Guidance Note - Annual Tax on Enveloped Dwellings

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H M Revenue & Customs have released draft legislation to implement changes to the way the UK taxes property held by “non-natural persons”.


Non-natural persons

A non-natural person is essentially a company, partnership or other structure involving a corporate vehicle.


“High value” property

The new taxes will only affect “high value” property held by non-natural persons.  The definition of “high value” for these purposes is an interest valued over £2m.


The Tax

From April 2013 a new tax called the Annual Tax on Enveloped Dwellings (ATED), will be chargeable on residential property valued at more than £2m, subject to a number of limited reliefs.


The reliefs are available for:

• property rental businesses
• trades involving the exploitation of a single interest in a dwelling (for example, guest houses)
• property developers
• property traders
• occupation by certain employees or partners
• farmhouses, where occupied by a qualifying farm worker
• dwellings occupied by charities, or by certain diplomatic or public bodies.


The tax chargeable if a residential property falls within these rules is as follows:

Value of property  Tax chargeable
 >£2m - £5m
 >£5m - £10m £35,000
 >£10m – £20m £70,000
 Over £20m £140,000


Properties currently held by non-naturals

It should be noted that these rules carry retrospective effect.  If a property is currently held in a non-natural structure, it will be caught from April 2013. 


There are alternatives to the use of a company, but most of these come with a level of added complexity and cost.  However, given the tax charges noted above, these additional costs may be worthwhile.


We can help with the restructuring that may be required and have good links with offshore and UK providers to facilitate this.


Roger Holman

Cripps Harries Hall LLP

March 2013


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