A new annual tax on enveloped dwellings (previously called annual residential property tax) shall apply to every year (or part of a year) that a residential property worth more than £2 million is owned by a company (or certain other 'non-natural persons'), subject to exceptions.
Who will be affected?
Potentially every person that beneficially owns a single interest in a residential property worth more than £2 million other than individuals.
From 1 April 2013.
The Finance Bill will introduce a new tax, ATED. As discussed above, it forms part of a package of three measures (SDLT and CGT being the other two) designed to stop a particular type of practice connected with high-value residential property sales that the Government refers to as 'enveloping': ie, acquiring a residential property using a company to act as a special purpose vehicle, then selling the shares in that company rather than the property to avoid SDLT being chargeable.
From 1 April 2013, ATED of between £15,000 per annum and £140,000 per annum, depending on which valuation band applies to the property, shall apply to every year (or part of a year) that a high-value residential property is owned by a company (or certain other 'non-natural persons'), subject to exceptions that apply to a broad range of business activity.
Reliefs will need to be claimed on a 'nil-charge' ATED return annually or by amending an ATED return. As with SDLT, they are subject to withdrawal in certain circumstances. The ATED return for the first year (1 April 2013 - 31 March 2014) will probably need to be submitted by 1 October 2013 (depending on when the Bill receives Royal Assent) and the tax paid by 31 October 2013. Returns and payment for subsequent years will need to be submitted by 30 April.
The charges will be increased by the rate of inflation but the valuation thresholds will not.
Like its cousin, SDLT, ATED is a 'slab system' rather than a progressive tax like income tax, which has a graduated structure. So, eg, a property worth £1.9 million does not attract the tax, but one worth £2.1 million attracts the full charge of £15,000 per annum. This has a distorting effect on the market and produces a cliff edge on pricing near the thresholds for the bands.