Clampdown on use of companies to buy homes ‘is working’

Government attempts to deter buyers from purchasing property through a company structure may finally be working.

HMRC figures show an 18% yearly decline in receipts from its Annual Tax for Enveloped Dwellings (ATED) to £143m during the 2017/2018 financial year – the second consecutive annual decline.

The number of liable declarations for the tax were also down 10% annually to 7,020.

The tax was introduced in 2012 to discourage the use of companies to buy properties for owner occupation and included a 15% slab-style Stamp Duty payment plus an annual tax.

It was initially imposed on properties above £2m, with the threshold being lowered to £1m in 2015-16 and to £500,000 in the 2016-17 tax year.

Naomi Heaton, chief executive of property adviser London Central Portfolio (LCP), said: “The Government’s objective to reduce the number of properties purchased through a corporate wrapper for personal use can be seen as a success.

“The number of liable transactions more than £2m has fallen by 27% since inception, as more purchases are made in individual’s names and many have de-enveloped their properties.

“The flipside, however, has been a reduction in revenue from ATED with a fall of 18% in 2017/18. This is at a time when increased taxation in the residential space and the fallout from Brexit have resulted in falling transactions and lower Stamp Duty receipts.

“A lack of understanding and knowledge at the highest levels of policymaking continues to plague UK property.

“When HMRC’s consultation document to reduce the ATED threshold to £500,000 was published in 2014, the initial estimates for the additional revenue were grossly over estimated. It was forecast that the take for 2017/18 would be in excess of £80m for properties between £500,000 to £2m. In reality it amounted to just £20m.

“A more considered approach to property taxation will be needed in the coming years if the housing market is going to flourish.

“Crowd pleasers, such as the additional 1% levy on Stamp Duty for overseas buyers at a time when we should be letting the world know that we are ‘open for business’, is hardly the kind of initiative the faltering UK economy needs in the current Brexit maelstrom.”

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2 Comments

  1. Property Money Tree

    Well said!

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  2. James Wilson

    More ignorance and muddled thinking from LCP.   Ignorance in that when the SDLT changes were introduced then Chancellor George Osborne that it was a TAX CUT on stamp duty.  He said that SDLT receipts would fall as less people paid stamp duty.   So to criticise the policy for causing a reduction in tax on property transactions makes no sense.  The same muddled thinking applies to the reduced take take from ATED.  It is a sign that the policy is working better than expected that ATED receipts are going down, and again means that LESS TAX is being paid on property transactions, which they should be applauding.   Of they are also wrong about Brexit.  Brexit is having almost no impact on central London.   What is butchering volumes is:  1) prices are far too high to be sustained by domestic demand and 2) buyers of all kinds (foreign and domestic) finally understanding what a Corbyn / Mcdonnell government is going to mean for central London prices.   C / M government (which I think it now overwhelmingly likely) will mean a new top rate of income tax at maybe 70%.   It will mean a Land Value Tax (maybe 3% annually) and certainly new restrictions on foreign ownership of residential property.   And no chance of cut in SDLT at top end.    Those are the reasons why only fools are currently paying central London prices.   Nothing to do with Brexit.

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