Update on the mansion tax

    Update on the Mansion Tax


    Annual Tax on Enveloped Dwellings (ATED)
    The most recent change, as of 20th March, is the change of name from Annual Residential Property Tax, to the new name of Annual Tax on Enveloped Dwellings (ATED), and whilst the draft legislation was published in January 2013, Royal Assent is not expected until June; therefore the final details remain to be seen.  Nonetheless, the main points are already well known.

    The essential details

    • Residential property within the UK owned by non-natural persons, i.e. companies, that are worth in excess of £2m, as at the 1st April 2012, will be liable for the ATED.
    • The ATED comes into effect on 1st April 2013, but there are transitional arrangements meaning that the return for 2013 needs to be submitted by the 1st October 2013, with a first payment date of 31st October 2013.
    • In future years the return needs to be submitted by 1st April, and payment made by 30th April in each year. 
    • The proposed bands are as follows:
      £2m to £5m £15,000
      £5m to £10m £35,000
      £10m to £20m £70,000
      Over £20m £140,000

    Potential exemptions
    There are a number of reliefs available, which include the following:

    • The property is let on a commercial basis to a third party.
    • The property is open to the public for 28 days per annum or more – HMRC will produce more guidance on this before July 2013.
    • The property is held for charitable purposes.
    • Farmhouses where there is a commercial farming business, and occupied by a ‘qualifying farm worker’.  HMRC will produce more guidance on this before July 2013.

    Property valuation
    The valuation date for properties subject to the ATED is the 1st April 2012, or the date on which the property was acquired if after that date.  Properties will then need to be valued every five years, so another valuation will be required on 1st April 2017.  The valuations must be on an open market, willing buyer, willing seller basis.  If the HMRC challenges a valuation and finds that it is wrong, then the person responsible for paying the tax may have to pay penalties, plus the increased ATED payable plus interest.

    Pre Return Banding Check (PRBC)
    You will be able to check with HMRC as to which band a property falls within, if it is within 10% of a banding threshold.  Guidance will be issued in the summer, but a PRBC should be available with effect from 1st June 2013.  In some cases HMRC may want to check the interior of a building, but they will normally accept valuations that have been carried out by a professionally qualified valuer.

    What to do next?
    If you’ve not already taken professional advice, then you must do so now.  Our experience is that many of our clients do qualify for reliefs, whereas for others, some form of restructuring might well prove to be beneficial.  The guidance from HMRC is clear, this is a tax on ‘Enveloped Dwellings’ i.e. private dwellings owned by companies.  Houses that are held by individuals or by a Trust will not be liable for the tax.  For more information please don’t hesitate to contact us.


    Key contacts

    Philip Eddell

    Philip Eddell

    Country & London House Consultancy

    Savills Newbury

    +44 (0) 1635 277 709

    +44 (0) 1635 277 709