Is ATED a price worth paying?

The first was simply to raise additional tax revenues for the exchequer; the second was to gently discourage overseas owners from hanging on to properties that could be released for sale and help ease the ongoing housing shortage. The former it may have achieved, but the latter is yet to be proven, certainly if our experience is anything to go by.

ATED is an annual tax payable mainly by companies that own UK residential property valued at more than £500,000. To put the values into context, owners currently pay £3,500 for properties valued above £500,000 but less than £1m, and £220,350 for properties worth in excess of £20m (for April 2017 to end March 2018). The range is quite remarkable, but it averages around £25,000 for a comparatively ‘modest’ property. Well, modest for London anyway!

Properties need to be revalued every five years, and this, of course, requires a professional valuation. We have been approached by a number of wealth management companies to value properties on behalf of overseas corporates and investment trusts, since the value is critical in calculating what the tax will be. This tells us something immediately, but is not quite the whole story. The total value is also dependent on stamp duty, and since property values have fallen – taking properties into a lower duty band – the total tax paid in ATED has also declined.

Put simply, if the UK government thinks that ATED is going to put overseas companies off buying new properties, or hanging on to their existing assets, they need to think again. It may not be encouraging people to buy UK properties, but it is certainly not discouraging them either. The tax they are prepared to pay – even for a property to remain vacant – seems to be a price worth paying.