Annual Tax on Enveloped Dwellings (ATED) - Are You Required to Submit a Declaration or Return?

As the 30 April 2025 deadline for ATED Returns and ATED relief declaration returns approaches, property owners must ensure compliance with HM Revenue & Customs (HMRC) regulations.

An ATED return must be completed if your property meets the following criteria:

• It constitutes a dwelling (such as a house or flat), including any associated gardens, grounds, or buildings. 
• It is located within the UK. 
• It is owned either wholly or partly by a company, a partnership with corporate partners, or a collective investment scheme. 
• Its value exceeds £500,000. 

The term 'dwellings' excludes hotels, guest houses, boarding school accommodation, hospitals, student halls of residence, military quarters, care homes, or prisons.

However, relief from this tax is available under the following circumstances:

• The property is used in a property rental, property development, or property trader business. 
• The property is made accessible to the public. 
• The owning company is a financial institution acquiring property for lending purposes. 
• The property provides accommodation for employees. 
• The property is used for social housing or is a farmhouse (except if certain connected persons reside there). 

If your property falls under the ATED regulations, an ATED return must be filed:

• By 30 April 2025, if on 1 April, the property was within the scope of ATED. 
• Within 30 days of acquisition if the property falls within the scope ATED after 1 April. 
• For newly constructed properties, within 90 days of either the date it becomes a dwelling for Council Tax purposes or the date of its first occupation. 

Non-compliance may result in penalties and interest. 

Furthermore, where relief is available, a relief declaration return must be submitted by the same deadlines.

HMRC Compliance Checks

Over the coming months, HMRC will be sending ‘One-to-Many’ letters to companies that own one or more dwellings valued at over £500,000, declared no profits in their Corporation Tax returns between 2017 and 2020 and either filed no ATED returns or claimed the relief outlined above. The letter explains that as the company’s tax returns show that it did not make a taxable profit, it may not have been run on a commercial basis, with a view to a profit. In such cases, the ATED relief will not apply.

The letter asks companies to review their ATED position and respond within 40 days, either providing further information, making a disclosure or filing any outstanding returns. If HMRC does not receive a response within the set time, they may raise a discovery assessment, and penalties may apply.

If you're uncertain about your obligations regarding ATED or require assistance with submissions, don't hesitate to reach out to our tax experts at tax@teamjs.co.uk. We're here to guide you through the process and ensure compliance with HMRC regulations.