The number of corporate wrap homes has dropped by 6.3%

The number of homes owned in company names has dropped 6.3% in the last year – since tax rates were hiked up – according to official Government statistics which reveal the number of residential properties owned by “Non-Natural Persons” for the first time.

wrapped house CardiffLondon Central Portfolio has had a trawl through the data (which runs to December 2015), and reports that 3,990 properties are owned in corporate wrappers (otherwise known as Non-Natural Persons or NNPs) for owner-occupation across England and Wales – representing around 0.2% of the country’s total housing stock. Another 3,040 properties have been bought by NNPs for commercial purposes (such as rental and development); these do not pay the Annual Tax on Enveloped Dwellings, but are required to notify HMRC.

63% of enveloped properties for owner-occupation are valued between £2m and £5m; 23% are valued between £5m and £10m; 14% are valued above £10m, and 230 come in at more than £20m.

Of the 3,040 properties bought for “genuine commercial investment” – and so ATED exempt – 74% are valued between £2m and £5m; 18% are valued between £5m and £10m, and 7% are valued above £10m. A goodly proportion of these are owned by major pension funds and institutional investors.

The total number of properties bought over £10m – and recorded by the Land Registry – since the ATED was introduced in 2012 has increased five-fold, from 13 to 65. In the pre-ATED world, many of these would have been bought in wrappers and not recorded on the Registry.

The Government has sought to discourage owner occupiers buying in corporate wrappers since 2012, says London Central Portfolio, as part of a strategy to reduce stamp duty mitigation and encourage people to invest in their “own names” rather than using the anonymity of a company structure.

Chunky tax charges were introduced on £2m+ properties to disincentivise such corporate purchases and, at the same time, raise revenue for the Treasury. These levies included the introduction of a 15% slab-style stamp duty payment and an Annual Tax on Enveloped Dwellings (ATED), which increases by price bands from £7,000 to as much as £218,000 per annum. In December 2014’s Autumn Statement, George Osborne quietly increased the original rates by 50% and lowered the entry capture value to just £500,000; indications are that policy is likely to continue in a similar vein.

Total ATED tax receipts for 2015 brought £116m in to the UK economy, despite a 6.3% drop in the number of properties now owned by NNPs, compared with 2014. The high levels of taxation for properties bought in corporate wrappers is beginning to outweigh any tax planning benefits, notes LCP, with a new trend emerging for “de-enveloping” (dropping properties out of NNPs and into personal names).

Regional Breakdown

  • London as a whole accounted for 89% of ATED tax receipts (£103m)
  • The South East accounted for 10% (£11m)
  • The other 2% came from the rest of the UK (£2m)

Top Local Authorities

  • The City of Westminster accounted for 52% (£60m) of total ATED receipts in 2015
  • In second place was Kensington & Chelsea accounting for 27% (£32m)
  • The other 21% of ATED tax receipts have come from Barnet, Camden, Runnymede and “the rest of the UK” (£24m).

These HMRC statistics are markedly lower than some headline-grabbing estimates of yore, notes LCP; Transparency International claimed last year that 36,342 properties in London were owned in off-shore vehicles alone. That’s five times the government’s number.

Image: The Park House Club in Cardiff, wrapped as a gift in 2006 (photo by Howard Dickins, CC by SA 2.0)

londoncentralportfolio.com