Mark Alexander invited to consult with Chancellor’s advisers on Budget Tax proposals affecting private landlords

Mark Alexander invited to consult with Chancellor’s advisers on Budget Tax proposals affecting private landlords

16:40 PM, 6th August 2015, About 6 years ago 66

Text Size

I am very pleased to inform all members and readers that Mark Alexander (founder of Property118) has been invited to consult with advisers to the Treasury Select Committee on the 24th of August in regards to Budget changes.

The Invitation LetterMark Alexander

Subject: RE: Summer Budget Property Measures Consultation

Dear Mark,

As I am sure you will be aware, at the Summer Budget 15  the Chancellor announced two new policies related to property income. Firstly the restriction to finance cost relief for individual residential landlords and secondly the reform of the wear and tear allowance. The Government announced that it would like to consult stakeholders on the detail of these measures, as an individual with an interest in the area we would therefore like to invite you to participate in a discussion on the changes. We are particularly interested in comments on the legislation in the Summer Finance Bill 2015 regarding the restriction to relief for finance costs (clause 24) and your views on the new relief that allows a deduction for actual costs that will replace the wear and tear allowance (https://www.gov.uk/government/consultations/replacing-wear-and-tear-allowance-with-tax-relief-for-replacing-furnishings-in-let-residential-dwelling-houses).

We plan on running two workshops to discuss these issues, please do let us know if you are able to attend either of these sessions. If you would like to meet to discuss this issue but none of the times above would be suitable, please let us know and we will explore arranging further meetings.

18th Aug 10.30-12.30

24th Aug 14.30-16.30

Finally, if you are not the correct person to talk to about these measures, please do forward this on to relevant colleagues.

Kind Regards

 

Sean Rath | Policy Advisor | Personal Tax | Personal Tax, Welfare and Pensions
HM Treasury, 1 Orange, 1 Horse Guards Road, London, SW1A 2HQ

The reply sent by Mark Alexander

Subject: RE: Summer Budget Property Measures Consultation

Dear Sean

I am indeed aware of the proposals and would like to comment specifically about clause 24 and the Impact Statement which has failed to consider many unintended consequences.

It is somewhat unclear what the Chancellors objectives are. Increase revenue for the treasury, cool the property market down, help first time buyers etc. There have been some very muddled comparisons offered too.

FACTS

“For every £1 invested into new build property £2.12 flows into for the economy” – source ONS.

57% of new build property has been purchased by buy to let landlords since 1992. For every four properties built for sale developers have built another for social housing in recent decades. Therefore, buy to let has been responsible for much of the property development of the last two decades. Reducing investment demand will reduce property values and the viability to build more. This will not improve the housing crisis. IFS support my views on this.

The Impact Statement suggests that clause 24 will affect 1 in 5 landlords. I have run several scenarios though a spreadsheet and arrived at the conclusion that landlords with highly geared property portfolios will be hit hardest. Based on the Pareto Principle (the 80/20 rule) it is likely the affected 20% of landlords will own 80% of the property in the PRS, many of these will be highly geared. Due to the way the proposed tax changes are to be calculated it is possible that many of these landlords will pay more tax than they make in terms of real profit, i.e. profit as calculated after all costs, which is the method used for all other businesses to calculate tax liabilities. Indeed, it is even be possible for landlords to be taxed on losses under the clause 24 proposal. Cashflow problems will get worse as interest rates rise.

Affected landlords have some stark choices to face. Should they increase rents to cover the additional tax burden in order to maintain the status quo for their finances? Do they sell and incur CGT with a view to reducing their gearing? In many cases the net proceeds of sale will be insufficient to pay CGT where a leveraging strategy has been utilised, this is likely to be applicable to the same landlords affected by the tax. The bankruptcy of many landlords is therefore inevitable if clause 24 is implemented as proposed. I am one such person. Mass repossessions are inevitable if clause 24 forces portfolio landlords to into insolvency. This will need to be factored into the recovery of lending institutions balance sheets.

