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Annual Tax on enveloped dwellings (aka ATED) - more houses caught in April 2015

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Next month sees the extension of ATED to lower value dwellings following the Chancellor's announced changes in his 2014 Budget.

ATED is a tax payable by companies and similar entities that own a high value residential property (a 'dwelling').  ATED started as a flat-rate annual tax charge of between £15,000 and £140,000 on residential properties valued at over £2m on 1 April 2012. The charge is calculated based on the property's value (see property value table below). This value is then used for five years in order to calculate the ATED charge.

Now the ATED charges are planned to apply to lower value residences extended to residences worth more than £1million from April 2015 & £1/2m from April 2016. The ATED rates are summarised as follows:






































Property Value ATED 2014/15 tax ratesATED 2012/13 tax rates
£1/2m - £1m£3,500 (from April 2016)Not applicable
£1m - £2m£7,000 (from April 2015)Not applicable
£2m - £5m£15,400£15,000
£5m - £10m£35,900£35,000
£10m - £20m£70,850£70,000
£20m +£143,750£140,000

Note that relief is available for genuine commercial lettings, employee accommodation, charities, property trades, houses open to the public at least 28 days a year and farmhouses occupied by farm workers.  However, this relief must be claimed - it is not automatic.

HM Revenue & Customs have brought in a transitional rule where returns for properties valued between £1million and £2million in 2015/16 will require a tax return to be filed by 1 October 2015 and the 2015/16 tax will need to be paid by 31 October 2015.

Tagged onto these provisions, but not currently relevant to UK residents, is that as of 6 April 2015 the government plans to introduce Capital Gains Tax (CGT) at 28% on disposals of residential properties of over £2m by non-resident persons.  They are considering rolling this out to residents which would mean these gains would be charged at a higher rate than the corporation tax such disposals currently suffer.

What does this mean for owners of 'high value' residences?  If residential properties are held in this way, the tax consequences should be considered. This may have been done in the past, and indeed the Inheritance Tax (IHT) benefits may have been the original driving reason for the current arrangement. In the first instance a valuation will be required so the potential future ATED, SDLT, capital gains tax and IHT scenarios can be considered. This is not just a simple calculation as it will involve a view being taken on future personal and business wishes and needs.

As with all such tax situations, advice should also be sought before proceeding.  For further details call Alan Boby on 01295 250401 or email aboby@ellacotts.co.uk

Alan Boby

Ellacotts LLP

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