The Annual Tax on Enveloped Dwellings (ATED) regime came into force on 1 April 2013 in respect of UK residential properties owned by companies or by corporate partnerships that were worth over £2 million. It was then extended to properties worth over £1 million from 2015 and to properties worth more than £500,000 from 2016. We have a full briefing on ATED here.
The ATED return for the year to 31 March 2023 and any tax due for the year must both be dealt with by 30 April 2022. The amount of the tax charge depends on the value of the property and now ranges from £3,800 up to a maximum of £244,750 across six bands of value determined by reference to a property’s value on 1 April 2018 or its actual cost if acquired after that date.
There are a number of exemptions from the charge covering property rental businesses, developers, and dealers which must be claimed via an annual “nil return”. Failure to submit such a claim in good time will unfortunately expose the company to penalties.
HMRC introduced a new online ATED filing service with effect from 1 April 2017 which became compulsory in April 2018 for the filing of 2018/19 and later returns. This involves a registration process, which we can assist with, and does allow for the appointment of an agent to file on behalf of a company.
Looking ahead, a revaluation exercise will also be required in due course when the ATED charges will be rebased to 1 April 2022 values.
Homes for Ukraine, ATED and UK tax
The Homes for Ukraine scheme was announced by the Government on 14 March 2022. The scheme enables individuals, charities, community groups and businesses to bring people fleeing the conflict in Ukraine to the UK to stay in a property provided by them.
For a 6-month period, those Ukrainian individuals who are sponsored will be given a room or home in the UK rent-free. UK individuals who take part in the sponsorship will receive £350 a month tax-free income.
When the scheme was first announced, it seemed the Government had overlooked a crucial point applying to businesses: residential properties which are owned by a company and let on an uncommercial basis do not qualify for the relief from the ATED charge. As such, there was a potential cash charge for companies wanting to do good and support a Ukrainian national.
On 31 March, a statement from the Government clarified that:
- the £350 a month Homes for Ukraine payment would not be subject to income tax or corporation tax; and
- homes owned by companies but provided to Ukrainians under the scheme would continue to receive relief from the ATED charge.
The statement didn’t clarify whether there would be a need to refile ATED returns to claim the new relief. As mentioned above, normally returns are required to be filed by 30 April at the start of a financial year, and any changes to the property status reflected in a mid-year updated return. We therefore look forward to additional information around this.
Given that paying tax on a good deed would not be at the top of directors’ lists of things to do, the tweaks to the ATED rules have been welcomed, with many of our corporate clients now signing up to support the scheme.
For more information, please get in touch with your usual contact or use our enquiry form.
