ATED – have you thought about the 1 April 2017 property revaluation?

13 January 2017

The Annual Tax on Enveloped Dwellings (ATED) was introduced by the Finance Act 2013. The ATED is an annual charge, which was originally applied to residential properties with a market value in excess of £2m on 1 April 2012 (or date acquired if later), that was held by a company, collective investment scheme, or partnership where at least one of the partners is a company or collective investment scheme. Since its introduction we have seen the limit drop, reaching its current level of £500,000 on 1 April 2016.

While there are a number of reliefs that eliminate the ATED charge such as where the property is exploited as part of a property rental business or properties held for charitable purposes, those that do not qualify for a relief or have been exempt from ATED on the grounds that the property was of low value, may need to concern themselves with the revaluation due to take place on 1 April 2017.

To date, the value of the interest in the property which is taken into account is generally its market value at the later of 1 April 2012 and the date on which the owner acquired the interest. However the rules dictate that the 1 April 2012 values would need to be revalued every five years. The first revaluation for properties which have not been sold in the interim will therefore be on 1 April 2017.

While the new valuation does not need to be inserted onto the return until the period beginning on 1 April 2018, it is easier to consider the 1 April 2017 valuation at that point rather than at the later date where the valuation is used. 

You can work out the value yourself or you can use a professional such as an estate agent, surveyor or other professional. Valuations must be on an open-market willing buyer, willing seller basis and be a specific amount. An undervaluation resulting in an underpayment of tax may result in interest and penalties as well as a demand for the tax shortfall.

When considering if the ATED charge is going to be an issue for you, or dismissing it immediately, consider:

  • That where your property was previously outside the scope of ATED due to the value being too low, could a revaluation cause you to breach the threshold?
  • While there is no indication that the threshold could reduce further, be aware that based on past trends, it is a possibility and could leave you further in the scope of an ATED charge if you do not qualify for a relief.

Contact us

For advice on investing in or disposing of residential property or assistance with filing your ATED return, please contact your local office. Alternatively, you can make an equiry.