Does a client need to pay ATED on a property occupied rent-free by a shareholder's daughter?
Q: My client is an offshore company which owns a UK residential property. The property is used rent-free by the shareholder’s daughter. It was worth £450,000 when purchased in 2015. Does the company need to pay the Annual Tax on Enveloped Dwellings (ATED) on this property?
A: ATED was introduced from 1 April 2013 and originally applied to residential properties costing over £2 million. It was then extended to properties worth over £1 million from 1 April 2015. From 1 April 2016 it applies to properties that were worth more than £500,000 at 1 April 2012, or, which cost £500,000 or more if they were acquired after that date. This property will not be within ATED for the periods up to 31 March 2018 because it cost £450,000. However, all properties need to be revalued at 1 April 2017 and if it is worth over £500,000 at that point, then it will come within ATED from 1 April 2018 (i.e, 12 months after the revaluation date) – s102 FA2013. As the property is not let on commercial terms to a third party, the relief for a property letting business is not available, so an ATED return will need to be filed and the tax (of £3,500 for a property up to £1m) paid by 30 April 2018 and for every year whilst it remains within ATED.