HMRC revenue from tax on ‘enveloped’ properties soars by 50%

Added 6th June 2016

The UK tax office has raised £174m ($255m, €220m) from a tax on British homes owned by companies, latest data from London and Geneva-based law firm Collyer Bristow suggests.

HMRC revenue from tax on ‘enveloped’ properties soars by 50%

The figure is up 50% compared to last year when HM Revenue & Customs (HMRC) collected £116m from the annual tax on enveloped dwellings (Ated). In the year 2013/14, the department posted Ated revenues of £100m, according to Collyer Bristow research.  

The levy, introduced in April 2013, initially applied to residential properties valued at over £2m and held within a so-called corporate ‘envelope’ by companies, partnerships with a corporate partner and collective investment schemes.

It has since been extended twice; last year to cover homes worth more than £1m last year and again in April where it now applies to properties worth more than £500,000.

Crackdown on tax loopholes

The news comes amid a government crackdown on the tax advantages enjoyed by those investing in UK residential property via complex corporate and offshore structures.

At an anti-corruption summit held in London last month, British prime minister David Cameron announced a new public register for beneficial owners of UK property.

“The government needs to ensure...they do not altogether deter foreigners from investing or spending time in the UK."

This means that, for the first time, anyone buying property in the UK through an overseas company will have to reveal the ultimate beneficial owner of the company on a public register.

Other recent changes include a loss of inheritance tax (IHT) exemption for offshore companies, due to come into force from April 2017, increases to stamp duty tax and the introduction of capital gains tax for non-residents.

Discouraging overseas buyers

Collyer Bristow said the tighter tax measures introduced by the government could make UK residential property a much less attractive investment for overseas high net-worth individuals (HNWs).

Last year. International Adviser found that non-domiciled UK residents are increasingly seeking mortgage finance to fund their British property purchases following the introduction of the Ated and other changes.

“The increase in Ated collected reflects the government’s continued attack on the ownership of UK property via corporate and offshore structures.

“The government needs to ensure that in targeting tax avoidance and seeking to take heat out of the central London property market they do not altogether deter foreigners from investing or spending time in the UK,” said James Badcock, partner at Collyer Bristow.

Tax relief for ‘de-enveloping’

Badcock called on the government to consider tax relief for individuals in the process of ‘de-enveloping’ their property, revealing that it can involve “substantial tax charges.”

“It would be helpful if as part of its forthcoming consultation on the inheritance tax changes the government could consider reliefs against these- allowing individuals to move to the personal ownership which the government favours without prohibitive or punitive costs,” he said. 

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About Author

Monira Matin

Senior Reporter

Monira joined International Adviser in March 2016 from Informa Global Markets where she worked as a eurobond reporter for over two years, covering fixed income markets. She has previously held a number of editorial positions covering politics, insurance and technology. Monira has a degree in Journalism and Economics from City University.


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