Given the scenario’s outlined above it is likely that the property market will soon be flooded with sales of tenanted properties. This will impact the personal budgets of tenants for many reasons, moving costs for example. There will also be social implications, a simple example is children having to change school.

Surveys of both landlord and tenant groups have all come to the same conclusion, rents will have to rise to protect the cashflow of landlords. However, many landlords are not able to raise rents, particularly those housing LHA claimants. This group are at the greatest risk of insolvency and repossession. The knock on effect is that many LHA claimants will be seeking alternative rental accommodation at a time when availability will be shrinking.

What clause 24 fails to recognise is that over a million people have invested into the PRS over the last two decades and have based their property investment strategies on the normal business principles of taxing profit. The proposed changes affect business decisions made historically, clearly that is unfair.

As you may be aware, I run an online forum for landlords and tenants. Well over 100,000 people have subscribed to our discussion thread on this subject and over 2,000 comments have been posted. Link >>> http://www.property118.com/?p=76164

I have intentionally kept my reply brief at this stage and covered only the most important aspects of a much wider debate.

I would like to attend the workshop on 24th August 14:30 to 16:30. Please send me details, where to report to etc.

Yours sincerely

 

Mark Alexander – founder of Property118.com

Related articles – LINK

http://www.property118.com/category/budget-2015-campaign/

Join The Landlord Tax Levy Campaign Group

YOUR Money, YOUR future, YOUR choice.

 



Comments

by Dr Rosalind Beck

15:43 PM, 7th August 2015, About 6 years ago

Reply to the comment left by "LondonProperty1 L" at "07/08/2015 - 15:32":

In terms of the Wear and Tear allowance I've never claimed it, so a reversal on that would mean nothing to me. For me it is a red herring and I would be willing to just say 'we accept that policy.' I have only ever claimed for actual expenses and provided receipts. So that would be the order of the bargaining.
I agree that the kind of solutions suggested by the BoE are the way to go. It is clear that the latter and the Treasury are divided on this issue.

by LondonProperty1 L

15:58 PM, 7th August 2015, About 6 years ago

With all due respect but the fact that YOU (or individual landlords) decided not to claim it is probably not necessarily going to be of importance to a broader discussion during such a meeting. Indeed, if the allowance were to stay you can start claiming it to offset some of that income. And in any case, reinstating this policy would equate to giving an inch and taking a mile... So I broadly agree with you.

To reinforce your point and add to my list - one potential argument for "wait and see strategy" could be alignment of the budget proposal with BOE's policy. There may be currently both bodies looking at the same issue, which may lead to unintended consequences (such as over regulating the market).

PS. Sorry for multiple posts, but wanted to throw some ideas out there.

by Gary Dully

17:28 PM, 7th August 2015, About 6 years ago

Er, Ladies & Gentleman of Housing, may I please remind you that Mr Osborne has declared WAR on every landlord in the country and for the sake of what?

I didn't pick this battle and I suggest that you have another look at the spreadsheet, because currently I am a Basic rate tax payer, with a bad set of heart valves and overnight he is sending my business to oblivion.

Well now its the opportunity for us landlords to 'Get Real' with our Lord & Masters and start to talk about the consequences to our tenants and not ourselves.

Your tenants don't know anything about CGT. LTV, BBC or ITV - but they do know what a massive rent rise is!
So we should stick to That Point, until it runs out of steam.

So Lets look at a tenants point of view.
They will be paying 32% tax on their rent that you cant use except to pay the HMRC.
Note: [100%-20% tax relief= (80%) x 40%Tax ) = 32%]
It would have been easier to have us charge VAT, but he is actually charging a "Tenants Levy".

You don't pay for anything do you? - Your Tenants Pay For The LOT!

That is what is missing from this argument.
The Politicians of the land have just been voted in and this Government has just set up the Tories "Tenant Levy". (Its The Poll Tax For Tenants)

There is no other UK business that is going to be taxed this way, so just explain that fact. Because the government doesn't want private individuals to rent houses any more, only their rich company friends and they will use me as their scapegoat.

