September 16, 2014

Property again.  Was it the duck houses that irrevocably tainted the relationship between our government and the governed in the area of property policy?  Anyway, duck houses are the first things that come to my mind in connection with the idea we should reduce the administrative burden of the ATED – the annual tax on enveloped dwellings.

Because ATED is a rich buggers’ tax: it’s the “not-quite-a-Mansion-Tax” tax on houses that are owned by some kind of corporate entity to avoid Stamp Duty Land Tax.  The idea is that if you and I live in a house we own and then sell it we don’t pay capital gains tax but, if the house is worth enough, we have to pay stamp duty.  If we own two houses and sell one of them, well, we only get the CGT exemption (broadly) for one house at a time.  So if we had to sell the estate in Scotland to finance the country house in Berkshire we’d have to pay capital gains tax on the estate (pause for hollow laughter, because capital gains tax is a notoriously voluntary tax) and Stamp Duty Land Tax.  So we’d put the estate into a company, preferably offshore, and just sell the shares in the company instead, right?  Hence ATED, an annual tax on “enveloped dwellings” – houses that are put into some kind of corporate ownership rather than being owned by a natural person.

In that light, the fact that the tax only started in April last year and already the buggers are wanting the “burden” of administering the tax to be eased seems preposterous to me: the condoc says upfront that the entire aim of ATED in the first place is

to discourage enveloping, to encourage the de-enveloping of property and to ensure that those who continue to hold property in this way pay a fair share of tax

The consultation also says it should be read “by those currently within the charge to ATED… those who are likely to fall within the regime in the future, ATED practitioners and representative bodies” (Pause to boggle at the thought that there are already “ATED practitioners”)  Yes, I know that there are inoffensive businesses which have to claim exemption from ATED and it is, presumably, reducing the administrative burden on these which is the aim of the consultation.  They are listed as:

1) property rental businesses (including preparation for sale, demolition and conversion);

2) dwellings opened to the public;

3) property developers (including exchange of dwellings interests);

4) property traders carrying on a property trading business;

5) financial institutions acquiring dwellings in the course of lending;

6) dwellings used for trade purposes (occupation by qualifying employees and partners);

7) farmhouses (occupation for the purposes of carrying on a trade of farming) and

8) providers of social housing. (2.6)

You know, I might have been persuaded that there was some legitimate policy aim in here, if I hadn’t read on, past the list of inoffensive businesses to the list of those who have already been engaged in “informal discussions” with HMRC.

They’re helpfully listed in Annex A: let’s play “spot the one whose interests most closely align with your own.”

Barratts PLC

British Land Company

British Property Federation

Burges Salmon


Chartered Institute of Taxation (CIOT)

Clifford Chance

Council for Licensed conveyancers


Ernst & Young

FTI Consulting


Hunters Solicitors


Law Society

National Landlords Association

Rawlinson & Hunter

Smith & Williamson

Stephenson Harwood

Taylor Wimpey PLC

All worthy enterprises, of course, but what about the rest of us?  Isn’t this all really a bit like… asking MPs to decide their own expenses claims???



  1. “Enveloping” is where an individual sticks property into a company to get some advantages – normally, as you say, tax ones – that you might not expect to arise.

    The situation where a housebuilding company happens to own a lot of houses is an entirely different one, and one which you would expect to arise as a natural feature of that business.

    The problem is that ATED works on a property by property basis: you have to do a return in respect of each house. If you have hundreds of houses in building company, you have to report that each one individually is eligible for relief because it’s owned by a property developer. You also have to report the acquisition and disposal of each one.

    The simplification is to look at the potential envelope, rather than looking at the things enveloped. The point of ATED is to say that putting a house into a company could be a bad thing; the relief works by saying that it’s OK so long as the company is OK. All the simplification does is to say that if a particular company qualifies for the relief, then there’s no point saying “this one’s exempt; and that one; and that one; and that one…” when you could just say “All my properties are exempt – see, here are my credentials”.

    It’s basically just fixing a bug in the design of ATED, stemming from focusing on the property rather than the context it’s in.

    The list of people involved is basically the list of people who are having to repeat themselves needlessly.

    Analogy: at the moment, the ATED rules are like a self-service checkout in a supermarket, set up in such a way that you have to get the assistant along after every item to verify that you’re over 18 and so are allowed to buy that particular item. It would take *hours*. The simplification is simply to have the assistant confirm you’re 18, and so entitled to buy any item you like, and then let you get on with it.

    • That makes a lot more sense than the consultation document, thanks! The trouble is, I’m still not sure I trust the assistant not to be nodding her little underage friends through along with the actual grown ups…

      • Analogies break down after a while… 🙂 But in this case, the whole point is to look at properties which are used privately, and pretty much by definition that means that they have to be the only property a company owns otherwise you lose control over the property.

        So if the “bad” properties are all in individual wrappers, this simplification has no effect: if you took it up, you’d replace one report for the property with one report for the company.

        A better way of putting it: the perceived abuse is at the retail level, but the simplification can only be used by wholesalers.

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