All posts by Mark Alexander

I am the founder of Property118 and operate in private practice as a Consultant Landlord. I now reside in Malta for tax purposes but have a substantial property portfolio in the UK which I have been building since 1989. Read testimonials via THIS LINK For telephone, Skype and email Consultations please see the form below. [gravityform id="169" name="Consultancy Booking Form"]

FREE WEBINAR – Last Chance To Register Latest Articles

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.


Too Honest? – We Shall See Landlords Stories, Latest Articles, Lettings & Management, Property Investment News, Property Investment Strategies, UK Property Forum for Buy to Let Landlords

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
Zero Deposit
£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!


FREE – short new eBook on landlord incorporation Latest Articles

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!

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Incorporation Costs Less Than You Might Think Landlord Tax Planning, Latest Articles

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:

  • £400 Initial Consultation (inclusive of VAT)
  • £1,500 + VAT for assistance to obtain non-statutory clearance from HMRC (fees refunded if clearance is denied)
  • £0 Capital Gains Tax. This assumes that equity in the property portfolio has a higher value than the capital gain
  • £0 Stamp Duty (LBTT in Scotland). This is because partnerships are exempt at the point of incorporation
  • £0 Mortgage valuation fees. There is no need to remortgage
  • £0 Lenders fees. The transaction can be structured in a way to enable existing finance terms to be unaffected

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:-

  • £6,995 + VAT up to 10 Properties
  • £7,995 + VAT for 11-20 properties
  • £8,995 + VAT for 21-30 properties
  • £9,995 + VAT for 31-40 properties
  • £10,995 + VAT for 41-50 properties
  • £11,995 + VAT for 51-75 properties
  • £12,995 + VAT for 76-100 properties
  • £13,995 + VAT for 100 or more

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.

RISK FREE PROCESS

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.

Tax Consultation Booking Form

Consultations include new client compliance checks, fact find via email with complimentary software, expert analysis, a detailed written report and recommendations and a 30 minute Q&A session via Skype or telephone.
  • Please provide an overview of your circumstances and what you are looking to achieve.
  • If you have a spreadsheet with details of your properties please upload it here.
  • Price: £ 400.00
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Are Landlords Ever Required To Pay National Insurance? Landlord Tax Planning, Latest Articles, Tax & Accountancy, Tax and Accountancy, Tax News, UK Property Forum for Buy to Let Landlords

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:-

“HMRC has updated its National Insurance Manual at NIM23800 – Special cases – property letting: business for Class 2 NIC to confirm that Class 2 NICs are only payable by individuals who are liable to income tax on property letting and the activities amount to a business rather than just an investment.
This clarity has been achieved by the National Insurance Contributions Act 2015 (NICA 2015), through the reform of Class 2 NIC from 6 April 2015.
Class 2 NICs may be due from self-employed earners.
A self-employed earner is defined at s2(1)(b), Social Security Contributions and Benefits Act 1992 (SSCBA 1992), as ‘a person who is gainfully employed in Great Britain otherwise than in employed earner’s employment (whether or not he is also employed in such employment)’. ‘Employment’ has been defined by s 122, SSCBA 1992, for many years as including any trade, business, profession, office or vocation, ie, not just self-employment, but working for a living generally.
The key word here is ‘business’. A person who is liable to income tax on the profits arising from the receipt of property rental income, will be a self-employed earner for NIC purposes if the activities carried out amount to running a business. This much has not changed. Those in business letting property before 6 April 2015 had a liability to Class 2. Now they can opt to pay voluntarily.
HMRC explains that property letting requires some activity to maintain the investment, but that activity alone is not enough to make it a business. For example, being a landlord normally involves:

·        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.

