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14:24 PM, 20th July 2015, About 9 years ago 35
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The following are just a selection of the emails that Property118 members have sent to George Osborne since his budget announcements affecting landlords last week.
Please feel to post yours in the comments section below ….
Dear Mr Osborne
I am writing to you to express my dismay and consternation at the proposed changes to the allowances on taxation for small landlord businesses like my own.
I have tried to provide an income for my retirement to avoid relying solely on the state pension and a meagre pension from my employer and have chosen to do without luxuries in order to build up a small portfolio of properties to provide that income and the proposed changes will destroy those plans.
As with any other small business, finance and loan interest costs are a direct running cost and the treatment of any other business in the same way as that proposed is inconceivable (a plumber not having an allowance for purchase of van etc).
If these measures are adopted a landlord having a long void due to a maintenance problem eg a fire or a non paying tenant, would still have his mortgage interest to pay but would have no income to set it against. Not only may he have no income due to the above circumstances but he would still receive a tax bill for interest he has paid on his mortgage.
Large property owning corporations and wealthy investors who have no borrowings will not be affected by these changes, it will hit hardest landlords, including basic tax payers incidentally, who have invested as individuals and who have planned their businesses from day one around the current allowances.
It is vital that a business letting property is seen as just that – A BUSINESS. Running this type of business is as complicated and time consuming as any running any other. It takes long term planning, it has overheads, it is affected by late paying and non paying customers as is any other – it cannot be right or fair that there are totally discriminatory rules for only this kind of business.
The assertion given by the chancellor that landlords paying the basic rate of tax will be unaffected by the changes has now been shown in calculations to be patently untrue, including by HMRC themselves.
Along with the extreme financial hardship caused to hard working business people – most of whom helped to put the Conservatives in office, ultimately this will inevitably also cause a reduction in the supply of privately rented housing and an associated escalation of rents for the tenants, as landlords decide the diminishing margins make letting property no longer a viable proposition.
I sincerely hope that you are able to look again at these proposals and hopefully ditch them altogether or if not then make them apply only to new investments thus not affecting businesses built on a certain previous business model.
Yours sincerely
And another ….
Dear Mr Osborne
I am most concerned about the proposals, for the following reasons:
Landlords who bought in their own names will pay tax on their interest expense, rather than on real income. Interest is a legitimate cost of our business, just as it is for any other form of enterprise in the country which borrows money to buy assets that generate taxable income.
Rental property is not a hands-off investment like buying gold bars. Being a landlord requires work. They can be called upon any day, at any hour, to deal with problems. For some of them it is a full-time job maintaining their properties and dealing with tenants and agents and the administrative and accounting work that is entailed.
If this proposal is applied to existing mortgages you will be changing the rules for people who bought 20 years ago or more. You will undermine the concept of certainty which businesses of all types of rely on.
The illustrative example from Megan Shaw, Product Owner – Property Income & REITs at HMRC, of the effect of the proposed change shows a man with a salary of £40,000 and a real rental income from one property of £1,200 after deducting interest of £10,800. Currently he is a basic rate payer.
When the interest is disallowed, he becomes a higher rate payer. His tax goes up by £1,800. So after spending his time and money looking after this property for a year he has to hand over the real profit of £1,200 to the government, plus 50%. out of his net salary. If he had a second property with the same figures, he would hand over 175% of the real profit.
This is not taxation, it is confiscation of assets by the State. The communist party would be delighted.
Even if the landlord makes a loss he will have to pay tax on the interest, out of his other resources.
If landlords have no other source of income then HMRC, a branch of the government, will make them bankrupt. The result will be divorces, suicides (single and double), and an increased burden on the state.
Lenders will lose money in the bankruptcies.
Landlords who bought in their own names will exit the sector on masse, causing a house price crash. Lenders will lose money in the crash.
Affected landlords will not start companies to buy the new-builds, so fewer homes will be built, fewer sites will be developed, so less affordable housing will be built as well. This announcement may already have had the effect of deterring purchasers.
For both reasons the amount of rented accommodation will fall, reducing the mobility of labour both within the country and from outside, and rents in the remaining properties will rise.
The IFS says the measure is wrong.
You are attacking your party’s natural supporters.
Please do not apply this confiscatory measure to existing mortgages.
Yours sincerely
and another …..
Dear Mr Osborne
Following your proposed reduction in interest relief for private landlords (whilst exempting those who have a Ltd company structure) the unfortunate full implication of this is that many buy-to-let landlords will end up paying more tax than they are actually making in profit, even paying tax after having experienced a loss!!
The other effect will be that many highly geared landlords (i.e. those with over 75% gearing on their portfolios) will face bankruptcy due to this measure and the double tax whammy of CGT hitting them as well, as they sell out.
Please also bear in mind the mass of distressed sales which will result, not to mention the thousands of rental homes which will become unavailable as a direct result of this measure, just at the time when government is seeking to provide more homes, not less.
