Differences of opinion – What do you think?

Differences of opinion – What do you think?

8:35 AM, 1st March 2020, About 2 years ago 13

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In the embedded video below there are a few answers given by the presenters (Mark Smith and Andrew Roberts) that I disagree with.

The first is in regards to the pricing of Limited Company Buy-to-Let mortgages vs individual Buy-to-let mortgages.

Whilst I agree that at face value there is a difference, in my experience, those lenders offering cheaper rates do not do so for Portfolio Landlords. Furthermore, lenders who do lend to Portfolio Landlords are pricing their products very similarly for both individuals and Limited Companies. However, there two major differences, and they are:-

  1. Ltd Company borrowing is much easier to arrange than ever before (more availability)
  2. maximum loan based on rental income are far more generous for Limited Company applications, because Section 24 taxation does not need to be factored into affordability and stress testing

What are your thoughts on the above? Please comment below.

The second answer I disagree with is the generic response to the question about whether to remortagge before of after incorporation. I don’t think there can be a ‘one-size-fits-all’ answer to this question, because there are several factors to be taken into consideration, such as:-

  1. Is there a ‘latent gain’ position? – Explanation HERE
  2. What is the new debt to be used for, i.e. reinvestment in the business or personal use?
  3. Is there an opportunity for a Capital Account Restructure? – Explanation HERE 

To be fair to the Presenters, I know from experience that it isn’t always easy to answer questions from the floor when you have a large audience and a camera in your face. Likewise, Tax Barristers rarely put themselves into this position and always like to consider formal advice to their clients very carefully indeed. Presentations of this nature should never be considered to be formal advice.

I have discussed these thoughts with both Mark Smith Andrew Roberts and we are very much ‘on the same page’, but what do you think about these points, particularly the financing angle?

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Comments

by Mark Alexander

13:52 PM, 27th February 2020, About 2 years ago

Reply to the comment left by Andrew at 27/02/2020 - 10:49
I agree with David's point in regards to PPR reliefs (if available), because this sets the base cost for CGT calculation purposes. In turn, this can reduce or negate a 'latent gain' or indeed create an opportunity for a Capital Account Restructure.

by Simon Hall

11:36 AM, 28th February 2020, About 2 years ago

Reply to the comment left by Andrew at 27/02/2020 - 11:10Andrew, are you an Accountant in this video? FYI, you do not lose 80% TAX relief on Mortgage Interest. Maximum Tax Relief previously available was 45% for an additional rate Tax payer. Introduction of Section 24 will result in 100% loss of Mortgage Interest relief however you will be provided with 20% Tax Credit. Consequently maximum loss of Mortgage Interest relief is 25% for additional rate Tax payer i.e those who earn/gross rent above £150k or 20% those who earn/Gross rental income less than £150K.

I am surprised Mark, you did not pick up on this anomaly as you have good attention to detail.

by Mark Alexander

11:47 AM, 28th February 2020, About 2 years ago

Reply to the comment left by Simon Hall at 28/02/2020 - 11:36
Hi Simon

I concur with your comment above.

There are a few other anomalies I have yet to comment on and I intended to drip feed them into this discussion, as I didn't want to come across as being overly critical of the presenters. I knew what they meant in all instances, but it is my intention to add clarity on several other points when I find the time.

As I said in my initial post ..

"To be fair to the Presenters, I know from experience that it isn’t always easy to answer questions from the floor when you have a large audience and a camera in your face. Likewise, Tax Barristers rarely put themselves into this position and always like to consider formal advice to their clients very carefully indeed. Presentations of this nature should never be considered to be formal advice."


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