The case for (and challenges surrounding) increased de-enveloping within residential and commercial real property taxation

Abstract

Abstract This article offers an appraisal of England and Wales’ real property tax regime, exploring both residential and commercial property taxation from the perspective of enveloping. It will be demonstrated that the residential property regime has been successful in closing many enveloping-based taxation loopholes, whilst the commercial property regime has taken a clear policy-based stance in permitting a limited degree of inheritance tax mitigation. That said, though both regimes are capable of drawing significant yields from direct property taxation, both struggle in obtaining revenue from enveloped holdings. Given the current socio-economic landscape in England and Wales, a de-enveloping policy is desirable. Unfortunately, uncertainty surrounding overseas entity classification—particularly as regards foundations and anstalts—thwarts this preferred de-enveloping aim. This obstacle has not been overcome by the beneficial ownership register recently introduced by the Economic Crime (Transparency and Enforcement) Act 2022. Remedial reforms are therefore proposed.