BoE stress tests: all you need to know

The Bank of England has released the results of its latest round of its annual banking stress tests and its semi-annual financial stability report this morning. Used to measure the resilience of a bank’s balance sheet in adverse scenarios, the stress tests measured the impact of a severe slowdown in Chinese growth, a global recession […]

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Draghi: Eurozone will decline without vital productivity growth

It’s productivity, stupid. European Central Bank president Mario Draghi has become the latest major policymaker to warn of the long-term economic damage posed by chronically low productivity growth, as he urged eurozone governments to take action to lift growth and stoke innovation. Speaking in Madrid on Wednesday, Mr Draghi noted that productivity rises in the […]

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Asia markets tentative ahead of Opec meeting

Wednesday 2.30am GMT Overview Markets across Asia were treading cautiously on Wednesday, following mild overnight gains for Wall Street, a weakening of the US dollar and as investors turned their attention to a meeting between Opec members later today. What to watch Oil prices are in focus ahead of Wednesday’s Opec meeting in Vienna. The […]

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Banks, Financial

RBS emerges as biggest failure in tough UK bank stress tests

Royal Bank of Scotland has emerged as the biggest failure in the UK’s annual stress tests, forcing the state-controlled lender to present regulators with a new plan to bolster its capital position by at least £2bn. Barclays and Standard Chartered also failed to meet some of their minimum hurdles in the toughest stress scenario ever […]

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Barclays: life in the old dog yet

Barclays, a former basket case of British banking, is beginning to look inspiringly mediocre. The bank has failed Bank of England stress tests less resoundingly than Royal Bank of Scotland. Investors believe its assets are worth only 10 per cent less than their book value, judging from the share price. Although Barclays’s legal team have […]

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Categorized | Property

Osborne reaps rewards from ‘enveloper’ tax

Posted on July 31, 2014

Chancellor George Osborne©Bloomberg

Chancellor George Osborne

In 2012, George Osborne, the UK chancellor, jacked up taxes on people who used companies to buy expensive residential property.

This was an effort to crack down on stamp duty land tax avoidance, which he described as “a major source of abuse”.

    Rules imposing a 15 per cent rate of stamp duty were placed on “enveloped properties”, (properties held through a company). The following year, an annual tax – ranging from £15,000 to £140,000 a year – was also introduced.

    In the latest Budget, the Treasury raised the rates and widened the scope of the tax, so it now affects properties valued at £500,000 or more.

    Treasury officials initially expected that few people – just 1,100 – would pay the new annual tax because they believed that the measures would deter people from buying “enveloped” property to escape stamp duty. It was originally expected to bring in £35m a year, together with the 15 per cent of stamp duty land tax.

    But it has raised far more than expected. The latest data show the annual tax alone has brought in £198m over the past 10 months. HM Revenue & Customs said it was too early to draw conclusions, but it was possible “enveloping is more prevalent than was first thought”.

    Advisers said a lot of property owners had decided against “de-enveloping” their properties. Some wanted to preserve their anonymity but, for many, the biggest factor in their decision was wanting to avoid triggering a capital gains tax charge – 28 per cent of the gain – when they removed the property from the structure.

    Inheritance tax planning is another consideration for many older non-residents and non-doms (wealthy foreigners living in Britain who keep their foreign income outside the UK tax net).

    Many non-doms put their assets in an offshore company before they reach the cut-off point – 17 years – after which they come under normal inheritance tax rules. Removing the property from its corporate envelope would expose it to inheritance tax, increasing death duties.

    The new taxes have damped but not destroyed the appeal of holding property through a company. But it has affected the market, according to Lucian Cook, residential research director at Savills.

    “The taxation had the effect of tempering price growth in the residential market”, he said.