Until 1 April 2016, ATED was only applicable to residential properties valued at over £1m. This is where residential properties were held ("enveloped") by a company or a partnership with a company member or a collective investment scheme.
The valuation threshold for properties subject to ATED is now only £500,000. The valuation date for properties subject to ATED has been updated from 1 April 2012 (or the date of acquisition, if later), to 1 April 2017 (or the date of acquisition, if later).
This has brought a large number of properties, which were previously below the threshold, into the scope of this annual tax.
The ATED is calculated by using a banding system and the annual chargeable amount for 2018/19 has risen to £3,600 for dwellings valued at between £500,001 to £1m.
However, there are a number of reliefs and exemptions that apply.
The main reliefs are for dwellings:
- being
redeveloped or held as stock for resale by a property developer.
• held by property rental businesses where the building is let out to a third party on a commercial basis.
• that are open to the public for at least 28 days per year or are used to provide accommodation or other services to the general public on a commercial basis.
- that are farmhouses occupied by working farmers.
- held by trading companies for the use of employees in the trade.
- owned by providers of social housing.
- acquired by financial institutions in the course of lending.
- held by property rental businesses for occupation by employees.
- held by property management companies for occupation by a caretaker.
The main exemptions relate to exempt bodies such as charities, public bodies and bodies established for national purposes.
Properties need to be single dwellings to be liable to this charge. Hotels, guest houses, boarding school accommodation, hospitals, student halls of residence, military accommodation, care homes and prisons are not single dwellings.
Capital gains: When a property subject to ATED is sold, a special ATED related capital gains tax will be payable. The amount of CGT payable will depend upon the length of time that the property has been owned and the length of time the property was subject to ATED.
Planning ahead: Although ATED is based on property values as at 1 April 2017 (or the later acquisition date) a new valuation will be required on 1 April 2022 and that valuation will form the basis for the tax calculation in subsequent years.