Connect with us

Global Banking and Finance Review is an online platform offering news, analysis, and opinion on the latest trends, developments, and innovations in the banking and finance industry worldwide. The platform covers a diverse range of topics, including banking, insurance, investment, wealth management, fintech, and regulatory issues. The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website. .

Top Stories

Falling numbers of properties owned in corporate structures as taxes bite

Falling numbers of properties owned in corporate structures as taxes bite

Government statistics published for the Annual Tax for Enveloped Dwellings (ATED) show falling numbers of owner occupied properties in corporate structures and an accompanying decrease in tax revenues.

The tax was introduced in 2012 to discourage the use of companies to buy properties for owner occupation. It included a 15% slab-style Stamp Duty payment and an annual tax, the ATED, which increases according to property value to as much as £220,350 p.a now. It was initially imposed on properties above £2m, with the threshold being lowered to £1m in 2015-16 and to £500k in the last tax year (2016-17).

According to the figures, analysed by London Central Portfolio (LCP):

  • Overall ATED receipts have fallen for the first time this year (tax year 2016-17), from £178m to £175m. This is despite an increase in rates of 50% across the board in 2015-16 and the recent extension to include properties above £500k
  • The decrease in tax take was greatest in the price band between £5m – £10m at 10%
  • The Government also heavily overestimated the number of owner occupied enveloped properties between £500k – £2m, collecting just £21m, only a quarter of the projected £90m tax take
  • Actual numbers of enveloped dwellings have also fallen. Over £2m, where a comparison can be made with when the tax was first imposed, properties held in corporate structures decreased 22%. They have also fallen 10% since the previous year
  • Only 7,300 properties are now recorded as being held in corporate structures for owner occupation, representing just 0.03% of all privately-owned units in England and Wales
  • These decreases in both receipts and volumes are due both to a de-enveloping of existing properties as owners transfer them into their own names and a general reduction of purchases through corporate structures

Naomi Heaton, CEO of LCP, comments:

“Meeting the Government objective, the ATED has increasingly encouraged owner occupiers to hold properties in their own names or drop them out of corporate vehicles. According to the latest data, just 7,300 properties are now liable to the charge, representing only 0.03% of all privately owned property in England and Wales.

“For properties valued above £2m, where a like-for-like comparison can be made with when the tax was first introduced, only 3,100 properties are now held in corporate wrappers. This is a 22% fall from 2013 and 10% down over last year. Alongside the annual charge, which has more than doubled since it was first introduced to as much as £220,350, the 15% ATED specific Stamp Duty may also be discouraging new corporate purchases.

“Whilst the falling number of owner-occupied properties in corporate wrappers is good news for the Government, it is now being accompanied by falling tax revenues. ATED tax receipts in 2016-17 were down from £178m to £175m. Without the tax now being collected from properties below the original £2m threshold, the overall fall in receipts is 6%.

“This first sign of falling revenue may come as a surprise to the Government who significantly overestimated (by 3 times) the number of owner occupied properties held in corporate wrappers at the sub-£2m end of the market. With high establishment and running costs, the use of company structures has typically not been considered an option at these price-points. As a result, the Government’s projected windfall of £90m from properties between £500k and £2m has failed to materialise with under a quarter of this collected, at just £21m.

“As a whole, the Government has made considerable progress in achieving its objectives of encouraging owner occupiers not to hold through company structures. Whilst a tax take of £175m in 2016-17 is considerably higher than the £75m estimated back in 2012, there is now the real prospect of falling revenues. However, in 2018-19, 5 years after the scheme was implemented, revaluations will be required for all properties originally caught by ATED. This may find a number of properties moving into higher value tax brackets, providing a further windfall for the Exchequer. In the meantime, Hammond may take a leaf out of Osborne’s book, who increased ATED by 50% in the 2015 Autumn Budget.”

Global Banking & Finance Review

 

Why waste money on news and opinions when you can access them for free?

Take advantage of our newsletter subscription and stay informed on the go!


By submitting this form, you are consenting to receive marketing emails from: Global Banking & Finance Review │ Banking │ Finance │ Technology. You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact

Recent Post