Summer Budget 2015 – Landlords Reactions

Reply to the comment left by “Mark Brown” at “30/09/2015 – 20:13“:

What an appalling and emotional letter…you will dig yourself a big hole where you will find difficult to reverse the situation.

Had I been your tenant, I would have used this letter to my advantage and would have made your life living hell.

You do not mix business and emotions.

Reply to the comment left by “KATHY MILLER” at “30/09/2015 – 20:49“:

Hi Kathy

Where have these quotes from Mike and Helen come from?

Reply to the comment left by “Barry Fitzpatrick” at “30/09/2015 – 21:06“:

Might have been me Barry I mentioned the quote 12/9 21:37

However, it was in context of the comparisons being made to victims of genocide and war when talking about this tax. I said I wouldn’t walk past such comparisons – no one should. For evil to reign all it needs is for “good men to say nothing”. But think debate has moved on since then.

The MPs ‘stock’ answers to the letters from LLs are political and deliberately so. The fundamental issue is leveraging is a short term business tool but the equity release, high % debt and interest only is a combination for disaster…long term. The ability to borrow based on interest rates at a 300 year low is something that makes the economists out there very nervous. Then throw in a housing shortage and politics kicks in. I think they will look at limited companies using the same finance models moving foward if they invest in residential.

Sentiment is against LLs – but I am sure the threatening calls on this thread to raise rents as soon as possibly will help gain support – not. MPs can use the threatening behaviour as real examples why more controls are required….it sounds likes a political vote winner too.

The very aggressive posters on here serve only those who wish to see them fail.

Reply to the comment left by “Saeef Khan” at “30/09/2015 – 21:32“:

Relax Mark A & Saeef it isn’t real….

Mark A it was as you suppose, “for comment”

I am glad it has raised the relies it has….

when you think about the facts though, it is not wrong and it is not really spin either…

The government are cleaver people and so have looked at landlord affordability and typical portfolio models. When they met you, Mark A, there was no “Aha moment” for them. Your comment immediately after the meeting was ” I felt like king Cnut trying to hold back the tide” – They knew! – They already knew the impact, & they have not changed a thing except tuning their rhetoric. And so, GO and DG knew and know Tenant tax would be a costs landlords could not bear = they knew and know the tax would have to be passed onto tenants.

In my humble experience, tenants are reasonable people they know the costs of houses and the mortgages – they get it! They know, not because I told them but because they are smart people, that their rent goes to pay for “their home” buying, interest, maintenance and yes a part goes to me as income – I don’t hide that from them. They know I don’t drive a Porsche, as if that were a measure, but that is to say, they know I am fair. They call me and I am always there to fix or replace or explain and so they know they have a fair deal.

I do enjoy working for and with my tenants, and if I didn’t, I would be an armchair investor. When I put rents up shortly I will explain it to my tenants in detail as they have a right to know why their rents are being increased. The outcome is the same, if I have to pay more tax from the same income the ends will not meet & the rent will go up or I will default on my tax or mortgages and either way, the tenant will be homeless. The alternative to telling them the truth about the Tenant Tax is to do what? – Lie? or simply evict them and make them homeless anyway?

If, as i believe, tenants know their rent pays for their home, its buying and maintenance, then they have a right to expect it to properly maintained. It follows that they also have a right to be told that maintenance is going to be curbed if it is going to be by reduced income. When bank rates go up my mortgage will go up! Why would a tenant not expect their rent to go up if interest rates have gone up – of course they do.

I don’t mix business and emotions – but unless i am missing a huge point here and please explain if I am – there is no advantage to the tenant in any outcome! Finance costs relief either stays as it is for all businesses or the tenant gets screwed one way or another – and that is the saddest part.

Reply to the comment left by “adam prospect” at “30/09/2015 – 23:18“:

Adam

Do your rents reflect that fact you don’t have mortgages? That is, if I held one of your properties up against an identicle mortgaged property would the rent you charge be the costs of the mortgage less than the identical property to rent?

I understand either way and don’t expect you to justify, but out of interest are your rents the “market rent” less the average costs of BTL or residential mortgage finance for your postcodes?

Could it be that I am only able to charge the rent I do because you charge the same rent too?

