Hope you like the animation!
Is this how you feel landlords are being treated?
Maybe our eBooks can help.
Hope you like the animation!
Is this how you feel landlords are being treated?
Maybe our eBooks can help.
This is you LAST CHANCE to register for the Property118/YPN/Cotswold Barristers joint webinar which will take place at 8pm on Thursday 22nd June 2017.
The registration link is; https://ypnmagazine.infusionsoft.com/app/form/26e17cb41be832a3d7ecbda47a2bbf61
The webinar will be hosted by Ant Lyons, founder of YPN and guest experts will be Mark Smith, Head of Chambers at Cotswold Barristers and Mark Alexander, founder of Property118 “The Landlords Union”.
If you have any questions about how to structure your business for optimal tax efficiency, this webinar is a MUST for you.
You may have read about the problems I’ve been having with a property I own in Halifax – LINK.
Here’s an update
The local agents who it’s been let with for years still haven’t been able to get it rented. Despite owning a stake in LettingSupermarket.com and the fact that they manage most of my portfolio I had kept this property with the local agent. I wanted to be fair with them as they have always been fair with me.
However, no progress has been made so I’ve decided to give LettingSupermarket.com a chance to let the property too. It’s still with the local agent as well and the deal is that whichever agency finds the perfect tenant first will secure the business.
I couldn’t possibly think of a more honest way to market the property that the description I’ve asked LettingSupermarket.com to post on their Rightmove and Zoopla adverts – see below.
“This centrally located property has had more than its fair share of problems with layabouts causing damage to the communal areas.
For this reason, the owner is prepared to accept 50% of market rent for the next 12 months for the for the right tenant to be able to help sort the problem. This would involve liaising with the Police and the freehold management company of the block and starting a Neighbourhood Watch Scheme.
The landlord will pay the agents fees and will not require a deposit for the right applicant. Your referencing fees will also be refunded if you have been honest on your application.
Once the problem is resolved and after a 12 month period has been completed the rent will be £50 a month below market value. If the problem still exists after six months the owner will have to consider giving you notice to quit so that the property can be sold or another tenant who is better equipped to solve the problem can be found.
The communal areas of the block are a bit of a mess at the moment but the carpets will be replaced and the walls will be re-painted shortly. The flat itself is very decent internally.
If you are the sort of person who isn’t easily intimidated and you are looking for a very cheap rent, this could be an ideal property for you and we look forward to hearing from you.
Applicants who are claiming housing benefits will not be accepted. You must be working and able to prove your credit history with bank statements and references.
Rent £250 per calendar month in advance
£50 Credit check which will be deducted from the 1st months rent for a successful applicant“
Here’s the advert link on Rightmove >>> http://www.rightmove.co.uk/property-to-rent/property-48890274.html
I will let you know how I get on, wish me luck!
Our latest eBook is just five pages long, including the cover page.
It is completely free to download and you are free to share it with whoever you wish.
It explains how inexpensive it can be for landlords to incorporate their business, compared to most people’s perceptions.
We also explain how the entire process can be de-risked, even the fees!
Given that incorporation can ‘wash out’ all capital gains to date, and that Limited Companies are not affected by the Section 24 restrictions on finance cost relief, the costs often pale into insignificance in comparison to the savings made.
Clients of Property118 Limited and Cotswold Barristers are often shocked to hear that the total cost of incorporation can be as little as £10,994.
Even landlords with more than 100 properties only pay £18,994.
This is how we have broken down these costs:
The largest cost by far is legal fees to utilise the Beneficial Interest Company Transfer incorporation structure. This is a one off fee based on a scale as follows:-
To be crystal clear, the above is the total cost of incorporating your ‘whole business’. Many landlords expect incorporation to cost £1,000’s for each property. In fairness, some professional advisers do charge eye watering fees but you have a choice not to use them.
The entire process is risk free because our consultation are backed by our guarantee of total satisfaction or else we will refund you in full with no quibbles whatsoever.
If our assistance to obtain non-statutory clearance from HMRC fails we will refund you in full. If clearance is granted there can be no come backs from HMRC, providing you have told the truth of course.
Our professional advisers are fully qualified, experience and specialist practicing Barristers-At-Law, they are regulated by the Bar Standards Board and carry substantial Professional Indemnity insurance.
The starting point is to book an initial consultation – please see below.
Some accountants have been telling their clients that if they want to claim they run the “business” as a “partnership” then they will automatically have to pay National Insurance.
“That can’t be right”, I hear you cry!
