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.”