UT (Tax & Chancery) UT/2024/000092 - [2025] UKUT 00331 (TCC)

94 Charge to tax

A tax (called “annual tax on enveloped dwellings”) is to be charged in accordance with this Part.

Tax is charged in respect of a chargeable interest if on one or more days in a chargeable period —

The tax is charged for the chargeable period concerned.

138 Property developers

A day in a chargeable period is relievable in relation to a single-dwelling interest if on that day—

If the property developer holds an interest for the purpose mentioned in subsection (1)(b), any additional purpose the property developer may have of exploiting the interest as a source of rents or other receipts in the course of a qualifying property rental business (after developing the land and before reselling it) is treated as not being a separate purpose in applying the test in subsection (1)(b).

A day is not relievable by virtue of subsection (1) if on the day a non-qualifying individual is permitted to occupy the dwelling.

In this Part “property development trade” means a trade that —

In this section references to development include redevelopment.

The ATED will be payable by certain non-natural persons that own interests in dwellings valued at more than £2 million. This tax will come into effect on 1 April 2013. It is an annual tax, and returns and payments will be required annually.

The measure is part of a package of measures designed to ensure that individuals and companies pay a fair share of tax on residential property transactions and to reduce avoidance. Its aim was to dis-incentivise the ownership of high value residential property in structures that would permit the indirect ownership or enjoyment of the property to be transferred in a way that would not be chargeable to SDLT.

As part of the package, Finance Act 2012 package, Finance Act 2012 introduced a 15 per cent rate of stamp duty land tax on the acquisition by certain non-natural persons of properties costing more than £2 million. That Act provided only two exclusions from the higher rate charge; for companies acting solely in their capacity as trustees, and for property developers with a 2 year trading history.

The scope of the 15 per cent rate was included as part of the consultation on the annual tax on enveloped dwellings. In response to the consultation a number of reliefs are to be introduced in ATED and also further reliefs into the SDLT legislation. Where possible the two reliefs should operate in tandem; so if the 15% of SDLT is paid on an acquisition then the property will be within ATED. In particular there are to be reliefs for; property rental businesses, property developers, property traders, trades that exploit a dwelling to generate income by providing access to a significant part of the interior, dwellings used to house employees or partners with a limited interest in the company or partnership, farmhouses, charities, social landlords, diplomatic property and sovereign and public bodies.

Relief will only apply if the property continues to satisfy the relevant qualifying conditions throughout the period of ownership. It is possible that a property could move into and out of the charge though out its ownership.

The intention of the measures is to stop or reduce the number of properties that will enter such complex ownership structures other than where the property is used in a genuine business (or owned by a specific category of person). For those who choose to continue to hold their property in such a manner, and are not relieved, there is to be a cost. Taken together with the introduction of the SDLT changes in Finance Act 2012 (and the changes in Finance Bill 2013) the ATED will result in a reduction in the number of high value properties owned in such structures.