The figure is up 53% compared with the previous 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 last April where it now applies to properties worth more than £500,000.
Tax changes
Collyer Bristow said that Ated is just one of a series of government measures designed to restrict the tax advantages enjoyed by those investing in UK residential property via complex corporate and offshore structures, often used by non-domiciled UK residents.
Other recent changes include:
- A loss of IHT exemption for offshore companies from April 2017;
- Increases to stamp duty land tax (SDLT); and
- The introduction of capital gains tax for non-residents.
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.”
He added that “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),” said Badcock.
Closing non-dom loophole
Last month, the UK government confirmed that non-domiciled investors with UK residential properties held via an offshore corporate structure will be subject to inheritance tax (IHT).
“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,” said Badcock.
“Next year, properties will need to be revalued for Ated purposes. This will result in properties moving up bands and significant increases in the tax take next year,” he predicted.