They will be introducing this "Tenant Levy", via the back door and will be trying to blame the private landlords, but we will be simply be collecting their new "Levy" and will be passing it straight to the Government just like VAT.

I suggest that from now on - that is the phrase everybody uses becomes. "Tenant Levy"

Please Stop looking at your tax bills and complaining, because nobody cares and start calculating how much rent will be needed to stop it hurting you,then divide that figure by the number of tenancies you have running. (That will be your rent Levy)

Explain to your tenants that if you are to stay in business the government will expect you to "Levy" them with the additional "Tenants Levy" of £ x per month from next April and it will double every April for the next 4 years.

Then ask them to consider signing the petition. You wont get much resistance.

If you do, just explain that its voluntary, but time is running out for you to avoid having to charge them an extra £x, or 32% from next April.

Then ask them again - if they still resist - you must have hit their granny with a shovel or 'fiddled' with their Sky Dish. ie: (They must hate your guts!)

Then tell them that they can do it right now on your iPad, or you can attach a link on their next rental statement, that you can email them. It takes about 35 seconds after clicking on the link.

Tell or show them, at the end of the petition that they will have an opportunity to voice their concerns to their MP. As their name will be there to send a message to.

Then stage 2:
See if you think that any of these Headlines might strike a chord, with a politician, Investor or Tenant - as there is something for everyone to have a go at.
(Main Headlines 1st) (Tag Line 2nd)

Tories Introduce Hidden ‘Tenant Levy’ and Try To Blame the Landlords!
( TagLine) (HMRC and Osborne under Fire for Misleading Parliament)

Rich English Tories declare war on Poorest Scottish Tenants
(Tagline) (Scottish Tenants to bear the brunt of Westminster Deceit)

Biggest Forced Rent rises Coming To The UK!
(Tag Line) Tories New “Tenant Levy” at 32% To Millions of UK Private Tenants.

Landlords and tenants unite in battle against the Tories ‘Tenant Levy’
(Tag Line)Thousands Sign Petition To Stop Massive Rent Rises Across The UK

Foreigner’s prepare to Fleece British Tenants when “Tenant Levy” Bites
(Tag Line) Non Tax Paying Hedge Funds Prepare To Steal Pensioners Assets and Homes of The Poor, (especially in Scotland).

Small Builders accuse the Tories of Deceit
(Tag Line) Up to 50% of Off-Plan Properties May Now Not Sell, because of Osborne’s Budget Deception

(M) Rented Property Market Prices Set To Crash due To Osborne
(T) Beleaguered Landlords Trying To Reassure Tenants Over The New Tories “Private Tenant Levy”

(M) Its Called the "Tenant Levy"
(T) and it starts at 32% of your Rent

(M) Banks Set To Lose Billions As BTL Landlords face Total Bankruptcy
(T) Fierce Attacks on MP's Expected Over Osborne's New “Private Tenant Levy”

(M) Tories Declare War on all Private Welsh tenants
(T) Welsh people singled out for unfair Tax increases say opposition parties

(M) Cameron's “One Nation” Rhetoric in tatters as he attacks Disabled Tenants Homes
(T) Disabled Private Tenants To Face Massive Rent Increases With New ‘Tenant Levy’

(M) Osborne Urged to "Go Back to School and Learn How Tax Works"
(T) Private Tenants Offer Chancellor and Cameron Lessons in Business Accounting

(M) Trump Says He would Fire Osborne If He Were UK PM
(T) You can’t buck the market, or discriminate against wealth providers says Trump

(M) Osborne The Most Foolish Chancellor Ever - Fact or Fiction?
(T) Osborne cant escape this debacle says Opposition Groups

(M) Osborne Blames Advisors For Tax Debacle
(T) Millions of Investors May Turn On Government as Budget Proposals Sink In

