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Do you own a residential property through a company?

If you own a UK residential property through a company or other corporate entity then you may fall under the Annual Tax on Enveloped Dwellings (ATED) regime.

ATED is an annual tax charge payable by ‘non-natural persons’, for example companies (both non-resident and UK resident) that own single UK dwellings with a ‘taxable value’ of £500,000 or more. For 2017/18 the taxable value is the market value on 1 April 2012 or, if later, when at least £40,000 is either spent on improvements or received on a part disposal.

From 2018/19 and subsequently, the taxable value will be the market value on 1 April 2017 or on acquisition if later. An ATED return must be filed within 30 days of 1 April (or the date the property was acquired, if later). But if the property only comes within ATED on 1 April 2017, the first return will be from 1 April 2018.

ATED rates for 2017/18

Property value Annual tax
£500,000+ to £1m£3,500
£1m+ to £2m£7,050
£2m+ to £5m£23,550
£5m+ to £10m£54,950
£10m+ to £20m£110,100
over £20m£220,350

Exemptions

There are many exemptions from ATED, but an annual tax return is still necessary to claim them. The most common exemption will apply to ‘buy-to-let’ corporate landlords if it is a property rental business with nobody connected to the company occupying the property or properties. Persons connected with the company include anyone who controls the company or is connected with someone who controls the company, such as a spouse or relative. If a property attracts an ATED liability, then ATED-related capital gains tax of 28% may apply on the sale of the property.