When a residential property is held through a company (or another non-natural person eg a trust) this potentially creates a liability to the Annual Tax on Enveloped Dwellings (ATED). This annual charge applies if the property is worth over £500,000.
There are several exemptions and reliefs for ATED, but those reliefs must be claimed each year for each property that falls within the ATED regime.
The property must be valued on acquisition to determine whether it is worth over £500,000. But it must also be revalued every five years after the acquisition, with the valuation undertaken on 1 April in 2012, 2017, 2022, 2027, etc.
The new valuation takes effect for the ATED reporting year starting on the following 1 April. Thus, the ATED return and payment for 2023/24 are based on the open market value of the property as assessed on 1 April 2022.
HMRC is writing to taxpayers who are currently paying ATED, to remind them to revalue their properties on 1 April 2022 using an open-market value.
This could result in the property moving up a valuation band for 2023/24, say from the £500,000 to £1m band, into the £1m to £2m band. Moving up a band will at least double the amount of ATED due.
Another trap for corporate landlords occurs is when the property becomes subject to ATED for the first time because the property value has exceeded £500,000. An ATED return or an ATED relief return must be submitted by 30 April within the year, so by 30 April 2023 for the year 1 April 2023 to 31 March 2024.
Failure to submit an ATED return on time will result in automatic late filing penalties. Also, failure to pay the right amount of ATED charge on time will generate a late payment penalty and an interest charge.
