The ATED regime, introduced on 1 April 2013, currently applies to UK residential properties worth more than £2m which are owned, purchased or sold by certain non-natural persons.
In the Budget 2014, the Chancellor announced that the Government will be gradually reducing the ATED threshold as follows:
- The threshold for the ATED charge will be reduced to £1m from 1 April 2015 and then to £500,000 from 1 April 2016.
- The threshold for the ATED-related CGT charge, which applies to the disposal of UK residential property, will also be reduced – to £1m from 6 April 2015 and to £500,000 from 6 April 2016. The ATED-related CGT charge will only apply to that part of the gain that is accrued on or after these respective dates.
- The 15 per cent higher rate of SDLT has been extended to apply to the acquisition by a non-natural person of residential property worth over £500,000 (previously £2m). This lower threshold applies to land transactions where the effective date was on or after 20 March 2014.
It was also announced in the Budget that the Government will consult on possible options to simplify the administration of ATED, in particular for property businesses eligible for reliefs.
Comment
A number of reliefs are available under the ATED regime, including relief for property development and rental businesses, and these will continue to be available when the threshold changes. This means that the ATED changes outlined above should not have an effect on the tax liability of those businesses that are entitled to relief.
However, when a relevant relief is claimed, a return must be filed – even where the effect of the relief is that there is no ATED liability. Therefore, since the changes will increase the number of properties caught by the regime and so the number of cases where relief will be sought, businesses should expect their compliance burden to increase.
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