In order for a property owner to be a self-employed earner, the property management activities must extend beyond those listed above.
For example, ownership of multiple properties, actively looking to acquire further properties to let, and where letting property is the property owner’s main occupation, could be pointers towards there being a business for NIC purposes.
Before the NICA 2015 changes, having a business of letting property would make a person self-employed for NIC purposes and there would have been a Class 2 NIC liability as a result, subject to a claim for small earnings exception (SEE).
NICA 2015 has changed the basis of Class 2 – compulsory Class 2 contributions (new SSCBA 1992, s 11(2)) will now only apply if the income of the self-employed earner is within Class 4, ie, income from a trade, profession or vocation taxable under ITTOIA, Part 2, Chapter 2 and above the ‘small profits threshold’ (the SPT, which has replaced the SEE).
Those landlords who are in business, but who are now self-employed earners without a Class 4 income are eligible to pay Class 2 contributions under the new s 11(6), SSCBA 1992, but they are not obliged to pay.
On the other hand, a landlord who is liable to income tax and Class 4 NIC on the profits of a trade, profession, or vocation in the UK because he or she offers more than just let property (see below), will automatically be a self-employed earner for NIC purposes (and so liable to Class 2 and Class 4 NICs if profits exceed the SPT and lower annual limit respectively).
A landlord is a self-employed earner, potentially liable to both Class 2 and Class 4 NICs if the activities amount to a trade for income tax purposes. This could include, for example, receiving income from other services such as providing a bank of washing machines in a multi-occupancy block that is rented to tenants, or providing an ironing service to tenants. Running a guest house or hotel will also usually amount to a trade for income tax purposes, so an individual proprietor will be a self-employed earner. This did not change at 6 April 2015.
If a property owner has an agent who manages the property/ies, things that the agent does should be attributed to the owner. ‘Agent’ includes a friend or family member, as well as a professional managing agent. However, a property owner will only be a self-employed earner on this basis if the things that the agent does for the property owner are enough to count as a trade.
In summary:
  • Letting property may amount to being in business, but if it does not, there is not (and never has been) a liability or entitlement to pay Class 2 NIC.
  • If letting property does amount to a business, but not a trade, it makes the landlord a self-employed earner eligible to pay Class 2 NIC (he or she would have been liable to pay Class 2 before 6 April 2015).
  • Where the letting business is also a trade because it includes more than property letting, the profits are liable to compulsory Class 2 and Class 4 if the trading profits exceed the relevant thresholds.”

Was this the biggest landlord tax planning event ever?


Are Joint Buy-to-Let Owners Automatically A Business Partnership For SDLT Exemption Purposes At Incorporation? Landlord Tax Planning, Latest Articles, Tax & Accountancy, Tax and Accountancy, UK Property Forum for Buy to Let Landlords

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

  • a partnership within the Partnership Act 1890
  • a limited partnership registered under the Limited Partnerships Act 1907
  • a limited liability partnership formed under the Limited Liability Partnerships Act 2000 or the Limited Liability Partnerships Act (Northern Ireland) 2002 or
  • a firm or entity of a similar character to any of the above formed under the law of a country or territory outside the United Kingdom.

Again I have emphasised the important words in bold.

So what is a “business“?

“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”

Reference https://en.wikipedia.org/wiki/Partnership_Act_1890

So that’s all cleared up then, right?

Sadly not!

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.”

Questions Unanswered

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.

Non-Statutory Clearance

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.

Was this the biggest landlord tax planning event ever?


Landlord Tax Planning Clinic Webinars Landlord Tax Planning, Latest Articles, UK Property Forum for Buy to Let Landlords

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.

Invitations will be sent exclusively to existing Property118 tax consultancy clients and members of The Landlords Union.

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?

Property118-webinar-intro from Mark Alexander on Vimeo.

Landlord Tax Planning Presentation in PowerPoint and Printable PDF formats

Optimal Tax Planning Strategies

The best strategy if you’re planning to sell some properties to pay down debt

Was this the biggest landlord tax planning event ever?

Fees refunded if HMRC decline your non-statutory clearance request

Major Breakthrough in Landlord Tax Planning


Landlord Incorporation Explained On Video Interview With Ranjan Bhattacharya Landlord News, Landlord Tax Planning, Latest Articles, Tax & Accountancy, Tax and Accountancy, Tax News

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.


Tax Consultation Booking Form

Consultations include new client compliance checks, fact find via email with complimentary software, expert analysis, a detailed written report and recommendations and a 30 minute Q&A session via Skype or telephone.
  • Please provide an overview of your circumstances and what you are looking to achieve.
  • If you have a spreadsheet with details of your properties please upload it here.
  • Price: £ 400.00
  • £ 0.00
  • American Express
    Discover
    MasterCard
    Visa
     

Landlord Tax Planning Presentation in PowerPoint and Printable PDF formats

The best strategy if you’re planning to sell some properties to pay down debt

Fees refunded if HMRC decline your non-statutory clearance request

Major Breakthrough in Landlord Tax Planning

How Angie and Dan Could Have Saved £280,000


Halifax Druggies Making This Lovely Flat Unlettable Latest Articles, UK Property Forum for Buy to Let Landlords

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:-

  • Put up posters and give leaflets to all local residents offering a reward of £1,000 for information leading to the arrest and conviction of the drug dealers operating in the flats
  • Start a Neighborhood watch group
  • Contact the local amateur Rugby club and consider offering the 50% discount on rent to a couple of burly Rugby prop forwards

I think these are all great ideas.

Any other thoughts and suggestions?

Thanks in advance

Mark Alexander – founder of Property118.com


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