75: ATED update: New valuation date
Under the rules relating to the Annual Tax on Enveloped Dwellings (ATED) properties held within enveloped structures have to be revalued every five years in order to determine the band within which the property falls within for ATED purposes.
The first statutory valuation date for fixing the ATED band into which the property fell for the first five ATED periods (including the current one) was either 1 April 2012 for properties owned in an envelope at this date or the date of acquisition if later.
The second valuation date was therefore 1 April 2017. The value on that date will fix the ATED band into which a property will fall and thus the level of charge for the next five tax years from 1 April 2018.
In some parts of the UK (particularly in London) properties are likely to have increased in value since 1 April 2012, or possibly the date of acquisition (if later), and this could result in a property moving up an ATED band. Conversely, there is also the possibility that some properties, particularly at the higher end of the market might be worth less and therefore fall into a lower band from 2018/19. Consider the following examples:
- A property valued at £850,000 as at 1 April 2012 will presently be within the £500,000 to £1m ATED band and ATED for the current period (2017/18) is £3,500. If this property is valued at £1.2m as at 1 April 2017, the ATED payable for the 2018/19 ATED period will increase to £7,250.
- A property valued at £12m as at 1 April 2012 is currently within the £10m to £20m ATED band with ATED payable for the current period of £110,100. If this property is valued at £9.5m as at 1 April 2017, the ATED payable for the 2018/19 ATED period will decrease to £56,550.
The revaluation date will apply to properties owned as at 1 April 2012 and those purchased in an enveloped structure since then. Consider the following further examples:
- An enveloped property is owned as at 1 April 2012. It was valued at this date for the first five years of the ATED charge. The same property will now need to be valued again as at 1 April 2017 to determine the correct ATED band for the next five years of the ATED charge.
- An enveloped property is purchased in May 2016. The value of the property at the date of acquisition will determine which ATED band it falls within and therefore the amount of ATED period. Despite only being valued in May 2016 the property needs to be revalued again as at 1 April 2017.
Enveloped properties which are let commercially may also need to be revalued as at 1 April 2017 even if ATED relief is available.
Failure to submit an accurate ATED return and pay the correct amount of ATED due may lead to the imposition of penalties and late payment interest.
It is important for directors of companies owning UK residential properties to obtain professional valuations of enveloped properties as at 1 April 2017, if they have not done so already. This will determine whether there is any adjustment in the banding to ensure the correct amount of ATED is paid going forward.
14 December 2017