You will recall that in Budget 2014 the Chancellor announced that the Annual Tax on Enveloped Dwellings (“ATED”) legislation was to be extended from 6th April 2015 to include residential properties held by non-natural persons and valued at more than £1m. At the same time it was announced that from 6th April 2016 this regime would be extended further to catch similar properties valued at £500,000 or more.
There are a number of reliefs available for ATED and the most prevalent is likely to be the exemption for commercial letting to unconnected third parties. However, although these reliefs might be available, they do need to be claimed and this is expected to be done through a ‘relief declaration return’. HMRC should be publishing the relief declaration return shortly and for entities which will enter the ATED regime for the first time on 6th April 2015, they will have until 1st October 2015 to submit that return.
For those same properties, but where statutory reliefs are not available, the entities owning the property will have until 1 October 2015 to register within the ATED regime and until 31 October 2015 to pay the associated ATED charge. ATED related Capital Gains Tax will also become chargeable on any gains accruing in the period from 6 April 2015 until the date of disposal. Where there is mixed use post 6 April 2015 (i.e. post 6 April 2015 the property spends some time within the ATED regime and sometime outside the regime through claiming a relief), then the post 6 April 2015 gain is apportioned between the two and that element that relates to the ATED period would be chargeable.
In order to minimise disputes and negotiations with HMRC in the future we would suggest that an independent valuation is obtained of the property as close as possible to 6th April 2015.
Should you have any queries in relation to ATED, please contact us.