On 1 April, 2013, the Annual Tax on Enveloped Dwellings (ATED) was implemented wherein Non-Natural Persons (NNPs) who have more than £500,000 worth of interest for their homes are subject to tax. This impacts most businesses, joint ventures involving company members, and collective investment plans.
According to HMRC’s technical guidance, if any of the following applies to the property, a corporation must complete an ATED return:
- The property is a dwelling.
- The property is worth more than £500,000.
- The property is owned entirely or partly by a company, partnership, or collective investment scheme.
Dwelling property refers to a residential building intended for use by one or more households as a home, such as a house, apartment, mobile home, houseboat, vehicle, or other “substantial” structure. If a person owns one directly rather than through a company, no ATED or ATED-related Capital Gains Tax must be paid.
The ATED regulations aim to deter firms from owning “expensive houses” that are utilised as homes by the company’s owner(s). The laws require the following:
- When a business purchases an “expensive dwelling,” Stamp Duty Land Tax (SDLT) is levied at a penalty rate of 15%.
- A yearly tax charge is based on the home’s value.
The company must use that date to revalue its properties on or before 1 April, 2022 and use the acquisition date if the property is acquired after 1 April 2022. Based on the property’s value, a banding system calculates the amount it must pay.
Amounts subject to charges from 1 April 2023 to 31 March 2024 are as follows:
| Property Value | Annual Charge 2023/24 |
|---|---|
|
Between £500,000 and £1 million |
£4,150 |
|
Between £1 million and £2 million |
£8,450 |
|
Between £2 million and £5 million |
£28,650 |
|
Between £5 million and £10 million |
£67,050 |
|
Between £10 million and £20 million |
£134,550 |
|
More than £20 million |
£269,450 |
There are fines for late filings, late payments, or faulty returns. However, taxpayers have the right to appeal to HMRC’s disagreements to their returns, such as a penalty or determination, and will have 30 days to justify their appeal.
Legend Financial and Tax Advisor can advise on which property holding structure is best for your situation and offer guidance on restructuring if necessary. If establishing an offshore corporation is the right course of action, we can advise determining the amount of ATED tax that must be paid and submitting ATED returns to HMRC on your behalf.
References
HM Revenue & Customs. 2014. ‘Annual Tax on Enveloped Dwellings’, GOV.UK (GOV.UK): https://www.gov.uk/guidance/annual-tax-on-enveloped-dwellings-the-basics
dev. 2023. ‘ATED for Non-Resident Companies | ECOVIS Wingrave Yeats’, ECOVIS Wingrave Yeats: https://www.ecovis.co.uk/news/ated-for-non-resident-companies/
