Another Open Letter to George Freeman MP – Conservative

by Mark Alexander

13:21 PM, 26th August 2015
About 3 years ago

Another Open Letter to George Freeman MP – Conservative

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Another Open Letter to George Freeman MP – Conservative

Having received a very bland response to the open letter I wrote to George Freeman MP on 13th July 2015, and various subsequent emails, I have eventually managed to arrange an appointment to meet him. Another Open Letter to George Freeman MP – Conservative

Inspired by a letter published by Property118 Member Jerry Jones to his MP I decided to send something very similar to my own MP prior to our meeting.

Thanks also to “Appalled Landlord” for his help checking my numbers and proof reading my letter before it was sent.

See below.

Dear Mr Freeman,

I have made an appointment to meet you at your clinic in Attleborough Town Hall at 11:30am on 2nd October 2015.

I reject the idea that landlords have an unfair advantage over either companies or homeowners and offer the following analogy for you to reconsider.

In my last email to you I promised to produce an analogy based on your own expenses, as I think this may add clarity to my perspective by making comparisons of my predicament to your expenses claims.

Just suppose the tax relief on part of your expenses was restricted to 20% as it is for landlords. Given that mortgage finance is usually the major expense in property, let us treat your staffing costs in the same way for the purposes of this example.

Please consider that MP’s expenses are no more of a sacred cow to the Great British Public than landlords’ interest, so the parallel is rather appropriate – nobody is likely to be rushing to the barricades to defend either of us.

In broad terms, your current income is composed of £74,000 salary as of May this year, plus expenses. Based on the complete year of 2013-14’s figures, your expenses amounted to just over £171,000, of which £129,000 related to staffing costs. In this respect you are in quite a similar position to many landlords as regards their income. In your case the total is £245,000, of which part is taxable and part is an expense and thus deductible. On that basis, in very broad terms, you are liable for tax of around £19,000, leaving you a post-tax income of £55,000.

If the similar restrictions were applied to your staffing expenses in 2020/21, your taxable income would be deemed to be £203,000, comprising your salary and that part of your expenses that you use to pay staffing costs. The tax liability on that income would be £77,450.

“But wait”, I hear you cry, “what about the 20% tax relief due on my staffing cost?”

Quite right, 20% of £129,000 is £25,800 so we can deduct that in order to reduce your tax liability to just £51,650. You must pay that tax out of your £74,000 salary, leaving you a net income of £22,350. Your tax bill would be increased by 175% and your net pay would be down 59.5%.

Would you be able to run homes in Norfolk and London on that income?

If we use the same logic applied by The Treasury to your staffing costs as they are applying to landlords finance costs this is only fair of course. Reducing your tax relief would “level the playing field” between MPs and ordinary citizens who don’t get tax relief for employing nannies, cleaners, gardeners and the other staff they need to support their households.

The figures are actually far worse than that for many landlords, who will be expected to pay substantial tax out of a negative cashflow.

Do you now understand the reason for my concerns?

Companies that own rental properties will still be able to deduct all their finance costs from income before paying tax on their resulting profits at the rate deemed appropriate, as will sole traders in every other form of business. Money necessarily paid out to someone else should NOT be regarded as part of taxable income of any enterprise, whatever its structure.

As to whether private homeowners are taxed less favourably than landlords, consider the impact of two homeowners swapping properties and renting to each other for identical rent amounts. By renting these same properties they are subjecting themselves both to capital gains tax if they sell, and income tax on rental income less costs. If their costs (e.g. repairs, mortgage interest) exceed their rental income, this will leave them in an inferior tax position as such tax losses cannot be offset against other (non-property) income, and they still face a potential capital gains tax liability.

I look forward to meeting you

Yours sincerely,

 

Mark Alexander

Related Open Letters >>> http://www.property118.com/category/open-letter-to-mp/

TAKE ACTION

To calculate the impact of this policy on your personal finances download this spreadsheet

A petition has been started – see >>> https://petition.parliament.uk/petitions/104880

A Q&A sheet explaining the problem and the likely unintended consequences associated with George Osborne’s proposals can be downloaded here. Please feel free to copy, print, distribute.

Would you be prepared to invest just 15 minutes a day to campaign against the Budget proposals to restrict finance cost relief for private landlords?

Join The Landlord Tax Levy Campaign Group

YOUR Money, YOUR future, YOUR choice.

Related articles – LINK

http://www.property118.com/category/budget-2015-campaign/

Editors Note: Due to the overwhelming support and popularity of this campaign we must apologise that Property118 is physically unable to respond to all direct emails and telephone calls. We would be most grateful if you can comment via the thread below and the team of readers working with us will help pick up on all points 🙂



Comments

Richard Mann

14:07 PM, 27th August 2015
About 3 years ago

Fantastic piece of work, well done in formulating this.

Dr Rosalind Beck

14:26 PM, 27th August 2015
About 3 years ago

I love it!
(slight mistake with editing in penultimate paragraph, but can't see it mattering). I have to laugh out loud when I read 'But wait”, I hear you cry, “what about the 20% tax relief due on my staffing cost?”
Great stuff. Let's see if the genius can see it now for what it is.
The letter is truly inspired and I hope the Telegraph can publish the analogy in one of the articles in their campaign against the buy-to-let tax grab.

David Price

14:28 PM, 27th August 2015
About 3 years ago

An excellent letter. If we are not successful in getting the landlords turnover tax proposals rejected perhaps we should start a campaign to tax MP's expenses.

Jerry Jones

14:30 PM, 27th August 2015
About 3 years ago

That looks strangely familiar 😉

Mick Roberts

15:01 PM, 27th August 2015
About 3 years ago

Brilliant, that should go to all MP's. And newspapers too.

Mark Alexander

15:08 PM, 27th August 2015
About 3 years ago

Reply to the comment left by "Jerry Jones" at "27/08/2015 - 14:30":

I have indeed credited my inspiration to you Jerry 😀
.

matchmade

16:58 PM, 27th August 2015
About 3 years ago

Many thanks for all this hard work. I've signed the petition. One suggestion as regards the personal finances spreadsheet: it would be helpful to add some rows relating to dividends, both for anyone who has any dividend-generating investments outside ISAs and SIPPs, and for anyone running a limited company and taking dividends as an alternative to salary. The Chancellor took a huge swipe at landlords in the Summer Budget, but he also attacked anyone running a small business through a company, so it would be very useful to factor the new dividend tax regime into the mix.

Jerry Jones

17:12 PM, 27th August 2015
About 3 years ago

Reply to the comment left by "Tony Atkins" at "27/08/2015 - 16:58":

Yes, not content with the kick in one goolie, he has applied the boot to the other one too for any landlords who also run small limited companies.

David Price

17:22 PM, 27th August 2015
About 3 years ago

Reply to the comment left by "Jerry Jones" at "27/08/2015 - 17:12":

He has to be 'fair' to individual and incorporated landlords, everyone, landlords that is, has to be kicked equally.

On a more serious note, isn't it amazing how one person can do so much damage to an entire community using only a pen (or perhaps a word processor). How tens of thousands of thriving business can be destroyed with one thoughtless action.

Jerry Jones

17:33 PM, 27th August 2015
About 3 years ago

Thankfully, my mail-order business can run just as well from Malta as from the UK.

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