(M) Tories could be out of Power For A Generation Thanks To Osborne
(T) Withering verdict over Tory ‘Tenant Levy’ Debacle

(M) Up To 80% of Private Tenants To Face Catastrophic Rise In Rents
(T) Osborne's Opponents offer free web calculator For Tenants To View Massive Rent Rises Over Next 4 Years

(M) Major Accountancy Firms Distance Themselves From Tories "Tenant Levy"
(T) Tories Have Turned UK Red Book Into the “Mugabe Book of Theft”

(M) PM Orders Urgent Review Into HMRC advisors
(T) Cameron 'Spitting Blood' after being ‘Rumbled” by Scots SMP’s and Labour

(M) Landlords. Labour and Shelter Point The Finger At Osborne
(T) Labour Party Leader Cheered on as Osborne Wont back down

(M) Foreign Firms Won't Pay Any Tax, But Private Tenants will Says IFS
(T) Foreign Firms buying up UK Rented Properties as Treasury Loses The Plot, “it will be like a Gold Rush”, says City Spivs.

(M) Osborne Architect of His Own Destruction Says Opposition
(T) He thought he was King Canute, but under estimated the UK Public's intelligence.

(M) HMRC set to fleece poorest tenants for £Billions
(T) Tax Office Set To Enforce Tories ‘Tenant Levy’, Despite Protests From Business
Major Bankruptcies To Follow

(M) Opposition Join Forces with Landlords to Fight against Tories ‘Tenant Levy’
(T) Unlikely allies join forces to protect all UK Tenants from Tory ‘Tenant Levy’

(M) Foolish Osborne Enrages The Grey Brigade
(T) Pensioners Groups Attack Government Over Proposed Massive 'Tenant Levy'

(M) Millions of UK Investors Set To Lose Their Life's Savings
(T) Forced Bankruptcies Forecast By Treasury as Tories "Tenant Levy" Starts in April

(M) Commercial Lenders And Banks Won't Bail Out Chancellor
(T) “Your not blaming us this time”, Bankers Tell Cameron, "Its Your New Tax, Not Ours!"

(M) English Banks To Evict Scottish Tenants By The Thousands
(T) Rage against Tories “Tenant Levy” as rents are set to go “stratospheric”

(M) Most Tenants Will Have To Live In Tents Says Labour/ Lib Dems/ Farage
(T) Paedophiles and Tarts Will Be walking Our Streets, Because of Chancellors Stupidity

(M) Councils To Lose Billions In Council Tax Due To Rental Market Crash
(T) Empty Properties and Bankrupted Landlords, who pays now as Councils Coffers Run Dry?

(M) Council Tax To Rise As Private Tenants Face Eviction
(T) Councils Running Out Of Tenants Paying Tax - Landlords Have No Money

Without Labouring my point - Politicians don't appear to care about anything except the poor threatening To Kill Them, with that in mind - I have Stopped Complaining About Myself and I'm Finding People Are Listening!

Does That Help Put Some Fire In Your Belly?

by Monty Bodkin

17:48 PM, 7th August 2015, About 6 years ago

Reply to the comment left by "Ros ." at "07/08/2015 - 15:43":

In terms of the Wear and Tear allowance I’ve never claimed it, so a reversal on that would mean nothing to me. For me it is a red herring and I would be willing to just say ‘we accept that policy.’

Hardly a killer argument that one Ros.

The point of it is, furnished lets encourage mobility of the workforce. Scrap it and landlords will stop doing it.

It is anti-business and will cost more than it gains. Against all Tory values.

Admittedly a side issue but selling it down the river just because it doesn't affect you personally grates a little.

by Monty Bodkin

18:14 PM, 7th August 2015, About 6 years ago

Reply to the comment left by "Gary Dully" at "07/08/2015 - 17:28":

Amusing Gary and quite true, that would be the consequence of this.

But at the moment we are still at the reasonable negotiation stage.

Looking at your past posts, diplomacy is not your strong suit.

