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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Dwellings subject to ATED: introduction: ATED - general outline

In broad terms, liability to ATED arises for any period from 1 April 2013 onwards where—

  • a company (including a body corporate, but not including certain public bodies e.g. the British Museum, nor a corporation sole) or
  • a partnership which includes a company as a member of the partnership, or
  • a collective investment scheme

has a ‘single-dwelling interest’ in a dwelling worth more than £2 million as at 1 April 2012. Dwellings are due to be revalued for ATED purposes every 5 years from 1 April 2012. A ‘dwelling’ includes the garden or grounds that go with the dwelling.

The amount of ATED charged depends on the valuation band into which the dwelling falls. There are four bands. For the first year of ATED to 31 March 2014 the chargeable amounts range from £15,000, where the value of the dwelling is up to £5 million, to £140,000, where the value exceeds £20 million. The chargeable amounts (but not the thresholds of the bands) increase annually by reference to the consumer prices index (CPI), however the ATED valuation band in which a dwelling falls does not affect liability to capital gains tax on disposal of the dwelling. The capital gains tax charge arises simply where ATED is chargeable in any amount.

Where a person holds an interest in more than one dwelling - for instance, if they own a block of flats - or where their interest comprises a dwelling and non-residential land, their interest is apportioned for ATED purposes and each interest in a single dwelling is treated as a separate chargeable interest. The charge to ATED (and any reliefs available) applies by reference to each separate interest, called a ‘single-dwelling interest’.

ATED is chargeable for any day (from 1 April 2013) when the value of the ‘single-dwelling interest’ exceeds the £2 million limit. But days are not chargeable if any of the reliefs from ATED apply. If, for example, a company has a ‘single-dwelling interest’ for the whole of the year to 31 March 2014 and 200 of the 365 days in the year are ‘relievable days’ under any of the ATED reliefs, the company will be charged 165/365 of the annual chargeable amount for that ‘single-dwelling interest’.

The main ATED reliefs are broadly where the property is —

  • in use for the purposes of a property rental business run commercially with a view to profit (subject to certain exceptions, for example, where the property is occupied by a person connected with the landlord);
  • held as trading stock of a property development or trading business (again, subject to exceptions);
  • open to the public for at least 28 days a year as part of a trade carried on commercially with a view to profit;
  • repossessed by a mortgage lender;
  • a farmhouse, subject to meeting various conditions;
  • held by a charity for its charitable purposes, subject to meeting various conditions;
  • held by a registered social housing provider for qualifying purposes.