must register within three months of the chargeable date. Any tax due must, in most cases, be paid within three months and 14 days of the disposal.
Higher UK Stamp Duty Land Tax rates apply to purchases of residential property by companies and some trusts. From April 2017, Inheritance Tax will be due on the value of UK residential property held by foreign-registered companies or excluded property trusts.
Our expert team can help you understand everything you need to know about UK property tax, and make sure you are compliant.