Don't Get Caught by ATED penalties - Annual Tax on Enveloped Dwellings

Annual Tax on Enveloped Dwellings (ATED) is an often unknown Tax and reporting regime which governs residential properties held inside Limited Companies. The penalties can be severe as below so care should be taken to make sure your business is compliant where applicable.

The government introduced ATED to discourage the use of 'enveloping' properties within companies to avoid paying Stamp Duty Land Tax. Since its introduction the government has continued to reduce the threshold of ATED so it applies to more properties.

Full details of the rules can be found at;

The good news is that there are reliefs and exemptions from reporting and paying the tax .. for example if the property is let to a third party on a commercial basis or owned by a property trader as the stock of the business. Care needs to be taken to ensure any reliefs and exemptions do apply. Details are at;

Rates and Penalties

The amount you’ll need to pay is worked out using a banding system based on the value of your property.

Chargeable amounts for 1 April 2021 to 31 March 2022

Property value Annual charge
More than £500,000 up to £1 million £3,700
More than £1 million up to £2 million £7,500
More than £2 million up to £5 million £25,300
More than £5 million up to £10 million £59,100
More than £10 million up to £20 million £118,600
More than £20 million £237,400
 Penalties: Annual Tax on Enveloped Dwellings (ATED);
Late filing Late payment Penalty
  30 days late 5% of tax due
3 months late   Daily penalty £10 per day for up to 90 days (max £900)
6 months late   5% of tax due or £300, if greater
  6 months late 5% of tax outstanding at that date

Outline of filing

An ATED return and payment is due within 30 days of the acquisition of a high value residential property by a company or other type of NNP, unless a relief Return has already been filed for the same type of relief. For existing properties, an annual ATED return and tax payment are due by 30 April during the tax year. For 2020/21 the return and payment was due on 30 April 2020.

A single return is fine for the rest of the year as long as the same type of relief applies e.g. if the Company buys another property to develop, there is no need to submit a further ATED Return but if it buys a property for letting, then another return should be submitted within 30 days of purchase. 

If you have any queries, please contact us for further information.