ATED

What is the annual tax on enveloped dwellings?

The annual tax on enveloped dwellings (ATED) was introduced as part of a package of measures aimed at making it less attractive to hold high-value UK residential property indirectly, eg through a company, in order to avoid or minimise taxes such as stamp duty land tax (SDLT) on a subsequent disposal of the property.

The other measures included in the anti-avoidance package relating to high-value UK residential property include:

  1. the single higher rate of SDLT on the acquisition of high-value UK residential property for non-natural persons (NNPs) (for further details, see Practice Notes: Rates of SDLT and Single higher rate of SDLT for high-value residential property transactions), and

  2. prior to 6 April 2019, a capital gains tax (CGT) charge on sales of high-value UK residential property by NNPs (abolished from 6 April 2019) (for further details, see Practice Note: Capital gains tax charge on ATED-related gains [Archived])

When does ATED apply?

The provisions enacting ATED are set out in Part 3 of the Finance Act 2013 (FA 2013). ATED

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All in? Court confirms when a settlement is 'made' for the purposes of excluded property (Accuro Trust (Switzerland) SA v The Commissioners for HMRC)

Private Client analysis: This case considered the meaning of 'relevant property' under the settlements regime of the Inheritance Tax Act 1984 (IHTA 1984) and, in particular, the time at which this definition is to be tested. The question arose as to whether the trustees of an offshore trust established by a non-UK domiciled settlor were subject to the UK settlements regime in respect of property added to the trust after the settlor became deemed domiciled in the UK, or whether they were exempt from such charges as the trust consisted solely of excluded property. The First-tier Tribunal (FTT) held that whether trust property is excluded property is based on the status of the trust at the time that it was established, not at the time that the property in question was added to the settlement. As a result, the trust in this case did consist solely of excluded property and no inheritance tax (IHT) charges arose as a result of either the ten-year anniversary or capital distributions. The FTT was also asked to consider whether their jurisdiction was appellate, or supervisory only. The FTT held that, while their jurisdiction was supervisory, the questions raised by the trustees were relevant in establishing whether HMRC had acted reasonably and that the outcome (ie that the paid IHT should be refunded and that no further IHT was due) would be the same in either case. Written by Katherine Willmott, senior associate solicitor at Foot Anstey LLP.

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