Changes to the Annual Tax on Enveloped Dwellings

Patricia Mock, a tax director in the private client services practice at Deloitte comments:

“The Annual Tax on Enveloped Dwellings (“ATED”) regime raised five times the projected amount for 2013/14 due to the unexpectedly high number of properties held within “corporate envelopes” targeted by the new rules. The Government considers holding property in this way to be a form of tax avoidance and accordingly levies a range of charges on such corporate envelopes. This includes an annual tax calculated by reference to the property value and a flat rate of Stamp Duty Land Tax payable at 15% on property acquisitions such as corporate envelopes.

“Announced today were large increases in the rates of annual tax at 50% on top of the expected inflation rise. From 1 April 2015, charges on affected properties will be as follows:

• those worth more than £2 million but up to £5 million will incur a charge of £23,350 – the previous charge was £15,400
• those worth more than £5 million but up to £10 million will incur a charge of £54,450 – the previous charge was £35,900
• those worth more than £10 million but up to £20 million will incur a charge of £109,050 – the previous charge was £71,850
• those worth over £20 million will incur a charge of £218,200 – the previous charge was £143, 750

“These increases are no doubt a consequence of the higher yields from the tax than expected since its introduction.

“Properties worth more than £1m held in envelopes will also be subject to ATED from April 2015, the rate being as previously announced at £7,000.

“Interestingly, although the rate of Stamp Duty Land Tax payable on acquisitions via corporate envelopes remains at a flat rate of 15%, the equivalent top rate for purchases by individuals is now an increased rate of 12%. Although this significantly lessens the up-front comparative disincentive for acquisitions through corporate envelopes, the increased annual tax charges will clearly continue to discourage many from such structures.”

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Notes to editors

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