If the budget measure is, as Jeremy Hunt clearly told me, an essential measure is to raise tax to deal with the deficit; Then if raising tax is the goal, and rich landlords are the target, it seems to me the fat and low hanging fruit is with the un-mortgaged landlords who charge the same “market rent” as mortgaged landlords but don’t have the same “market costs” i.e. take high rents with no finance costs to pay.

Why would it not be fair and or better governance to make un-mortgaged Landlords charge less rent (cap it) or pay significantly more tax on the “over cap” rent so as to put downward pressure on rents generally and simultaneously encourage us rogue dangerous landlords to pay off our mortgages quicker or risk loosing tenants to un-mortgaged landlords who charge less rent, all of which could happen without putting tenants in the firing line?

What i would do if I were you is start a rent reduction forum and that would put us gougers on this forum in a real spin… You could and morally should be reducing rents. That is a tool at your disposal as you don’t have mortgages. I’ll go out of business for the right market reasons and sooner than 2020, you’ll be able to buy my houses and all tenants can have lower rents – WIN-WIN-WIN

The under-occupancy penalty (also known as the under occupation penalty, under-occupancy charge, under-occupation charge or size criteria)[1] is a reform contained in the British Welfare Reform Act 2012 whereby social sector tenants with rooms deemed to be “spare” face a reduction in Housing Benefit, resulting in them being obliged to fund this reduction from their incomes or face rent arrears and potential eviction by their landlord (be that the local authority or a housing association). The under-occupancy penalty has been popularly branded the Bedroom Tax, especially by critics of the changes who argue that they amount to a tax because of the lack of social housing (or in some areas, any rented accommodation) for affected tenants to downsize to. The penalties are also criticised as having a disproportionate impact on disabled people.

Supporters of the changes have referred to the unreformed system as a “spare room subsidy”[2] whereby tax-payers are said to be subsidising social housing tenants living in houses larger than their needs require, with the said intention of the policy being to reduce these costs and ease housing shortages and overcrowding. The reforms were one part of the 2010-2015 Coalition Government’s wide-ranging welfare reform agenda which included the introduction of Universal Credit, the introduction of a cap on the total size of the welfare bill (see Welfare Cap), reform of Council Tax and reform of disability benefits (see Personal Independence Payment).

LETS MAKE THIS SIMPLE , LETS CALL IT BEDROOM TAX

everyone then paid attention and it was scrapped.
It didnt even vaguely apply to the vast majority of people.

Well here is what is causing all the trouble:

