There has been a 50% hike in the amount collected by HMRC via the Annual Tax on Enveloped Dwellings (ATED), with an extension of the charge boosting tax revenue to £174m last year according to analysis by law firm Collyer Bristow, which warns of the potential impact on foreign property investors
First introduced in April 2013, ATED is payable on high-value UK residential property owned via companies. The tax originally applied to any property worth more than £2m, which has subsequently been changed, first to all properties worth more than £1m in 2015/16 and from 1 April 2016, any worth more than £500,000.
ATED brought in £100m in its first year of operation, which rose to £116m in 2014/15 and £174m in 2015/16.
James Badcock, partner at Collyer Bristow, said: ‘The increase in ATED collected reflects the government’s continued attack on the ownership of UK property via corporate and offshore structures.
‘UK residential property is now an increasingly unattractive investment prospect for wealthy overseas purchasers. The government need 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.’
Other recent changes which are having an impact on the sector include a loss of IHT exemption for offshore companies from April 2017, increases to SDLT and the introduction of capital gains tax for non-residents. Collyer Bristow say that the changes, when combined, could make UK residential property a much less attractive investment for overseas high net worth individuals.
Badcock said: ‘Many will now be looking at how they can “de-envelope” their property. This process 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.’
