Annual Tax on Enveloped Dwellings (ATED) is payable by ‘non-natural persons’, such as companies, that hold an interest in UK residential property valued at over £500,000. The ATED charge is based on the property’s value and applies unless an available relief is claimed.

One such relief applies to dwellings that are let to a third party on a commercial basis and are not, at any time, occupied or available for occupation by anyone connected with the owner. If this relief is applicable, it should be claimed in an ATED return.

ATED is payable for a chargeable period ending on 31 March each year. Returns must be filed within 30 days of the period commencing, meaning returns for the period 1 April 2025 to 31 March 2026 must be submitted on or after 1 April 2025 and no later than 30 April 2025.

In the coming months, HMRC will be issuing ‘One-to-Many’ letters to companies that own one or more dwellings valued at over £500,000, declared no profits in their Corporation Tax returns between 2017 and 2020, and either did not file ATED returns or claimed the relief outlined above. The letter explains that, as the company’s tax returns indicate no taxable profit, it may not have been operated on a commercial basis with a view to making a profit. In such cases, the ATED relief will not apply.

The letter requests that companies review their ATED position and respond within 40 days by providing further information, making a disclosure, or filing any outstanding returns. If HMRC does not receive a response within the specified timeframe, they may issue a discovery assessment, and penalties could apply.