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ATED and CGT: a residential property tax round up

Mala Kapacee reports from the the February 2015 meeting of London Tax Club.

On Tuesday 10 February 2015, Aparna Nathan of Devereux Chambers spoke to Tax Club about the annual tax on enveloped dwellings (ATED) and its interaction with capital gains tax (CGT) rules.

The ATED

Aparna Hirst of all explained that the ATED charge is levied where someone other than an individual (a 'non-natural person' such as a company or trust) holds residential property worth more than £2m (subject to various exemptions). Apart from the ATED charge these structures may also give rise to other issues. For example, if the ATED regime applies, stamp duty land tax (SDLT) is payable at 15% on property purchases over £500,000.

The ATED is charged from 1 April 2013 based on the value of the property. If the property was owned before 1 April 2012, the cost is rebased to market value at 1 April 2012. Any disposal, part-disposal or acquisition creates a new valuation date, with further valuation dates every five years to keep the charge based on reasonably current values.

Changes announced in the 2014 Budget include decreasing the property value threshold for ATED and CGT: a residential property tax round up to apply to £1m (as at 1 April 2012) from 1 April 2015, and to £500,000 (as at 1 April 2012) from 1 April 2016. The ATED charges were significantly increased in the 2015 Autumn Statement but the statement did not announce changes to the charges applicable to the properties under £2m.

This is an extract from an article in the April 2015 edition of TAXline, the magazine of the Tax Faculty.

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