Property update: Do you hold residential property in a company?

The annual tax on enveloped dwellings (ATED) rules apply to UK residential properties held in a company with a value in excess of £500,000, and an annual charge applies unless certain reliefs or exemptions can be claimed.

The filing and payment deadline for the 2024/25 tax year is 30 April 2024 and the charge for this year will be based on the value of the property as of 1 April 2022. A revaluation of the property occurs every five years, with the next revaluation due in 2027.

You can work out the value yourself or you can use a professional valuer, but it must be based on an open-market willing buyer, willing seller basis. Please note that HMRC can challenge your valuation and if they find that it is wrong, they can charge penalties and interest. If you are close to the threshold, a professional valuation may provide more comfort, or a pre-return banding check (PRBC) could be obtained from HMRC.

A PRBC can be requested from HMRC where the estimated value of a dwelling is within 10% of an ATED threshold. This will confirm HMRC’s view as to whether ATED applies, and if so at what rate.  Requests for PRBCs should be submitted as far in advance of the return due date as possible to avoid late filing. More information and the form to request a PRBC can be found here.

A fixed annual charge applies where a property falls within the ATED regime based on the 2022 value of the property (the last revaluation year as mentioned above). For 2024/25 tax will be due as follows:

Property Value (£) 1 April 2024 – 31 March 2025
500,001 – 1,000,000 £4,400
1,000,001 – 2,000,000 £9,000
2,000,001 – 5,000,000 £30,550
5,000,001 – 10,000,000 £71,500
10,000,001 – 20,000,000 £143,550
20,000,001 + £287,500

Not all properties will be subject to a charge, however, as there are certain exemptions and reliefs which apply, but the company may still be required to file a return to claim the relevant relief. One of the most common reliefs is for properties let to a third party on a commercial basis with no occupation by anyone connected to the owner.

If you would like further advice, please contact our expert property team.

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