It’s nearly time to submit your Annual Tax on Enveloped Dwellings (ATED) returns
By Chris Campbell, Head of Tax (Tax Practice and Owner Managed Business Taxes)
28 March 2024
Learn how to prepare for the upcoming Annual Tax on Enveloped Dwellings (ATED) deadline (April 2024). And we unpack the outcome of a recent tax case on ATED penalties.
The Annual Tax on Enveloped Dwellings (ATED) is a tax payable on residential property in the UK. The majority of ATED is payable by companies, but it can also be payable by partnerships (if a partner is a company) and collective investment schemes, such as a unit trust or an open-ended investment vehicle.
ATED return requirements
ATED returns are due for submission by 30 April each year. When properties are acquired during a tax year, an ATED return must be completed within 30 days of acquisition covering the remainder of the ATED fiscal year and the property will form part of the annual return process thereafter. Different rules apply for newly built properties.
To coincide with the tenth anniversary of ATED, we published an article advising on the more detailed and complex requirements. ATED returns for 2024/25 will be due for submission by 30 April 2024, which is also the due date for any payment. It’s important to bear in mind that an ATED return may be still required if no ATED is actually payable. For instance, to claim a relief to avoid an ATED charge being due.
ATED liability for 2024/25
The valuation date was revisited for 2023/24 returns. For 2023/24 to 2027/28, ATED will be based on the value as it stands on 1 April 2022. The valuation of properties acquired after 1 April 2022 will be based on the value on acquisition. ATED is not payable for properties valued up to £500,000.
The ATED liability for 2024/25 return is as follows:
Property value | ATED charge |
More than £500,000 up to £1m | £4,400 |
More than £1 million up to £2m | £9,000 |
More than £2 million up to £5m | £30,550 |
More than £5 million up to £10m | £71,500 |
More than £10 million up to £20m | £143,550 |
More than £20m | £287,500 |
The ATED charges for the past two years and earlier years are available on the HMRC website.
Penalties will be charged by HMRC on late ATED returns or an inaccurate return. Penalties and interest will also be charged for late payments of ATED.
Case law on ATED penalties
On the topic of ATED, let’s see what can be taken from a late ATED return submission case - in the case of Derrida Holdings Limited v HMRC [2023] TC08905.
Derrida Holdings Limited is a property investment company. The company bought a derelict pub in 2017 for £265,000 and spent £191,191 refurbishing the property. Both the refurbished property and a previous property bought in 2016 and subsequently refurbished were rented out as houses of multiple occupation.
The directors were unaware of the requirement to submit ATED returns. However, when they discussed the matter with their accountant, they were advised to submit a nil return. This return was submitted by 31 January 2021, nine months after the 30 April 2020 deadline for submitting 2020/21 ATED returns.
HMRC charged late filing penalties, a position that was not altered following a statutory review. The tribunal looked at the unique circumstances of the case when considering if there were reasonable excuses.
On reviewing the facts, the First Tier Tribunal found that the submission of an ATED return was not grounds for stating that the company was within the scope of ATED, given that there is no liability payable where a property’s value does not exceed the valuation date (in this case it was 1 April 2017).
As no ATED return was due, the tribunal allowed the appeal by the company and the penalties were reduced to nil.
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