New tax on enveloped property to drag in more of the London property market – EY Budget comment

19 March 2014

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John Cooney, EY’s head of personal tax comments: “The Chancellor has announced the extension of the Annual Tax on Enveloped Dwellings (ATED), which previously only affected properties valued at more than £2 million. It will now hit properties worth over £1 million with effect from 1 April 2015 and those worth over £500,000 with effect from 1 April 2016.

“The ATED is an annual tax which applies to properties held in corporate entities and is charged in bands dependent on the value of the property, starting at £15,000 for properties valued between £2m and £5m and up to £140,000 for properties valued over £20m.  Today’s announcement will introduce new bands for the lower valued properties.

“The ATED is a complex tax with a myriad of reliefs for properties which are purchased in a company and used in a commercial way, such as rental properties, those used as part of a trade or those which are open to the public.

“The measure is yet more administration for property businesses since, at present, companies with affected properties must complete a separate tax return to claim relief per property.  Even where no tax is due, the measure is likely to vastly increase the level of compliance costs for property companies, but also for companies who hold London property for occupation by their employees.”

For more information on the 2014 Budget, visit the EY 2014 Budget page.