Revalue ATED properties on 1 April 2017

ATED is the annual tax payable on high value residential properties held within a corporate structure. An ATED tax return needs to be completed each year if:

  • The property is a dwelling (i.e. residential property)
  • Is situated in the UK
  • Is valued at in excess of £500k
  • Is owned by a company, a partnership (where at least one partner is a company) or a collective investment scheme

Since the introduction of ATED in Finance Act 2013 we have seen the value at which ATED applies to residential properties plummet, catching many more properties.

 

Introduction threshold

  • 2013/14 Property value at more than £2million
  • 2014/15 Property valued at more than £2million
  • 2015/16 Property valued at more than £1million
  • 2016/17 Property valued at more than £500k

Whether a residential property was caught within ATED depended on its market value on 1 April 2012.  Revaluations must take place every five years, meaning one is due on 1 April 2017. Although the revaluation is not considered until the return period beginning 1 April 2018 (with tax payable on 30 April 2018) it is beneficial to obtain the revaluation now rather than in 12 months’ time.

 

Valued at less than £500k in April 2012…but only just

For example, properties whose value in April 2012 was (maybe marginally) previously too low to be caught within ATED, may now breach the threshold based on their 1 April 2017 revaluation.   If that property is unable to qualify for an exemption there may be an unexpected tax charge next year.  By ascertaining the value now we are given the opportunity to take stock, consider whether the annual tax charge outweighs the benefit of holding the property in a company and if necessary make arrangements to perhaps extract the property before the charge arises.

The recent changes to the inheritance tax treatment of UK residential properties held through corporate entities, may also make some of these structures redundant. For these reasons a review of the structure is worthwhile.

 

Some good news?

Despite all the doom and gloom surrounding Brexit, the uncertainty regarding the terms of our exit from the European Union may give some unintentional tax savings for enveloped dwellings.  House prices in the capital for buyers of a four bedroom family home have fallen by 8.7% in the past 12 months.  This may prove the best opportunity to obtain a valuation at a lower level.  The even better news is that the valuation is fixed for the next five years.

 

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