Mansion tax could cost the country £1bn

As the value of the property is not always linked to the income of the owners, especially when a home that has accrued in value is handed down through generations, the burden of tax is likely to be funded by borrowing, Mr Cook explained. "This means that rolled up debt (together with interest accruing) is likely to be offset against the value of the assets charged."

Wealthy homeowners have been hit by an onslaught of tax changes since a mansion tax was first proposed – including the increase of stamp duty on homes worth more than £1m from 4pc to 5pc and 15pc on £2m dwellings bought by overseas investors.

For domestic buyers a 7pc property tax is slapped on their £2m residence.

Both the Liberal Democrats and Labour have rejected early plans to impose a 1pc levy on value in excess of £2m, and now back a banded proposal that mirrors the annual tax on enveloped dwellings (ATED).

Buying residential property via enveloped dwellings or corporate structures was a method of avoiding stamp duty.

That loophole has been closed by George Osborne.

"If it were to be of the order of scale of ATED … [it] has the capacity to put a fairly sizeable spanner in the working of London's prime property market," said Mr Cook. "At the heart of the issue is whether mansion tax is designed to be a revenue raiser or a playing field leveller."

The Savills report recommended that the Government should scrap mansion tax and add more council tax bands.

The highest property values in Westminster only pay £14 a year more in council tax than a two–bedroom, second–floor flat in Weymouth.

It also called for the Government to impose a minimum charge for the properties in the top bands, irrespective of local authority fees.

It would seem "broadly fair" that all properties worth between £2m and £5m pay £5,000 per year. Those between £5m and £10m pay £7,500 per year and those worth over £10m would be charged £10,000, Mr Cook explained. The tax from these additional receipts could be used to reduce the council tax burden of those suffering hardship or fund housing projects, he said.

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