Statistics show drop in ATED receipts

19 Feb 2018

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The latest statistics published by HM Revenue & Customs (HMRC) show a drop in overall receipts from the Annual Tax on Enveloped Dwellings (ATED).

The key headlines are:

  • In 2016-17 ATED receipts fell by 2% to £175 million, from £178 million in the previous year;
  • This fall was observed across most bands, with the £5 million to £10 million band falling by the largest amount (10%), followed by the £2 million to £5 million band which fell by 6% and the £10 million to £20 million band, which fell by 7%;
  • This decrease in receipts was offset slightly by the new £500,000 to £1 million band, which was introduced in April 2016 and accounted for 4% of ATED receipts in 2016-17;
  • In 2016-17 the number of liable declarations increased by 28% to 7,300 (from 5,720 in 2015-16). This is due solely to the introduction of the £500,000 to £1 million band in April 2016, as there has been a decrease in declarations in every other band from 2015-16;
  • Receipts from ATED declarations located in London accounted for 87% of all receipts in 2016-17, by far the highest of all regions, but one percentage point lower than the proportion of receipts in 2015-16.

Lucy Brennan, partner at Saffery Champness, commented:

“The drop in ATED receipts may have come as a surprise to many, including perhaps the government. Driven in part by a 68% rise in relief claims, the decrease on last year’s take may be due to people increasingly renting out their properties.

“The other reason for the increase in reliefs will be the inclusion of property valued over £500,000. We may well see more reliefs claimed in the future with more and more individuals turning to companies to hold property portfolios in light of the recent changes in interest relief.

“Looking ahead, from 6 April 2017 all UK residential property is subject to inheritance tax, regardless of the structure it is held in, and therefore there was a lot of de-enveloping activity prior to that date, which may impact on HMRC’s ATED take in 2017/18.

“After that, we may see a rise again, and not just because the charge is subject to inflation, but because we are coming up to the first period for revaluations. The charge on 1 April 2018 will be calculated on revised valuations at 1 April 2017 for the properties. Most property values are likely to have increased since ATED was introduced – particularly prime London property, which continues to be the biggest source of ATED revenue for the government.”

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Lucy Brennan

Partner, London

Key experience
Lucy advises individuals, partnerships, trusts and companies on their personal and business financial and taxation affairs.