Relief for finance costs related to
residential property businesses
(1) ITTOIA 2005 is amended in acco
rdance with subsections (2) to (6).
(2) After section 272 insert—
“272A Restricting deductions for finance
costs related to residential property
(1) Where a deduction is allowed for costs of a dwelling-related loan in
calculating the profits of a property
business for the tax year 2017-18,
the amount allowed to be deduct
ed in respect of those costs in
calculating those profits for income
tax purposes is 75% of what would
be allowed apart from this section.
(2) Where a deduction is allowed for costs of a dwelling-related loan in
calculating the profits of a property
business for the tax year 2018-19,
the amount allowed to be deduct
ed in respect of those costs in
calculating those profits for income
tax purposes is 50% of what would
be allowed apart from this section.
(3) Where a deduction is allowed for costs of a dwelling-related loan in
calculating the profits of a property
business for the tax year 2019-20,
the amount allowed to be deduct
ed in respect of those costs in
calculating those profits for income
tax purposes is 25% of what would
be allowed apart from this section.
(4) In calculating the profits of a prop
erty business for income tax purposes
for the tax year 2020-21 or any subsequent tax year, no deduction is
allowed for costs of a
dwelling-related loan.
(5) Subsections (1) to (4) do not appl
y in relation to
a property business
carried on by a company otherwise than in a fiduciary or representative
capacity.
(6) For the meaning of “costs of a dwelling-related loan” see section 272B.
272B Meaning of “costs of a dwelling-related loan”
(1) Subsections (2) to (5) apply fo
r the purposes of section 272A.
(2) “Dwelling-related loan”, in relati
on to a property business, means so
much of an amount borrowed for purposes of the business as is
referable (on a just and reasonable apportionment) to so much of the
business as is carried on for the purpose of generating income from—
(a) land consisting of a dwelling-ho
use or part of a dwelling-house,
or
(b) an estate, interest or right in
or over land within paragraph (a),
but see subsections (3) and (4).
(3) Anything that in the course of a pr
operty business is done for creating
(by construction or adaptation) a dwel
ling-house, or part of a dwelling-
house, from which income is to be
generated is, for the purposes of
subsection (2), to be treated as do
ne for the purpose mentioned in that
subsection.
(4) An amount borrowed for purposes of a property business is not a
dwelling-related loan so far as the amount is referable (on a just and
reasonable apportionment) to so much of the property business as
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consists of the commercial letting of furnished holiday
accommodation.
(5) “Costs”, in relation to a
dwelling-related loan, means—
(a) interest on the loan,
(b) an amount in connection with the loan that, for the person
receiving or entitled to the amount
, is a return in
relation to the
loan which is economically equivalent to interest, or
(c) incidental costs of obtaining
finance by means of the loan.
(6) Section 58(2) to (4) (meaning of “i
ncidental costs of obtaining finance”)
apply for the purposes
of subsection (5)(c).
(7) A reference in this
section to a “dwelling-house” includes any land
occupied or enjoyed with it
as its garden or grounds.”
(3) In section 274(1)(b) (rules which override rules allowing deductions) after “as
applied by section 272” insert “, and to section 272A (finance costs)”.
(4) In section 274(3) (meaning of “relevant prohibitive rule”) after “as applied by
section 272” insert “, and apart also from section 272A”.
(5) After section 274 insert—
“Tax reduction for non-deductible finance costs
274A Tax reduction for non-deductible
costs of a dwelling-related loan
(1) Subsections (2) to (5) apply if—
(a) an amount (“A”) would be deduct
ible in calculating the profits
for income tax purposes
of a property business for a tax year but
for section 272A, and
(b) a particular individual is liabl
e to income tax on N% of those
profits, where N is a number—
(i) greater than 0, and
(ii) less than or equal to 100.
(2) The individual is entitled to relief
under this section for the tax year in
respect of an amount (the “relie
vable amount”) equal to N% of A.
(3) Subject to subsection (4), the
amount of the relief is given by—
where BR is the basic rate of income
tax for the year, and L is the lower
of—
(a) the total of—
(i) the relievable amount, and
(ii) any difference available in re
lation to the individual and
the property business for carry-forward to the year
under subsection (5), and
(b) the profits for income tax purposes of the property business for
the year after any deduction unde
r section 118 of ITA 2007 (“the
adjusted profits”) or, if less, th
e share of the adjusted profits on
which the individual is liable to income tax.
(4) If the individual’s gross finance-
costs relief for the year (“GFCR”) is
greater than the individu
al’s adjusted total income for the year (“ATI”),
BR L
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the amount of the relief under this se
ction for the year in respect of the
relievable amount is—
where BR and L have the same meaning as in subsection (3).
(5) Where the amount (“AY”) of the re
lief under this section for the year in
respect of the relievabl
e amount is less than—
where BR is basic rate of income tax
for the year and T is the total found
at subsection (3)(a),
the difference between—
(a) T, and
(b) AY divided by BR (with BR ex
pressed as a fraction for this
purpose),
is available in relation
