ATED: what is it and how does it affect charities?

This is a tax that was introduced with effect from April 2013 and applies to companies (and similar kinds of structures) that own dwellings with an individual value of £2m upwards. The purpose of the tax was to eliminate any tax advantage in holding residential property in corporate ‘envelopes’ as distinct from the more usual holding of it in the name of individuals. This is an annual tax and runs alongside and in addition to the increased rate of Stamp Duty Land Tax (SDLT) on such ‘enveloped’ residential properties.

There is a charitable exemption from the tax. This does not extend to wholly owned subsidiaries of charities, since the company in question has to be ‘a charitable company’. In order to qualify for the relief, the charity must hold the interest for one of two purposes. Either it must be used for the furtherance of the charitable purposes of either the charitable company or of another charity (note, not its subsidiary) or held as an investment from which the profits will be applied to the holder’s charitable purposes. In other words, this is extremely similar to the familiar SDLT exemption for charities. It is clearly based upon that model.

There are anti-avoidance provisions aimed at ensuring that individuals do not give qualifying properties to charity only to continue to use them for their own residential purposes. This comes with detailed ‘related-party’ qualifications…

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