ATED tax receipts on property held by corporates up 53%

HMRC has seen a 53% hike in the amount of annual tax on enveloped dwellings (ATED) paid last year, which rose to £178m, according to analysis by law firm Collyer Bristow

It says HMRC data shows a £62m increase in the tax take from high-value UK residential property owned via companies.

The firm’s analysis highlights 88% of receipts relating to properties in London and 9% in the rest of the south east. Over half the receipts are from one London borough, Westminster.

Collyer Bristow explains the number of properties subject to ATED has increased substantially over the last three years. The tax originally applied to any property worth more than £2m. It has been extended gradually, first to all properties worth more than £1m in 2015/16 and from 1 April 2016, any worth more than just £500,000. 

James Badcock, partner at Collyer Bristow, said: ‘ATED appears to be having a significant tax raising effect but it is questionable whether the tax is fulfilling its original purpose of bringing properties out of the corporate veil.

‘Relatively few properties appear to have been removed from corporate ownership.  This is likely to be because it is difficult to do so without incurring prohibitive capital gains tax and SDLT charges, and also because up to now corporate ownership has provided protection from inheritance tax (IHT).’

Badcock says this is about to change, with the government bringing non-UK companies owning residential property within the scope of IHT for non-UK individuals for the first time from April this year.  He predicted significant increases in the ATED tax take next year, as the result of properties being revalued and likely to move up bands.

‘The government is not offering any relief to those wishing to de-envelope, effectively trapping them within an increasingly costly structure, which it was a perfectly proper and accepted form of ownership when they purchased the property.  This already seems to be resulting in significantly decreased foreign investment in UK residential property,’ Badcock said.

HMRC’s latest quarterly stamp duty land tax (SDLT) statistics shows the estimated receipts for the last quarter of 2016 are £2.37bn from residential transactions, 20% higher than Q4 of 2015. Financial year-to-date for 2016-17, the estimated receipts are 17% higher than the same period in 2015-16.

The residential transactions receipts since Q2 of 2016 include those from transactions paying the higher rate of SDLT on additional properties. These are properties for which the additional 3% SDLT rate is applied, for example second homes and buy-to-let properties. So far in 2016-17 there have been 149,400 transactions of additional properties accounting for £2.319bn in total SDLT receipts, of which £1.190bn is attributed to the additional 3% element.

Annual Tax on Enveloped Dwellings (ATED) Statistics are here.

HMRC’s quarterly SDLT statistics are here.

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