HM Revenue & Customs is set to pocket £60m less from one of its property taxes than it forecast.
An analysis of the Annual Tax for Enveloped Dwellings, undertaken by property consultancy London Central Portfolio, reveals that receipts for the tax for 2017/18 show a chunky 18 per cent fall.
This comes after the Treasury admitted in February that - thanks partly to the effective scrapping of first time buyers’ stamp duty - official receipts from stamp duty for the final quarter of 2018 were down 17 per cent.
The ATED levy was introduced in 2012 to combat what was seen by some in government to have been the avoidance of stamp duty via the purchase of properties (usually expensive ones) by companies rather than individuals.
It was original levied on properties selling for £2m-plus but has recently been reduced to those costing £500,000 or more.
Figures analysed by LCP shows that in addition to the tax take being 18 per cent down, but also that ATED-liable declarations over £2m have fallen by 27 per cent since the levy was introduced.
London is, unsurprisingly, the area most affected by the tax, accounting for 87 per cent of all receipts; just two boroughs, the City of Westminster and the Royal Borough of Kensington & Chelsea, represent 75 per cent of all receipts.
“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 over £2m has fallen by 27 per cent since inception, as more purchases are made in individual’s names and many have ‘de-enveloped’ their properties” admits Naomi Heaton, chief executive of London Central Portfolio.
“The flipside, however, has been a reduction in revenue from ATED with a fall of 18 per cent 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 SDLT receipts for the Exchequer” she adds.
Heaton believes that a lack of understanding and knowledge at the highest levels of policy making continues to plague UK property.
“When HMRC’s consultation document to reduce the ATED threshold to £0.5m was published in 2014, the initial estimates for the additional revenue generated for the Exchequer were grossly over estimated. It was forecast that the take for 2017/18 would be in excess of £80m for properties between £0.5m to £2m. In reality it amounted to just £20m” she says.
“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 one per cent levy on SDLT 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.”