The recently-published Finance Bill 2013 includes an annual tax on high-value 'enveloped' dwellings – but charities have been granted an exemption.

The Annual Tax on Enveloped Dwellings (ATED) replaces the Annual Residential Property Tax and is payable by companies that own high-value residential property (a 'dwelling').

From 1 April 2013, it will be chargeable on companies, collective investment schemes and partnerships with company members who hold UK residential dwellings valued at greater than £2m on specified valuation dates. Such properties are said to be ‘enveloped’ because the ownership sits within a corporate ‘wrapper’ or ‘envelope’.

But the legislation includes a charity exemption for every day that the dwelling is held by a charity for use in furtherance of charitable purposes, either its own or that of another charity. It also applies if the property is used as an investment from which the profits are to be used for charitable purposes.

A day is not relievable, however, if on that day the dwelling was occupied by an individual who is a substantial donor, or the associate of a substantial donor.

John Hemming, chairman of the Charity Tax Group, praised the charitable exemption: "It is a welcome addition, having been omitted in the draft Finance Bill clauses and follows representations by the Charity Tax Group and other sector bodies,” Hemming said.

“It is difficult to know what the potential savings there will be to the sector as it is hard to quantify how much residential charity property is potentially caught by the tax, but it is likely to be significant for some charities with large property portfolios.”

Reduced VAT rate for ESM in charity buildings withdrawn

Elsewhere on the Bill, the reduced rate for the installation of energy saving materials (ESM) in buildings used solely for a relevant charitable purpose has now been withdrawn.

This may impact charities using buildings solely for a non-business use, such as a village hall. The measure will have effect on the installation of ESM supplied on and after 1 August 2013.

Finance Bill 2013 is available in full from the Treasury here, with explanatory notes here.

 

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