I would like you to please reconsider this measure which is grossly unfair and discriminatory to these small business owners, (Buy to Let is without doubt a business , (and a very labour intensive one at that) and not a passive investment.
Some Positive Ideas to improve things going forwards:
1. Full U-turn on the measure
2. if not a U Turn, then an amnesty on SDLT/CGT charging for a one-off move to Ltd structure for landlords who register with a scheme within a set time frame.
3. Apply the measures only to purchases subsequent to 2017
I have spoken to Ann Milton , MP for Guildford this morning at a Conservative party breakfast, and she agrees that many ramifications of proposed new laws are often not thought through fully, and open forums like this morning are very important in deciding how to proceed and also advised me to write to you, and to Mr Howarth, hence the email
I do hope you will decide to help
Yours sincerely
Previous Article
Liverpool Landlord Licensing - Judicial Review?
Alison King
19:35 PM, 11th March 2016, About 8 years ago
Reply to the comment left by "Mark Shine" at "19/11/2015 - 23:49":
I agree with your last comment Mark. The only thing I sometimes charge for is a contribution towards the referencing. I think there are sensible reasons for doing that. But I have known some agents charge both the landlord and the tenant for a standard tenancy agreement that takes me ten minutes to produce for nothing.
Steve Wood
20:52 PM, 11th March 2016, About 8 years ago
They are also going to make all businesses and landlords keep all their accounts digitally (accounting software) and and submit them 4 times a year soon. Not sure exactly how it will work but it is 4 tax returns not 1
Soon. So when people realise this and landlords and the self employed unite we will have more and more support to make lots of protests. The few idiots in power are going to cause mayhem. George Osborne etc are so dangerous - they will ruin the UK
Alison King
23:49 PM, 11th March 2016, About 8 years ago
Reply to the comment left by "Steve Wood" at "11/03/2016 - 20:52":
I don’t think that is going to be as bad as it sounds. It should be feasible to write a bit of software that extracts the tax details from downloads of your bank statement so it's practically automated. That's how I'm planning to manage it anyway.
James Singleton
13:06 PM, 13th March 2016, About 8 years ago
Reply to the comment left by "Steve Wood" at "11/03/2016 - 20:52":
It's not the landlords or small business' I'm worried about. How do you think those muppets at the Inland Rev will be able to handle this. They make enough mistakes already trying to process one submission p.a.
Gareth Wilson
18:35 PM, 13th March 2016, About 8 years ago
Reply to the comment left by "James Singleton" at "13/03/2016 - 13:06":
I'll bet only a tiny minority of staff at HMRC understand the theory of Clause 24, let alone how to manage the changes in reality.
Steve Wood
18:48 PM, 13th March 2016, About 8 years ago
Dear Alison
Unfortunately I can only believe, I may be wrong, that you have little understanding of the complexities of tax returns. No offence, but you may find it easy for what you do as a landlord but for businesses other than rental businesses it will be very difficult to comply with without being a significant burden and additional cost.
Steve Wood
18:53 PM, 13th March 2016, About 8 years ago
Reply to the comment left by "Gareth Wilson" at "13/03/2016 - 18:35":
Most HMRC staff have very low moral. Their numbers are continually cut and the burdens are placed on those who have to complete tax returns, soon to be 4 times a year. They will want you all to have accounting software to record it on.
So forget excel. I will not be enough. Good luck those that think it won't be a major challenge or addional cost and will cause lots of problems
Rachel Hodge
21:02 PM, 13th March 2016, About 8 years ago
http://www.independent.co.uk/news/uk/six-british-multinationals-including-shell-vodafone-lloyds-banking-group-did-not-paid-any-a6844676.html
This makes me so angry.
Steve Wood
21:15 PM, 13th March 2016, About 8 years ago
Reply to the comment left by "Rachel Hodge" at "13/03/2016 - 21:02":
It's not always black and white. larger companies do manage their tax, they have a duty to do so. Sometimes losses or capital / research may offset profits. Sometimes it's international tax and multi jurisdiction opportunities that enable the tax paid in the UK to low. Sometimes it is 'aggressive tax' planning etc. But it is not evasion. It is sometimes poorly reported. It is a focus of attention it appears.
We do understand poor reporting though don't we? Clause 24?
But that aside, how can they attack a sector of society and try to rationalise it in a way that is so flawed it beggars belief - landlords with a mortgage. Total crap.
Darlington Landlord
22:31 PM, 13th March 2016, About 8 years ago
Bank statements are the least of it!. Cash payments and receipts need accounting for plus credit card payments.
If you have a repayment mortgage or make extra payments this will need to be allowed for bearing in mind that you only get a mortgage statement once a year!.
There are bad debts and capital allowences. Also periods of voids and refurbishments - cashflow and profit is likely to be uneven.
We are not contractors or investers earning a pretty much reliable set amount each quarter.
Plus the tax office will need to do 4 times as much checking on small/self employed businessess!
Omnishambles part 2?