Significant fall in number of homes bought via company structures

Statistics published for the Annual Tax for Enveloped Dwellings show that the government appears to be succeeding in its  bid to cut the numbers of owner occupied properties purchased via corporate structures.

An analysis of government figures made by investment consultancy London Central Portfolio shows that ATED tax receipts have fallen for the first time in the 2016-17 tax year, from £178m to £175m. 

This is despite an increase in rates of 50 per cent across the board in 2015-16 and the recent extension to include properties above £500,000.

 ATED was introduced in 2012 to discourage the use of companies to buy properties for owner occupation. It included a 15 per cent slab-style stamp duty payment and the ATED itself which increases according to property value to as much as £220,350 per year. 

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

Other observations from London Central Portfolio reveal that the decrease in tax take was greatest in the price band between £5m to £10m, and that the government appeared to have overestimated the number of owner occupied enveloped properties between £500k and £2m, collecting just £21m - that’s under a quarter of the projected £90m tax take.

Only 7,300 properties are now recorded as being held in corporate structures for owner occupation, representing just 0.03 per cent of all privately-owned units in England and Wales.

“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 six per cent” says Naomi Heaton, LCP chief executive.

“However in 2018-19, five 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.”