ANNUAL TAX ON ENVELOPED DWELLINGS EXPLAINED
WHEN IT APPLIES
ATED was introduced under Part 3 of the 2013 Finance Act and applies to UK residential (not commercial) property owned on, or acquired after 1 April 2013, by what is referred to as a non-natural person (NNP). The legislation primarily relates to residential properties owned by limited liability companies, which are not covered by the reliefs and exemptions herein below stated. Technically, ATED applies to both offshore and domestic limited companies but in reality it is tax free or low tax offshore (international business companies) that are primarily effected.
ATED is payable each year between the 1st of April and the 31st of March and applies to residential properties located within the UK with a market value (as of the 1st of April 2016) of £500,000.00 or more.
The object of the legislation was to dissuade investment into UK (primarily London) residential properties by NNP’s as a means of seeking to avoid and/or mitigate corporate, capital gains and more recently inheritance taxes. It was part of a series of measures introduced to encourage either the de-enveloping of existing property investments (ATED) or discourage the purchase of such residential properties by NNP’s in the first place by introducing a punitive 15% stamp duty land tax (SDLT).
ATED Rates from 1 April 2017 to 31 March 2018
| Property value | Annual charge |
| More than £500,000 but not more than £1 million | £3,500 |
| More than £1 million but not more than £2 million | £7,050 |
| More than £2 million but not more than £5 million | £23,550 |
| More than £5 million but not more than £10 million | £54,950 |
| More than £10 million but not more than £20 million | £110,100 |
| More than £20 million | £220,350 |
THE HMRC RELIEFS & EXEMPTIONS
Charities and public/state bodies established for national purposes are exempted from ATED whilst reliefs are available for those engaged in the property rental business, property development, property trading and financial institutions acquiring dwellings in the course of lending. For the purpose of clarity, offshore companies seeking to avail of these reliefs must be registered for UK taxes with HMRC and do not receive them simply due to conducting one of the relief businesses. In particular, there is no relief available to offshore companies renting out UK residential property even if it is on a commercial basis if the company is not genuinely engaged in property rental and/or registered for corporate tax with HMRC.
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A FULL RANGE OF PROPERTY DE-ENVELOPING, ACCOUNTANCY & TAX PLANNING SERVICES
De-enveloping.co.uk is part of The SCF Group of Companies and has been specifically set-up to assist those who have purchased London and UK properties using previously tax efficient offshore or international business companies but now find that the annual Advanced Tax on Enveloped Dwellings (ATED) is too high to economically maintain on properties worth over £500,000.00 AND do not want to be subject to Stamp Duty Land Tax (SDLT) when transferring a company held property to themselves.
It should be noted that generally it is not economically viable to de-envelope properties below £750,000.00 but as the ATED tax thresholds are very punitive it becomes almost compulsory (where possible) for properties worth over £1,000,000.00 with very substantial savings coming into play for properties worth over £2,000,000.00.
The services offered by The SCF Group combine almost 25 years of offshore and tax planning experience which enable the firm to correctly prepare, amend, legalize or otherwise prepare a company for tax free conveyancing in conjunction with our specialist conveyancing solicitors. For those with properties worth £2 million or more the cost of de-enveloping is often less than 1 year’s ATED Tax.
It should be noted that not all properties can be de-enveloped including properties that have received 3rd party funding or are subject to encumbrances. In addition, generally commercial properties are exempt from ATED as are those that are carrying out genuine UK property management services, which for the purposes of clarification does not simply mean renting out a property using a UK estate agent but actually carrying out property management in the UK with profits subject to UK corporate and value added taxes.
ACCOUNTANCY & TAX PLANNING
In addition to property de-enveloping services The SCF Group also provides a wide range of tax planning, accountancy and company formation services both within the UK and internationally including wealth protection trusts and private interest foundations. For more information on the main SCF Group please go to our ‘Mother’ Website www.scfgroup.com.