A better alternative to S24?

by Readers Question

7 months ago

A better alternative to S24?

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A better alternative to S24?

I was thinking about Section 24 and the news that Hammond recently commented that if we could replace the revenue expected from S24 he would consider its repeal. Revenue from S24 is due to be £665m/yr after the 4 year implementation, so I got my thinking cap on.

I came up with a 2% rental levy. Charged across the board on all revenue from residential property, it would have several advantages: A better alternative to S24

1. Could truly ‘level the playing field’ by being charged equally to mortgaged individuals, cash buyers, companies. Everyone would pay it equally and would know how much was expected of them in advance.

2. MUCH cheaper than S24 for mortgaged landlords, yet raises more money.

3. My calculations show that just over £803m would be raised – £150m+ MORE than S24.

4. Simple to calculate and without complications.

5. Does not increase rents by much if anything at all, and negates need for increased evictions, which saves public money elsewhere.

6. Shows we as landlords are willing to co-operate with govt aims if fair and proportionate.

My calculations are based on roughly 4.5m private rental properties generating an average of £744 a month. This figure goes up to £892 if you include London. The gross rental take is around £40.176bn a year (WITHOUT the extra from London!) so 2% is around £803m.

Can anyone spot the downsides? I’m sure cash landlords/foreigners/companies might moan, but if its applied to everyone there can be no claim of discrimination and everyone in property gets equally and proportionately targeted.

Please note I am NOT in favour of this, but as an alternative to S24 is it not worthy of consideration?

All comments welcome!

Comments

Sunita Rickman

7 months ago

On first inspection - It sounds like a GREAT IDEA.

A much fairer system - Which doesn't distort The actual earning received and all the complications that go with that.

We will need to move fast with this - if He's going to look at it before S24 starts to be implemented ???

Gareth Wilson

7 months ago

Does Hammond have any smart-arse suggestions to replace the homes of those evicted or priced out of the market by Section 24?

We're not the problem nor responsible for answering his question.

The government has a funding gap because it is inefficient, ran by absolute pillocks, and needs to get its own house in order. They are spending too much money. And because they are spending too much money, they are taxing too much money. And because they are taxing too much money, the economy isn't generating enough money and those able to avoid paying taxes are not willing to contribute to the system. So then there is yet another shortfall, with tax rising yet further and the addiction getting worse and worse.

Meanwhile Hong Kong, a land of lower taxation, economic prosperity, and excellent public services, exemplifies the inadequacy of Hammond and his Consocialist peers.

James Fraser

7 months ago

Reply to the comment left by "Sunita Rickman" at "31/01/2017 - 10:28":

I for one intend to see that they all get a copy of the idea.

Simon Griffith

7 months ago

Gareth is of course correct and I believe the technical term for the gross tax take increasing when tax rates are reduced is the Laffer curve - pretty fundamental economics. Frankly I don't know why we have to threaten lower business taxes than the EU - we should be doing it. Period. There is no shame in taxing your country's citizens at the lowest possible rate. Back to the article though whilst more palatable than s24 it is unlikely to gain traction as the Build To Rent buddies of the so called Conservative party would not have this. They need every penny squeezed out of each tenant then paid tax efficiently to their shareholders unlike most PRS landlords who (used to) take a more holistic approach.

James Fraser

7 months ago

Reply to the comment left by "Simon Griffith" at "31/01/2017 - 10:48":

This is true, and one of the downsides, but there is always the option - if strictly necessary - of exemptions on certain size/activity etc. Hammond would still get £803m instead of £655m, even at current turnover rates, which of course would go up as more rentals entered the market. I'd like BTR included in this (think of the revenue then!) but if they HAD to be exempted it would still be a better option than S24.

Simon Griffith

7 months ago

I've just read another thread where there is a whole study going on about how to raise funds from property/wealth tax - James and others please exercise caution however well meant by giving them any more ideas. I can see rent controls anyway and we don't want alternative ideas to s24 being turned into additional taxes on top of s24 !

Appalled Landlord

7 months ago

Hammond’s question might be fair if we were trying to change a tax that was already bringing money into the Treasury to be wasted in a variety of ways. But we aren’t, we are trying to stop something that will be a bonus for the government, if it is allowed to start.

There is no economic or moral justification for departing from Generall Accepted Accounting Principles. Osborne thought he was being clever by attacking landlords to curry favour with Generation Rent in London and its hinterland, and to deflect attention from the fact that high prices there are the result of successive governments’ failure to address the housing shortage while encouraging immigration.

We should not accept being singled out for extra taxes or levies as if we are guilty of something. We did not create the housing shortage. On the contrary, we reduced it by improving the utilisation of existing dwellings and financing the construction of new ones. We did not make people homeless, we accommodated the homeless. However, the introduction of Section 24 is forcing many landlords to stop doing so.

By all means let him apply S 24 to new purchases, if he really wants to deter new housing.

Volunteering a levy of 2% is like volunteering to pay protection money. A blackmailer never
stops.

If Hammond wants a tax bonus let him cancel the proposed reductions in corporation tax.

Simon Griffith

7 months ago

As I was driving around today buying a new oven, repairing a broken wash hand basin waste pipe, replacing the silicon seal around a bath and all the other bits and pieces that no-one in government knows or cares about that are integral to portfolio buy to let (before settling at my desk to produce the mountains of paperwork necessary and progress our very expensive incorporation) I gave this some more thought. Appalled landlord is spot on. We are being singled out here, literally being bullied and abused - whatever the real reason behind S24 and all the other attacks landlords need to remember we are doing nothing wrong in our day to day business so we should not be punished for it. Quite to the contrary we should be rewarded with a more favourable tax regime as is the case in most other countries. 2%, s24, 3% stamp, and the rest are not justifiable in any format or combination- we're in danger here of taking a kicking and thanking the bully for not punching/kicking us harder.

KATHY MILLER

7 months ago

Reply to the comment left by "Simon Griffith" at "31/01/2017 - 15:51":

Yes Simon I agree with you on this, might be added to the Section24 and give HMRC food for thought.
You never know who is snooping around the sites.

The idea is interesting, fairer and given in the hope it would replace Section24 and stop them hitting on us, but It could back fire badly and of course the 2% would be increased whenever money was required .

Unfortunately the government are not fair in any form towards us and I cant see this changing .

Mark Alexander

7 months ago

I think it is far more fair than section 24, or at least it would have been if that had been the basis it was introduced.

However, the Government introduced s24 and all of it's associated consequences in such a contrived way, no doubt politically motived, that I don't trust them as far as I could spit these days.

Also, like many thousands of other landlords, I have implemented extreme and expensive measures to restructure my affairs. If these end up being in vein I will not be best pleased.

I agree with others who have commented too in that I don't trust the Government not to implement something like this over and above section 24. On that basis I don't think we should be feeding them new ideas on how to generate extra income from the PRS. If they were to introduce it, to appease the likes of L&G, I would not be the slightest bit surprised if they said something along the lines of; it won't be applied to large corporate build to rent companies with more than X rental units. They may then have to increase the levy, and who knows what to?

So in summary, I think it would have been a better idea than s24, but it is too late to switch now and we should stop feeding them ideas.
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