Overview of the ATED regime

Produced by Tolley

The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Overview of the ATED regime
  • ATED ― background
  • When does ATED apply?
  • Meaning of dwelling for ATED
  • Exclusions from definition of ‘dwelling’ for ATED
  • Linked dwellings
  • Connected persons
  • Calculating the ATED charge
  • Taxable value
  • Valuation and pre-banding check
  • More...

Overview of the ATED regime

ATED ― background

The annual tax on enveloped dwellings (ATED) regime was introduced by FA 2013, Part 3 and was one element of a series of anti-avoidance measures that were designed to make it less attractive to hold high-value UK residential property through a corporate structure (or ‘envelope’).

It should be considered in context with the charge to CGT on gains arising from the disposal of ATED-related properties (see ‘ATED-related gains’ below) and the 15% charge to SDLT on the transfer of such properties ― see the Stamp duty land tax ― basic rules guidance note.

The ATED regime applies to high-value UK residential property owned on, or acquired after, 1 April 2013, by:

  1. companies

  2. partnerships with at least one company member, or

  3. collective investment schemes (including unit trusts)

Together these are referred to in the remainder of this guidance note as ‘non-natural persons’ or ‘NNPs’. The ATED charge applies regardless of where the NNP is established or resident and therefore applies to both UK and non-UK NNPs.

Those within the ATED rules are subject to an annual property tax based on the value of the property held, although certain reliefs and exemptions are available. ATED also brings with it additional filing requirements for those within the scope of the provisions, even in cases where no tax charge is actually payable.

The ATED rules are complex, and this guidance note outlines the main aspects of the regime only.

For further detail on the ATED regime, see Simon’s Taxes B6.7 and also HMRC’s annual tax on enveloped dwellings technical guidance.

When does ATED apply?

Broadly, the ATED regime will apply where all of the following conditions are met:

  1. an NNP holds a ‘chargeable interest’

  2. that ‘chargeable interest’ is in one or more UK residential dwellings, referred to in the legislation as a ‘single-dwelling interest’ or ‘SDI’, and

  3. the taxable value of the SDI is more than £500,000

‘Chargeable interest’ for these purposes is defined very broadly and includes

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