Well it’s not quite clear cut, so I decided to do some more research on the subject and came across a very helpful article published by the ICAEW, to which I credit the remainder of this page:-
· undertaking or arranging for external and internal repairs,
· preparing the property between lets,
· advertising for tenants and arranging tenancy agreements,
· generally maintaining common areas in multi-occupancy properties, or
· collecting rents.
Until quite recently, many professional advisers (including myself) have argued that a partnership doesn’t exist unless HMRC has issued a rental property Partnership Unique Tax Reference number “UTR” and that three years of partnership returns have been submitted and accepted.
However, earlier this year I was made aware of HMRC issuing non-statutory clearance for the SDLT exemption of a rental business partnership which was incorporating, without meeting any of the above criteria.
I’m sorry it has taken me so long to share my research on this, I have been too busy helping paying clients to obtain non-statutory clearances for themselves!
The key to this matter are the words “business” and “Partnership”.
HMRC’s manual SDLTM33100 states as follows:-
“Where an entity does not carry on a business there will not be a partnership and the partnership rules set out in this chapter will not apply: even if the parties are bound by a partnership deed.” I have emphasised the word business in bold.
The manual also states:-
A partnership for the purposes of SDLT is defined as
Again I have emphasised the important words in bold.
“A partnership is defined in the 890 Partnership act as ‘the relation which subsists between persons carrying on a business in common with a view of profit”
If you only own a few properties and the work associated with managing them is predominantly outsourced, HMRC may argue that you are merely curating a passive investment and that you are not entitled to claim incorporation relief on the basis that you are not running a business. If you are not running a business, then the exemption for SDLT relief at the point of incorporation doesn’t apply either.
Thankfully, there is a way to obtain both clarity and certainty by following a process HMRC call “non-statutory clearance” BEFORE YOU COMMIT, which I will explain at the end of this article. First though, let’s take a look at the ambiguity.
In 2013 HMRC challenged whether a landlord was in fact running a business at Tribunal level, and despite winning initially, an Appeal at the Upper Tier Tribunal concurred that the appellant “Elizabth Moyne Ramsay” was in fact running a business. However, it was far from clear cut – reference http://taxandchancery_ut.decisions.tribunals.gov.uk/Documents/decisions/Elisabeth_Moyne_Ramsay_v_HMRC.pdf
To save you the trouble of reading the entire case the key findings of the appeal ruling are below.
“64. As I have described it earlier, in my judgment the word “business” in the context of s 162 TCGA should be afforded a broad meaning. Regard should be had to 10 the factors referred to in Lord Fisher, which in my view (with the exception of the specific references to taxable supplies, which are relevant to VAT) are of general application to the question whether the circumstances describe a business. Thus, it falls to be considered whether Mrs Ramsay’s activities were a “serious undertaking earnestly pursued” or a “serious occupation”, whether the activity was an occupation or function actively pursued with reasonable or recognisable continuity, whether the activity had a certain amount of substance in terms of turnover, whether the activity was conducted in a regular manner and on sound and recognised business principles, and whether the activities were of a kind which, subject to differences of detail, are commonly made by those who seek to profit by them.
65. In my judgment, taking the activities of Mrs Ramsay as a whole, I am satisfied that these tests are satisfied. Certain of the individual activities by themselves have little impact on the issue, but overall, taking account both of the day-to-day activities, and the work undertaken by Mrs Ramsay in respect of the early refurbishment and redevelopment proposals, I conclude that the activities fall within the tests described in Lord Fisher.
66. There remains, however, the question of degree. That is relevant to the equation because of the fact that in the context of property investment and letting the same activities are equally capable of describing a passive investment and a property investment or rental business. Although resolution of that issue will be assisted by consideration of the Lord Fisher factors, to those there must be added the degree of activity undertaken. There is nothing in the TCGA which can colour the extent of the activity which for the purpose of s 162 may be regarded as sufficient to constitute a business, and so this must be approached in the context of a broad meaning of that term.
67. Applying these principles, in this case I am satisfied that the activity undertaken in respect of the Property, again taken overall, was sufficient in nature and extent to amount to a business for the purpose of s 162 TCGA. Although each of the activities could equally well have been undertaken by someone who was a mere property investor, where the degree of activity outweighs what might normally be expected to be carried out by a mere passive investor, even a diligent and conscientious one, that will in my judgment amount to a business. I find that was the case here.”
If Mrs Ramsay had spent less that 20 hours running her business, would she still have been a business?
If Mrs Ramsay had owned less than 10 rental units, would she still be running a business?
