Tax Update: A brief guide to annual tax on enveloped dwellings (ATED)

Brian Dunk, Tax Consultant Voltaire Financial LLP

Finance Act 2013 introduced a new annual tax on ownership of high value residential property held by non-natural persons.
The tax, known as the annual tax on enveloped dwellings (ATED), applies to residential dwellings owned by companies, partnerships (including limited liability partnerships) where there is a corporate partner and also collective investment vehicles. 
Initially the threshold was set at £2m per dwelling, but Finance Act 2014 introduced measures lowering this to £1m from 1st April 2015 and prospectively to £500k from 1st April 2016.
Although the definition of “dwelling” is widely drawn there are a number of exemptions and reliefs that can apply sothat the ATED is not generally payable where a property is in commercial use, for example, let to a third party on commercial terms and not occupied by anyone connected with the owner or held in a property trading business.
Notwithstanding that a dwelling potentially within the ATED charge may qualify for one of these reliefs, there is still a requirement to submit a formal ATED return and make a claim for the relief. Strict time limits apply for the submission of ATED Returns and penalties apply in the case of late Returns. 
These penalties are not tax related and so will be payable where a relief is claimed so that ATED is not due. For example, in the case of a dwelling which was held in April 2013 and for which returns (for 2013/13 and 2014/15) were submitted late in April 2015 the total penalty would be £2,900.

To download the full Discovery Report click here