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Annual Tax on Enveloped Dwellings

Annual Tax on Enveloped Dwellings

The Annual Tax on Enveloped Dwellings (ATED), the new name for what was formerly known as the Annual Residential Property Tax, came into force on 1 April 2013. This was part of a package of measures introduced in Budget 2012 to tackle perceived avoidance of Stamp Duty Land Tax when companies (used as ‘envelopes’) bought expensive (>£2m) UK residential property.

Gregory Jones

Partner: Tax

KPMG in the Isle of Man


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The Finance Bill includes legislation introducing the ATED and the new rules on Capital Gains Tax (CGT) on enveloped structures. The Government has now tabled amendments to the ATED clauses, which, broadly, make changes in two particular areas:

  • The legislation includes anti-avoidance intended to prevent the artificial splitting of an interest in a property (with connected parties each holding an interest, so that the value of each is below the £2m threshold).  These provisions are to be amended where an interest is held in a company (or companies) and the connected party also holding an interest is an individual.  In this instance, the anti-avoidance rules will not now operate until the value of the connected party’s interest exceeds £500,000.  The Explanatory Notes to the amendments state that this change is intended to give “wider exclusions [from the anti-avoidance rules] than previously planned”.
  • A second set of amendments exempt charitable companies from the ATED charge providing that the donor of the property in question (or a person connected to the donor) is not allowed to occupy the property on terms that “it is reasonable to consider exist as a result of the gift”.

The first ATED return is due by 1 October (even where an exemption applies) and payment by 31 October 2013.

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