ATED – time to revalue your company’s residential dwellings

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If your company or partnership owns a residential dwelling, you may be affected by ATED. In which case, you need to update the value of your property to avoid potential penalties.

For the last 4 years, companies, certain partnerships and LLPs owning residential property have had to comply with the ATED regime – the Annual Tax on Enveloped Dwellings.

In its current form, any dwelling with a value of at least £500,000 as at 1 April 2012, or acquired later for at least that cost, falls within the regime, unless relief is available.

Whether tax is payable or relief is claimed, an ATED return has to be made. There are penalties for non-compliance.

Five year revaluation rule

Under ATED, property valuations need to be updated every five years to comply with the rules, and the next revaluation date is 1 April 2017. This applies to all properties owned at that date, even if acquired within the last five years.

The valuation as at 1 April 2017 will then be used to compute the tax due from 1 April 2018, giving those affected a year to agree a valuation.

Bands

ATED is self-assessed; you declare a value for each property and HM Revenue & Customs (HMRC) may challenge it if it wishes. The ATED charge depends upon which valuation band applies, those bands being:

£500k to £1M;
£1M to £2M;
£2M to £5M;
£5M to £10M;
£10M to £20M; and
Over £20M

If your property value falls clearly within a band, you may choose not to obtain a formal valuation. However, if your property is close to a band threshold, it would be prudent to obtain a professional valuation to defend your figures if challenged.

If your valuation is within 10% of a band threshold, and you are not eligible for full relief from ATED, you can apply to HMRC for a pre-return banding check (PRBC). HMRC will then review your valuation and advise into which ATED band the property falls. It will not agree a valuation, just the band. You can appeal where the finding goes against you.

The ATED tax charge is significant, and the charge rises appreciably with each band. There are penalties for late or incorrect returns, and the first returns affected by this revaluation exercise must be submitted by 30 April 2018.

Valuers will be busy with both ATED valuations and rating revaluation appeals, so it will pay to plan ahead and not leave the revaluation until returns are due.

Contact our property team for help and advice

If you would like to discuss ATED and how it may affect your business, please contact a member of our property tax team.

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