Government forcing landlords to house non-paying tenants for lengthy periods11:18 AM, 15th September 2020
About 5 days ago 39
There was a piece on the BBC News channel last Sunday, 28 February, concerning the tax changes for landlords: http://www.bbc.com/news/business-35681874 It was shown at 07.28 and at 14.16, and presumably throughout the day.
It propagated misinformation about the tax change, was biased against BTL landlords, and promoted a commercial alternative. My detailed complaints follow.
The news readers said that from next year “the generous tax allowances are being phased out”.
This was a reference to section 24 of the Finance (No. 2) Act 2015. Under this, landlords who bought property in their own names will have mortgage interest and other finance costs disallowed when the taxable profit is calculated. A “relief” of 20% of these disallowed costs will be deducted from the tax calculated on the inflated profit. The change will be phased in over four years, starting next April. The result is that some landlords will pay a levy of up to 25% of their finance costs, and may lose the personal allowance. The levy may exceed the real profit; it will be payable even when there is a real loss. Individual landlords have already started to increase rents so that they will have enough money to pay the levy to HMRC. Otherwise HMRC will bankrupt them.
My first complaint relates to the introduction of the piece. Landlords do not receive generous tax allowances. They receive exactly the same allowances as every other enterprise in the country. In paragraph 9 of its submission to the Public Bill Committee which scrutinised Clause 24 of the Finance Bill (as it then was), the Institute of Chartered Accountants in England and Wales stated: “We can think of no other business where the cost of funding the capital of the business is not tax allowable”. http://www.publications.parliament.uk/pa/cm201516/cmpublic/finance/memo/fb80c.pdf
In April 2017 individual landlords will start to be deprived of this hitherto universal allowance. That is the very opposite of having “generous tax allowances phased out”.
It is the Treasury which has described this universal allowance as “generous” to individual landlords, and only to them. https://www.gov.uk/government/publications/restricting-finance-cost-relief-for-individual-landlords
This is typical of the misinformation that the Treasury has disseminated to MP’s and their constituents since the budget announcement last July. It has made statements that are the opposite of the truth, which are then accepted by gullible MP’s.
There have been many articles in newspapers about how this measure will be bad for tenants – and ruinous for some landlords. There were interviews on BBC South East’s Inside Out on 1 February, and two interviews on BBC local radio last month. That is the real story that should have been reported.
Politicians are blaming landlords for the housing shortage in London and the South East, which is really due to politicians failing, over decades, to encourage enough new building.
Whoever included the word “generous” in the autocue either has an unquestioning mind, and therefore is not suitable for journalism, or has an axe to grind.
The introduction referred to a report, which was not named, that said 1 million properties could make losses from 2020. That is when section 24 comes into full effect.
This introduced a piece by your business correspondent Joe Lynam. He interviewed Jaye Cook, a landlord with 5 properties, who said he would have to sell them when the early repayment penalty period finishes. Asked if he thought loads of other BTL “investors” would be replicating that idea, he said “Absolutely. I think it’s become a much less attractive investment and people can’t afford a loss every month.” He did not comment on section/clause 24, much less complain about it.
Then three banners came on the screen about the 2m landlords, their 5m properties and the 1m properties that could make a loss if [interest] rates rise in the coming years. Below each the sources were shown as CML/Property Partner.
In the Telegraph that same day, Jaye Cook was quoted as planning to sell his properties. This was in an article quoting data from Property Partner to the effect that “Buy-to-let could become unprofitable in seven out of 10 towns and cities by 2020”. http://www.telegraph.co.uk/personal-banking/mortgages/the-governments-buy-to-let-tax-changes-mean-i-will-have-to-sell/
The following day, Jaye Cook was quoted “Once my fixed rates on some of the properties come to an end, I’m thinking of selling and reinvesting in Property Partner. I’ve already remortgaged some of my properties and invested hundreds of thousands through the platform.”
Last November he was quoted as follows: “Mr Cook says he will put money in crowd-funded schemes such as Property Partner, in which he has invested £200,000.” It is not clear from this whether this amount was invested in properties or in Property Partner itself.
My second complaint is that the BBC has allowed itself to be used to promote a commercial enterprise: Property Partner. The only landlord interviewed in the broadcast had a defeatist attitude to Buy-to-Let. He also had invested large sums through, or possibly in, Property Partner, which is an alternative to BTL. Why was someone with a vested interest in Property Partner selected as the only landlord to be interviewed about the tax changes?
Joe Lynam said that for renters keen to get on the housing ladder, the changes to BTL are welcome. This is a non sequitur, and is my third complaint. With all the subsidies available, a prospective buyer only needs a 5% deposit, and sufficient income to justify a mortgage. Those are the obstacles which prevent first time buyers (FTB’s) from getting on the housing ladder. Forcing landlords to sell properties will not change that situation, or help renters get on the housing ladder therefore.
Then Betsy Dillner, a director of Generation Rent, said to camera “These tax incentives have pushed a lot of amateur landlords into the market and removing these incentives will professionalise landlords and make way for FTB’s which may (sic) have been pushed out of the market because of these tax incentives pushing up prices.”
This is nonsense. BTL landlords do not have tax incentives, they have the same allowances as every other enterprise. These allowances did not push landlords into the market. The allowances did not push up prices. Ms Dillner is not even sure that FTB’s have been pushed out of the market.
In spite of all that, Joe Lynam’s said in a voice-over “And the Chancellor seems to agree.”
This is not true, and is my fourth complaint. Neither the Chancellor nor anyone from the Treasury has claimed that removing the allowance will professionalise landlords. Nor have they ever claimed that landlords have pushed up prices.
Mr Lynam’s then voiced the government’s spin: “The Treasury says that by restricting the mortgage tax relief it has addressed the unfair advantage enjoyed by BTL landlords.” Unfortunately, it does not explain what advantage BTL landlords enjoy or how it is unfair, but that is typical of the Treasury.
Bizarrely, the Treasury was thus given the right to reply about section/clause 24, even though nobody on the programme had complained about it or criticised it in the first place.
Then Mr Lynam asserted that “BTL landlords have enjoyed tax advantages down the years, but those advantages could be coming to an end.” This is not true, it is Treasury misinformation. BTL landlords have only enjoyed the same allowance for finance costs as every other enterprise. It is my fifth complaint.
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