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Member Briefing: Annual Tax on Enveloped Dwellings (“ATED”)

Date: 11/05/15

Annual Tax on Enveloped Dwellings (“ATED”)

You may be aware that ATED was introduced to correct a perceived SDLT avoidance arrangement and, initially, applied to properties valued at over £2m.

Developers were granted relief in certain situations from ATED (see link below for a full list of such circumstances) but in particular where

The dwelling is acquired as part of a property development business the property was purchased with the intention to re-develop and sell it on and isn’t, at any time, occupied (or available for occupation) by anyone connected with the owner 

Please click here, to read more:

However, developers still need to complete an ATED return if their property:

  • is a dwelling (see link above for definition)
  • is in the UK
  • was valued at more than £2 million on 1 April 2012 or at acquisition if later for returns from 2013 to 2014 onwards
  • was valued at more than £1 million on 1 April 2012 or at acquisition if later for returns from 2015 to 2016 onwards
  • is owned completely or partly by a company, a partnership where one of the partners is a company, or a ‘collective investment vehicle’ - for example, a unit trust or an open ended investment company

We have been alerted to an issue concerning the returns required by HMRC to allow developers to obtain relief from ATED. The position as described above is our understanding of the position but members are advised to seek independent advice if they feel that the requirement to make a return to HMRC applies to them.

Failure to file such returns has led to penalties being charged on some HBF members and we are currently consulting with members concerning what action HBF should take to pursue this matter.

As noted above, the previous requirement was to file a return for each property worth more than £2m. However this limit was reduced from 1st April 2015 to £1m and further reductions to £500,000 are proposed.

HMRC are clearly aware of the administrative burden facing developers, particularly given the proposed reductions from £2m to £500k, and are proposing a simplification as per the link below to the HMRC paper.

The key elements are as follows: 

  1. A new return called a “Relief Declaration Return” will be introduced by the Finance Bill 2015 such that businesses holding properties eligible for relief from ATED will only need to make a single return covering all properties (as compared to one return per property)
    1. This RDR form is still to be issued
  2. For 2015\16 only, the proposal is to have a filing deadline of 1st October
    1. For future years, the filing date will revert to 30th April

Please click here, to read more: