Budget 2016 – Landlord reactions

Budget 2016 – Landlord reactions

14:00 PM, 16th March 2016, About 7 years ago 137

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The Chancellor George Osborne has just delivered his Government’s Budget.

Quick reference details for Landlords Below:

Stamp Duty surcharge of 3% on residential property to apply to all investors regardless of size.

Stamp Duty on commercial property transactions is to be reformed. Our understanding is that bandings will be applied similar to residential property, albeit with a zero rate up to £150k and then 2% of any amount over £150K and up to up to £250K and then 5% of any amount over £250k. As an example, on a property that costs £300,000 the SDLT would be £4,500 – i.e. £0 on the first £150k, 2% on the next £100k (£2,000) and finally 5% on the next £50k (£2,500). If our understanding is correct then this will also impact on on related transactions of 6 or more connected property transactions (e.g. at incorporation of a property portfolio). More on this HERE

Capital Gains Tax Reduced – from 28% to 20% for higher rate tax payers and from 18% to 10% for low rate tax payers from April 2016. However there will be an 8% surcharge on residential property leaving Landlords selling at the same old rate!

Maximum interest relief against profit capped at 30% of turnover, but this is only for the largest companies and will not affect Landlords. This was a concern for Landlords pre-Budget.

Tax free income tax allowance threshold – increased to £11,500 from April 2017

High rate tax threshold – increased to £45,000 from April 2017

Corporation tax – decreased to 17% by 2020

Insurance premium Tax IPT – increased 0.5% and funds raised to be spent on UK flood defences (£700million)

Fuel Duty – Frozen again this year

Class 2 National Insurance for self employed to be scrapped

The Office for Budget Responsibility has downgraded growth forecasts due to external economic headwinds from the uncertainty in the Global economy.

Growth for 2015 was 2.2% but the forecast has reduced from 2.4% to 2.0% in 2016 with 2017 growth of 2.2% and then 2.1% for the following years.


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Nicholas Dickinson

11:28 AM, 26th March 2016, About 7 years ago

Reply to the comment left by "Mark Alexander" at "26/03/2016 - 10:34":

Different Ramsay, Mark!

The "Ramsay Principle" came about to overcome tax avoidance, based on three elements. Firstly, a scheme or plan to avoid the payment of tax otherwise payable. Secondly, artificial steps for which there is no commercial justification. Thirdly, if each artificial step is considered in isolation, the tax liability is expunged, but if the scheme is regarded as a whole, the liability is only disguised.

Personally, I don't think anyone need worry that incorporating their business utilising a BICT has anything to do with the Ramsay Principle. That doesn't mean to say it isn't a complex decision (which it is) but I suspect some are possibly justifying not pursuing this route on the grounds of if it sounds too good to be true it must be dodgy!


11:55 AM, 26th March 2016, About 7 years ago

Reply to the comment left by "Nicholas Dickinson" at "26/03/2016 - 11:28":

Good luck to you - I am just a bit more nervous of getting the authorities involved in my tax affairs - it could be very damaging for my career.

"If you are offered a way to pay less tax that sounds too good to be true, it probably is and be aware, HMRC never approves any scheme."


Nicholas Dickinson

12:38 PM, 26th March 2016, About 7 years ago

Reply to the comment left by "H B" at "26/03/2016 - 11:55":

Totally agree, but let's analyse what I am doing . . .

1. I am selling my property business to a company and the CGT that arises as a result of the sale is being rolled into the shares of the company. It will be payable if/when the shares are sold.
2. I am accounting for the SDLT on the "sale proceeds"
3. The company will pay corporation tax on its future profits
4. I will pay income tax on any future drawings I make from the company (subject to claiming whatever personal allowance and future dividend allowances are permitted by law)

None of these steps constitutes "a way to save tax that sounds too good to be true"


21:12 PM, 27th March 2016, About 7 years ago

Some of you are aware that we have been battling with HMRC about paying the extra 3% stamp duty on our main residence as we have been renting longer than the 18, then 36 months they included. We have just received this back, we are very happy!

I refer to your queries of 8, 9, 16, 17 and 18 March regarding the how the new higher rates will apply to your purchase of main residence for you and your family.

At Budget, on 16 March 2016, the government confirmed the final policy design for the higher rates of stamp duty land tax for purchases of additional residential properties. Full details of the changes can be found at https://www.gov.uk/government/publications/stamp-duty-land-tax-higher-rates-on-purchases-of-additional-residential-properties. The response to the recent consultation on the higher rates is also available at: https://www.gov.uk/government/consultations/consultation-on-higher-rates-of-stamp-duty-land-tax-sdlt-on-purchases-of-additional-residential-properties.

