Annual Residential Property Tax Update

• Published date: 27 July 2021
• Subject Matter: Corporate/Commercial Law, Tax, Corporate and Company Law, Capital Gains Tax, Property Taxes, Shareholders
• Law Firm: Wedlake Bell
• Author: Andrew McIntyre

In this article for Globally Speaking, we take a look at recent trends regarding the UK's annual property company tax, ATED.

What is ATED?

ATED, or to give it its full name, the Annual Tax on Enveloped Dwellings, is a tax which is charged every year in relation to UK residential properties owned by companies and certain other structures. ATED is charged on a daily basis which means a company could be liable to pay ATED for certain periods of the year but not others.

The total tax payable for the current ATED year (which runs from 1 April) is as follows:

Property value	Tax for this year
Over '500,000 to '1 million	'3,700
Over '1 million to '2 million	'7,500
Over '2 million to '5 million	'25,300
Over '5 million to '10 million	'59,100
Over '10 million to '20 million	'118,600
Over '20 million	'237,400

De-enveloping

One trend since the introduction of this tax in 2013 has been for clients to switch from company ownership to owning properties in their own name, known as "de-enveloping". This pattern is reflected in the latest data published by HMRC, which shows that the level of ATED paid to HMRC has fallen by 28% since 2015.

However, there are certain one-off tax costs when de-enveloping, which have discouraged some from de-enveloping their properties, notably stamp duty land tax and/or capital gains tax. This explains why ATED receipts still remain relatively high, particularly from properties worth more than '20m (the highest ATED band) despite the compelling tax reasons for owners to decide to de-envelope.

Renting

Another trend is for clients to let out properties as part of a rental business, which means that ATED is not payable. A point to be aware of is that renting to a shareholder or a family member is not sufficient to gain relief from ATED. Relief can be lost, with ATED becoming...