The March 2014 Budget announcement extending the 'ATED' (annual tax on enveloped dwellings) charge, which is a charge imposed on property owners whose properties are owned by companies, came as a shock to many. Since then we have had a lot of questions from clients asking what the best course of action is, and thought a blog on the topic would be helpful. We strongly advise against a 'knee jerk' reaction to this development by incurring taxes now to re-structure property holdings, because of course it is entirely possible that this charge will be further extended in the future.

To quickly recap, currently properties owned by companies (or by partnerships which have a corporate member) and which have a value of £2m are affected by ATED, which is a scaled charge automatically payable to HMRC. From April 2015, any property worth £1m and purchased through a corporate structure will be subject to ATED. From April 2016, the threshold will drop to include any property worth £500,000 owned by a corporate structure. The charges payable will be £7,500 for property worth £1m or more and £3,500 for a £500,000 + property. Those affected will need to file a return by October 2015 declaring the amount of ATED payable, with the payment being due by April of the following year. Further details are provided in our recent blog on this topic (link).

There are exemptions from ATED; largely property developers are exempt from the charge unless they retain any of their developments for rental or other investment purposes. Many property investors choose to do this by for instance developing a block of flats and retaining 2 or 3 apartments within a company wrapper. This strategy will need to be re-thought carefully.