With regards to whether the higher rates will apply when you purchase a new property which you intend to use as a main residence, following consultation the government has decided that if a purchaser disposed of a main residence before 26 November 2015 the higher rates will not apply if they purchase a new main residence on or before 26 November 2018, even if they own other residential property. As you disposed of your previous main residence in 2006 the purchase of new main residence on or before 26 November 2018 will not attract the higher rates, provided you have not owned another main residence in the interim period.

The transfer of property from yourself to a limited company with which you are connected with (e.g. a shareholder of) is liable to SDLT on the market value of the properties at the time of transfer (see SDLTM30220). If the transfers take place on or after 1 April 2016 the higher rates will apply. If following the transfer of the buy-to-let properties to the company you purchase a residential property in your own name the higher rates will not apply provided you own no other residential property at the time of purchase.



Jane Ewart | Policy Adviser | Stamp Taxes |

David Mensah

21:29 PM, 27th March 2016, About 7 years ago

That's great news, thanks for sharing with us!

Dr Rosalind Beck

10:01 AM, 28th March 2016, About 7 years ago

Please sign and share this petition:


If this idiot goes then we have more chance of someone else coming in who will reverse C24. GO is having to reverse so many decisions that he will be likely to hang onto C24 until it has caused havoc throughout the PRS and wider economy; someone else might see sense sooner. Get Osborne out!

Steve Wood

10:21 AM, 28th March 2016, About 7 years ago

I cannot read this. If we are to have such a petition it should be very well written, considered and factial. Countering the nonsense they have said about this. If we had such a petition I would sign it. It would be interesting to have a petition so succinct and well written with no emotion. Just rip the policy to shreds and let them debate it. That I would like to see and hear. I am not able to do this but from what I have seen, others are. Anyone want to start a thread and post some drafts? Of course they may not accept another similar petition so it would need to be titled and drafted accordingly

dom glynn

11:01 AM, 28th March 2016, About 7 years ago

Reply to the comment left by "Ros ." at "28/03/2016 - 10:01":

Signed and shared on FB.

Jon Pipllman

12:29 PM, 28th March 2016, About 7 years ago

I agree with Nicholas Dickinson that Ramsay isn't a concern with the 'BICT scheme.' We could both be wrong, but I agree with him.

I think there are three points on which the scheme might come unstuck.

i) Lenders might object and call in the loans or charge more to lend to the scheme. Not clearing the scheme with lenders would nag away at me.

ii) GAAR might render the scheme useless. Whether the fees were covered or not, I wouldn't want to be one of the test cases if HMRC decided to pursue this route.

iii) The scheme might be deemed to be notifiable under DOTAS rules. It might not be notifiable, but again, I wouldn't want to be one of the test cases if HMRC decided to pursue this route. The wording of DOTAS that makes me look at this is

'...a tax arrangement may need to be disclosed even if HMRC is already aware of it or it is not considered to be avoidance. A tax arrangement should be disclosed where:

it will, or might be expected to, enable any person to obtain a tax advantage

that tax advantage is, or might be expected to be, the main benefit or one of the main benefits of the arrangement...'

There have been scores of schemes that were offered with supporting QC opinion that they were valid, robust and defensible that HMRC has subsequently defeated. Often at great cost to the participants of the schemes.

Also worth noting that if HMRC suspects a person of tax avoidance, it can impose an obligation to pay, on account, the amount HMRC considers represents understated tax. An Advanced Payment Notice can be issued even before the tax liability is assessed!

Usually this only applies to participants of notified tax avoidance schemes.

This rule was introduced in the Finance Act 2014 and has been appealed by taxpayers vigorously, but to no avail (most notable Rowe). The very latest ruling that supports HMRC's ability to do this was the High Court dismissing a claim for a Judicial Review on aspects of the matter

If you want to, you can read the transcript of that judgment here


None of this says that the BICT arrangement is anything other than the perfect solution for some people. It could very well be just that.

Nicholas Dickinson

13:28 PM, 28th March 2016, About 7 years ago

Reply to the comment left by "Jon Pipllman" at "28/03/2016 - 12:29":

Excellent points Jon and I agree with the three potential risks you highlight. On the latter two I take the view that this is not a "scheme" in the same vein as tax avoidance schemes are typically established, but I acknowledge HMRC may take a different view. On the former, it is imperative that landlords first check their mortgage conditions to establish they would not be breaching them. In doing so they may find all sorts of breaches they are currently unwittingly committing, but I suspect that transferring the beneficial interest will not be among them! I totally understand the "nagging away" feeling and one should always have a plan B in business. I tend to find that alleviates the nag 🙂

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