What you've posted is the equivalent of the pub nutter saying to a newcomer,

"Even think about spilling my pint and I'll glass yer!"

by Dr Rosalind Beck

18:53 PM, 7th August 2015, About 6 years ago

Reply to the comment left by "Monty Bodkin" at "07/08/2015 - 18:14":

Okay Monty. I stand corrected. You are quite right to pull me up on it; it's just that I made the decision years ago to claim for actual expenses rather than the 10% wear and tear and I believe you can't then switch, but I'm not sure. As you say, just because it doesn't affect me, it will affect others - I have no idea how many as I'm just not au fait with it. However, as you agree, the 'tax relief' issue is so much bigger, and I don't want us to be too distracted by more minor issues.
Gary: I think many of your slogans are hilarious. You've got a gift there. It's great to have some amusing posts as we can all get a bit stressed out by this cr*p.

by Michael Casa

21:34 PM, 7th August 2015, About 6 years ago

Reply to the comment left by "Gary Dully" at "07/08/2015 - 17:28":

I remember a few years ago paying a cab fare PLUS a fuel levy.

Could we see AST's of the future with a similar breakdown:

Rent £x pcm
Osbourne Levy £x pcm
Total £x pcm

?

by Gary Dully

2:33 AM, 8th August 2015, About 6 years ago

What's so amusIng about what I have written?
I''m deadly serious.
On my first tax bill, unless I raise my rents, I will be made bankrupt or will be subsidising each property and more than likely, so will you.
You only need 1 legal mortgage on a property in London to get dragged into the Higher Rate Tax band and BTL Mortgages only need a provable income of £25k and a 125% rental load at 5.25% stress test to currently get passed by The Mortgage Works. (Nationwide Commercail Arm).

So just remember that nearly all landlords are about to become Higher Rate Tax Payers. For those that don't - don't get complacent, as I'm sure Osborne has something in mind for you next budget day.

However, keeping our campaign simple is much better, when I tell my tenants of the "Tories New Tenant Levy" @ 32% being introduced over the next 4 years.

They start to get fidgety and show their teeth.

Which is what I have been doing since I used the free spreadsheet on property 118.

My Local MP, Helen Jones, (Warrington North), has been, written to as have all my local councillors to warn the about their tenants facing massive rent rises after next April.

They have since replied and I have been asked for more information.

I intend to start a Nationwide discussion to protect my business as previous posts have written that it's "a done deal" and won't be dropped.

If that is true, then how do you intend to raise the Tories "Private Tenant Levy" on behalf of HMRC?

So start using the funny headlines Free of Charge now, and make the phrase "Tenant Levy" go viral, because the political discussions in September may only be how Jeremy Corbyn might send us back into the 1970's and your voice may not be heard above that storm in a teacup.

May the force be with you!

by Dr Rosalind Beck

7:39 AM, 8th August 2015, About 6 years ago

Reply to the comment left by "Gary Dully" at "08/08/2015 - 02:33":