I think we can now answer this at least in part because we are aware of a non-statutory clearance for incorporation relief having been issued to a landlord who owns 6 HMO’s. However, those properties had more than 10 tenancies so whilst the 10 property rule is no longer as ‘clear as mud’ we are still left dealing with murky water at best.
In order to deal with ambiguities HMRC provide a service whereby you can check your understanding of how they consider the legislation should be applied to your case BEFORE you commit to making changes.
The process can be utilised to enable you to obtain both clarity and certainty on whether you qualify for incorporation relief and Stamp Duty exemptions on incorporation. If clearance is granted there can be no come-backs from HMRC, unless of course you didn’t tell the truth.
At first glance, HMRC’s checklist looks quite benign. However, it is not!
Your submission needs to be extremely specific about the mechanics of running of your business and your interpretation of how the legislation applies to you. You will undoubtedly need some professional guidance from people with experience and a clear understanding of the legislation. Property118 Limited offer this.
We provide a service to assist you to apply for non-statutory clearance and, so far as we are aware, we are the only consultants offering a refund of fees guarantee if clearance is denied. This service is available exclusive to our Tax Consultancy clients.
To read more about this service please CLICK HERE.
I’m interested in your feedback on a series of Landlord Tax Planning Clinic Webinars I’m planning.
Each webinar will answer 5 pre-submitted questions from subscribers, and if time allows we will answer a selection of live questions too.
My co-host will be Mark Smith, Head of Chambers at Cotswold Barristers and Honorary Legal Counsel for The Landlords Union. Guest panelists will be invited from time to time and I’m hopeful that we will be able to persuade some of our tax consultancy clients and their accountants to join our guest panels to share their experiences from our tax consultations and further assistance we have provided with incorporations, formation of partnerships and helping them to secure non-statutory clearances from HMRC in regards to their tax planning.
Each webinar will last for 30 – 45 minutes and will be recorded live.
The webinars will cater for up to 100 people to dial in live on a first come first served basis, they will also be recorded.
We will publicise the questions asked and answered during the webinar after the event. Each recording will then be available for all Property118 tax consultancy clients and members of The Landlords Union to watch free of charge, or on a Pay Per View basis at £10 per webinar everybody else.
I fully intend for these webinars to be ultra professional and with that goal I have already set about recording Hollywood style intro’s, outro’s and transitions.
You can see my first attempt at a 10 second intro video below. They WILL get better.
I’m hopeful of being in a position to begin marketing the launch of the very first of the Property118 Landlord Tax Clinic Webinars in September 2017. Meanwhile, I’d very much appreciate your feedback on the concept, and any hints and tips you might be able to offer.
What do you think?
This 10 minute video interview about landlord incorporation was recorded in April 2017, just before the doors were opened to what is believed to have been the UK’s largest landlord tax conference ever.
When you watch this video you will learn about the legislation which can mitigate capital gains tax when a landlord business is transferred to a limited company, how partnerships can be exempt from Stamp Duty on transfers and how it is possible for landlords to retain their attractive mortgage products post incorporation. The latter point has been described by many landlords as “the Holy Grail” of landlord incorporation and has caused major upset in some parts of the mortgage industry.
After nearly 30 years in this business and being the founder of Property118 and run the forum since 2011 I thought I had encountered most problems.
However, this is a new one for me.
The picture above is my “problem property”. It is in Queensway, Halifax, West Yorkshire HX1.
My tenant has moved out because of a major problem in the block. The Police and the Freehold Management company have been about as useless as a chocolate fireguard so far but I have yet to unleash our legal hounds (Cotswold barristers) onto them.
The problem is that druggies keep breaking into the secure communal areas and trashing the place. They are the worst kind, young ‘hoodies’ taking heroin so discarded needles are common place.
The freeholders are now refusing to mend the doors, smoke alarms and clear up their filth.
We only have a tiny mortgage on the property so I could just secure the place, leave it empty and sit back whilst somebody else finds a solution or the druggies eventually kill themselves or each other. However, for those who know me, I’m not like that.
My first thought was to offer to rent my flat to a hard ass ex military man or a Police officer for half rent for 12 months and see what happens. I’m still considering that.
Market rent is only £450 for a two bed flat. I’d actually accept £200 for the right tenant.
I put a post about my dilemma on my Facebook wall and many other suggestions were offered including:-
I think these are all great ideas.
Any other thoughts and suggestions?
Thanks in advance
Mark Alexander – founder of Property118.com