1.This section increases annual tax charges for the Annual Tax on Enveloped Dwellings for the chargeable period 1 April 2015 to 31 March 2016 over and above the normal annual Consumer Prices Index increase.
2.Subsection (1) provides for an amendment to section 99 of Finance Act 2013 (amount of tax chargeable) and sets revised amounts for properties valued at more than £2 million as follows:
| Annual Chargeable Amount for 2015/16 | Taxable Value of the Interest |
|---|---|
| £23,350 | More than £2 million but not more than £5 million |
| £54,450 | More than £5 million but not more than £10 million |
| £109,050 | More than £10 million but not more than £20 million |
| £218,200 | More than £20 million |
3.Subsection (2) brings this annual increase into effect for the chargeable period beginning 1 April 2015.
4.Subsections (3) and (4) dis-apply the requirement to increase the charges by the September 2014 Consumer Prices Index and to publish an Order stating the revised amounts. Indexation will be reapplied to the annual charges for the chargeable period beginning 1 April 2016 for properties valued at more than £1 million.
5.The Annual Tax on Enveloped Dwellings is an annual tax payable by companies, partnerships with a corporate member and collective investment vehicles which own UK residential property valued at more than £2 million.
6.Most residential properties are owned directly by individuals. But in some cases they may be owned by a company, partnership with a corporate member or other collective investment vehicle. In these circumstances the property is said to be ‘enveloped’ because the ownership sits within a corporate ‘wrapper’ or ‘envelope’.
7.Budget 2014 announced a reduction in the £2 million entry threshold to £500,000 to be phased in over 2 years. From 1 April 2015 a new band will come into effect for properties with a value greater than £1 million but not more than £2 million with an annual charge of £7,000. From 1 April 2016 a further new band will come into effect for properties valued at more than £500,000 but not more than £1 million.
8.The ATED chargeable period runs from 1 April to 31 March. The amount of tax charged is based on the value of the property on a particular date. The annual chargeable amounts are subject to indexation by reference to the previous September Consumer Prices Index (CPI). Parliament can over-ride the normal indexation by provision in the Finance Bill.
9.This section increases the annual charge for the chargeable period 1 April 2015 to 31 March above normal September 2014 CPI increase for properties valued at more than £2 million. The new bands to be introduced with effect from 1 April 2015 and 1 April 2016 will not be affected by this change. Indexation will be reapplied to the annual charges for the chargeable period beginning 1 April 2016 for properties valued at more than £1 million.
10.This measure is to ensure that those wrapping residential property in corporate and other ‘envelopes’ and not using them for a commercial purpose, pay a fair share of tax.