UK: Annual Tax On Enveloped Dwellings – Do You Have Compliance Issues In Hand?

The annual tax on enveloped dwellings (ATED) applies from 1 April 2013 and those with entities affected should be considering the compliance issues. A number of reliefs from the charge may be available, but to be effective they must be claimed. There are time limits for submitting returns, making claims and making tax payments, and the consequences of noncompliance can soon mount up.

ATED applies to interests in a UK residential property (which is a single dwelling interest with a taxable value over £2m), where a company, or a partnership with a company as a member, is entitled to the interest. It also applies to such an interest held for the purpose of a collective investment scheme.

The legislation applies a charge depending on the level of the valuation, and then permits a claim to be made for relief from the charge, subject to conditions. There are 11 reliefs and further information on these and other tax issues affecting high value residential properties can be found in our briefing note number 241. Where a relief is claimed, the tax is reduced to arrive at an 'adjusted chargeable amount' depending on how many days the relief applies in the chargeable period. Where the relief applies for the full period, the charge will be reduced to nil. However in order for a relief to apply it must be claimed on an annual ATED return or by amending such a return.

In this first year of application annual returns must be filed by 1 October 2013 for chargeable interests held on 1 April 2013, and by the later date of 1 October 2013 or 30 days after the date on which the property first comes within the charge for interests acquired after 1 April 2013.

Failure to make tax payments or submit returns on time can result in interest and penalties being charged.

If you are within the ATED charge applies to you, the message is clear that compliance issues need to be dealt with in a timely manner.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.