to the individual and th
e property business for
carry-forward to the following tax year.
(6) For the purposes of this section—
(a) an individual’s adjusted tota
l income for a tax year is the
individual’s total income for that year less the total of—
(i) so much of that total income as is savings income,
(ii) so much of that total inco
me as is dividend income, and
(iii) any allowances to which the individual is entitled for
that year under Chapter 2 of Part 3 of ITA 2007
(individuals: personal and
blind person’s allowance),
and
(b) an individual’s gross finance-costs relief for a tax year is the
total relief to which the individual
is entitled for the year under
this section before any adjustment under subsection (4).”
(6) In section 322 (which lists provisions
relying on the definition of “commercial
letting of furnished holiday accommodation”)—
(a) in subsections (2) and (2A),
before paragraph (a) insert—
“(za) section 272B(4) (excep
tion from restriction on
deductibility of finance costs),”,
(b) in subsection (2), before the “and
” at the end of paragraph (g) insert—
“(ga) section 399A(9) of ITA 2007 (exception from restriction
on deductibility of interest on loans to invest in
partnerships),”, and
(c) in subsection (2A), before the “and
” at the end of paragraph (e) insert—
“(ea) section 399A(9) of ITA 2007 (exception from restriction
on deductibility of interest on loans to invest in
partnerships),”.
(7) In ITA 2007, after section 399 insert—
“399A Property partnerships: restriction
of relief for investment loan interest
(1) This section applies to interest on a loan within section 398 if—
(a) the partnership concerned carr
ies on a property business, and
(b) that property business or part of
it is carried on for the purpose
of generating income from—
ATI
GFCR
—————-
BR L
×
()
×
BR T
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(i) land consisting of a dwel
ling-house or part of a
dwelling-house, or
(ii) an estate, interest or righ
t in or over land within sub-
paragraph (i).
(2) Subsections (3) to (6) ha
ve effect to restrict relie
f under section 383(1) for
so much of the interest as is referable (on a just and reasonable
apportionment) to the property business or (as the case may be) the part
of it within subsection (1)(b).
(3) For the tax year 2017-18, the amount of that relief is 75% of what would
be given apart from this section.
(4) For the tax year 2018-19, the amount of that relief is 50% of what would
be given apart from this section.
(5) For the tax year 2019-20, the amount of that relief is 25% of what would
be given apart from this section.
(6) For the tax year 2020-21 and subsequent tax years, that interest is not
eligible for relief under this Chapter.
(7) Section 399(4) is to be applied in
relation to the tax year to which
subsection (3), (4) or
(5) applies before that
subsection is applied in
relation to that tax year.
(8) Anything that in the course of a pr
operty business is done for creating
(by construction or adaptation) a dwel
ling-house, or part of a dwelling-
house, from which income is to be
generated is, for the purposes of
subsection (1)(b), to be treated as
done for the purpose mentioned in
subsection (1)(b).
(9) A property business, or part of a pr
operty business, that consists of the
commercial letting of furnished ho
liday accommodation (as defined by
Chapter 6 of Part 3 of ITTOIA 2005
) is not within subsection (1)(b).
(10) A reference in this section to
a “dwelling-house” includes any land
occupied or enjoyed with it as its garden or grounds.
399B Property partnerships: tax reduc
tion for non-deductible loan interest
(1) Subsections (2) and (3) apply if
for a tax year an individual would be
given relief for an amount (“the relievable amount”) by section 383(1)
but for section 399A.
(2) The individual is entitled to relief
under this section for the tax year in
respect of the relievable amount.
(3) The amount of the relief is given by—
where BR is the basic rate of income tax for the year.”
(8) In section 26(1)(a) of ITA 2007 (tax reductions deductible at Step 6 of the
calculation in section 23 of ITA 2007)—
(a) after the entry for Chapter 1 of Part 7 of ITA 2007 insert—
“section 399B (relief for non-deductible interest on loan to
invest in partnership with residential property
business),”, and
BR the relievable amount
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(b) before the entry for section 535 of ITTOIA 2005 insert—
“section 274A of ITTOIA 2005
(property business: relief for
non-deductible costs of
a dwelling-related loan),”.

If we have any chance of getting scrapped it needs a label like “BEDROOM TAX” —

TENANT TAX or Tenant Added/Attack Tax (TAT)

is as good as it gets. Whining that it is “not fair” isn’t going to get this scrapped alone. Talking about a legitimate expense as a reduced relief isnt going to get us where this needs to go either.

TAT …maybe it will soon have VAT added as well.

Reply to the comment left by “Appalled Landlord” at “30/09/2015 – 22:01“:

Hi Appalled
https://competitionandmarkets.blog.gov.uk/2015/03/13/private-rented-housing-problems-for-tenants-on-a-low-income/

Reply to the comment left by “Ros .” at “30/09/2015 – 20:16“:

Hi Ros

I think the info is out there to collect on homelessness, so the government must be well aware of the homeless situation. But they were aware of the increased homeless from benefit cuts and still carried on.

Reply to the comment left by “Ros .” at “30/09/2015 – 20:16“:

Yes I think we all should write and I have sent an email

Reply to the comment left by “David Price” at “30/09/2015 – 15:25“:

Yes quite so, but they just take it from us instead and tax us to the hilt