05 Mar 2015 12:00 AM

Do you own a residence through a limited company? If so the limits for ATED are reducing.
In his 2012 Budget the Chancellor announced the introduction of the Annual Tax on Enveloped Dwellings (ATED). This is a tax payable by companies owning residential property. It commenced on 1 April 2013 and is payable annually.

A property is within ATED if ALL of the following conditions apply:

-It is a residential property (dwelling) that is located in the UK
-Was valued at £2million or more on 1 April 2012 (or at acquisition if later) and
-It is owned completely or partly by a company or other corporate body, a partnership, where one of the partners is a company or a collective investment vehicle, for example a unit trust or an open ended investment company (OIEC)

The £2million value is reducing to £1 million with effect from 1 April 2015 and to £500,000 with effect from 1 April 2016. The valuation, however, remains as at the 1 April 2012 date, for the time being.

The rate of tax payable varies with the valuation of the property worked out on a banding system.

Certain properties do not fall into the ‘dwellings’ category, for example hotels, guest houses, boarding school accommodation, hospitals, student halls of residence, military accommodation, care homes and prisons are all outside ATED

There are exemptions but these MUST be claimed on the ATED return. A dwelling might get relief from ATED if it is:

-Let commercially to a third party and is not, at any time, occupied or available for occupation by anyone connected with the owner
Held for charitable purposes
-Open to the public for at least 28 days per annum
-For the use of employees of the company for the company[‘s commercial business and where the employee has a 5% or less interest in the  company
-Farmhouses, if they are part of the land occupied for the purposes of a qualifying trade and the farmhouse is occupied by a farm worker or former long serving farm worker

There are other exemptions relating to properties held as part of a commercial property development business.

If you have any questions about ATED, or are unsure whether your dwelling is exempt please contact me david.gibbs@alliotts.com.