Well done for getting the message out there, Gary. I have a spreadsheet to record which MPs have been contacted, how many times they've been written to and whether they've been visited at their surgeries and/or if landlords have made an appointment. I've made a note that you have contacted Helen Jones; if you can let me have the other details that's great.
I agree with you that we must not see it as a done deal, because it is 100% wrong. I think you are very good with slogans, but I don't think it's as easy as just passing on the costs to tenants. When interest rates were climbing pre-2007 I couldn't just keep putting rents up. There wasn't much correlation between the interest rates and rents; my income was so low HMRC told me I was entitled to tax credits, but I didn't claim them for years, as I didn't like to. I think it will be similar with this 'property rental levy,' 'private tenant levy' etc.
Realistically, as in your situation, many landlords would be instantly made bankrupt, with the combination of early redemption penalties, massive new tax liabilities (in inverse relation to actual profit), CGT and so on. We don't have exact (or even approximate) figures of how many landlords, with how many properties would go bust in the first year, second year and so on (I wish we could get an approximation though - any volunteers to do some research on this essential piece of information?) It's a damn cheek that the Treasury has asked the RLA to produce research into the impact. The Treasury should have done that before introducing the damn thing. And they should certainly be doing it now. Maybe hundreds of thousands of properties, and thus even more hundreds of thousands of tenants will be involved.
My personal situation is that I could handle the policy if it were introduced and interest rates remained as they are today; once interest rates start climbing it gets very dangerous for me too. A 3% increase in interest rates would reduce my actual annual income to £5,000, but I'd have an alleged income of £95,000, which would be taxed at the higher rate. And if interest rates went up 3.5% I would have a minus income and even greater tax liability. Any group of people facing this law would be up in arms - our challenge is getting the lunacy and injustice of this proposal publicised as much as possible.
However, some of us think that the threat to raise rents could backfire and the Government could swiftly introduce rent controls - thus squeezing us at both ends if you like, until we burst! Threatening to raise rents will also not endear us to many groups, tenants included, and we need all the allies we can get, as a generally isolated and scapegoated group. And, as I said, for many landlords, raising rents isn't that simple. Someone on here got a bit panicky about all this and sent letters to the tenants at her two flats saying she was thinking about it and they both gave their notice.
I favour, as an approach, showing all the various negative repercussions it would have and presenting real solutions to the 'housing shortage.' BUILD MORE HOUSES & LET PRIVATE LANDLORDS CONTINUE TO PROVIDE THE ESSENTIAL SERVICE OF HOUSING MILLIONS OF PEOPLE, MANY OF WHOM DO NOT WANT TO BUY.
And real solutions to the Bank of England's desire to cool down the housing market, by increasing LTV ratios etc. - for home owners and BTL borrowers, actually.

by Gary Dully

10:38 AM, 8th August 2015, About 6 years ago

Reply to the comment left by "Ros ." at "08/08/2015 - 07:39":

Thanks for the Reply Ros,

Don't worry about rent controls, that wont happen with a Tory Government as it will spell doom for them and show them to be incompetent as they have some serious explaining to do

If they did that, their policies would be micro analysed by everybody, and they would have to explain why they are attempting to Bankrupt Landlords, making people homeless.

The General Public currently feel that South East Landlords are rip off merchants, closely followed by all others.

They were led to believe that we are competition for a 1st Time Buyer and in direct competition for them.

I prefer to say to critics that I find people eager to rent my properties as I am so reasonably priced, they soon fill up. I house 38 families and they aren't complaining.

But for every landlord they make bust, they will make a minimum 2 households homeless, and in my case 40 households homeless. (Mine + 39 Others)

They have no financial case given and they have turned normal accountancy rules upside down just to obtain their current position.

Keep it simple.
When talking about it, this has nothing to do with Landlords, its about Tenants and their plight.
You as a landlord will have to earn the populations respect and we are years away from that.

Just stick to "Tories Private Tenant Levy" @ 32%.

If you find other landlords are uncomfortable about saying that, simply remind them that politicians want them to leave the market for their corporate buddies and have introduced this "Tenant Levy of 32%" to force them to leave the market.

If they want a more detailed explanation, this is what I am saying...

They are Taxing private tenants, through landlords in 3 ways.
1). They are dragging all Private landlords into a Higher Tax Bracket, by bending accountancy rules. That way they can hit you with a new "Tory 32% Tenant Levy"

2) They are then forcing us to pay that 32% of the rent you pay me to the tax man, just like VAT.

3) I cant use that money for anything else, except pay tax with it.
When I raise the rents from April Next Year, that rent rise will then double each year for 4 years.
4) When interest rates rise I will have to raise the rents again, because the "Tories Tenant Tax Levy" will increase at the same time.

They have tried to call it something called "clause 42 I think", but as usual its through the back door. They aren't currently listening and we have a petition that people can sign on my iPad or I could send you a link on your next rent statement.

Would you be interested, in signing?


Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

BECOME A MEMBER