ATED Regime

Broadly, the ATED regime applies to companies, partnerships with a corporate member and collective investment schemes (UK or non-UK) holding high value residential properties. A company acting as a trustee of a trust or as nominee for an individual is exempt from the ATED charge.

From 1 April 2015, the definition of high value properties dropped from £2million to £1million and from 1 April 2016, this threshold will fall further to properties worth more than £500,000.

There are a number of reliefs available from the ATED charge including:

• A property letting business;
• A property trading business;
• A property development business;
• Dwelling opened up to the public e.g. houses of historical interest;
• Farmhouses; and
• Properties occupied by employees.

These reliefs need to be claimed by 30 April in the year to prevent penalties arising.

15% SDLT rate

For SDLT purposes, a property valued at more than £500,000 is considered to be a “higher threshold interest” and in the absence of any exemption, SDLT is payable at the slab rate of 15% on the purchase of such interest by a company, partnership with a corporate member or collective investment scheme.

There are three main reliefs available from this additional rate being applied:

• A property letting business;
• A property trading business; or
• A property development business.

The above reliefs available from ATED and the 15% higher rate of SDLT will be extended to cover equity release schemes (home reversion plans), property development activities and properties occupied by employees.  These extensions will apply from 1 April 2016.

The inclusion of these reliefs is welcomed as arguably, such transactions should never have fallen within the scope of the ATED and 15% SDLT regimes.  The Government does not intend for the extension to these reliefs to apply until April 2016 so purchasers in such circumstances may wish to defer their acquisitions.