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10:19 AM, 29th August 2015, About 9 years ago 94
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Dear Mr Freeman
A response was received this week to the petition to Government regarding the restrictions of finance cost relief to individual landlords. The key message seems to be that Government wishes to “level the field” for homeowners and landlords. I have given that a lot of thought, and on reflection I think I may have been wrong all along. I now agree the playing field should be levelled. I have listed how this might be achieved below:-
1) Homeowners do not receive tax relief of their mortgages at all. However, when they take a lodger into their home the first £7,500 of rent received is tax free. This should be extended to all rental properties, i.e. the first £7,500 from each unit upon which Council Tax is paid should receive the same £7,500 per annum tax free allowance.
2) When a homeowner sells their home the capital appreciation is not taxed. This should also be applied to each of their rental properties.
3) A homeowner is allowed £1million of IHT relief against the value of their home. This should be extended to equity in rental portfolios.
4) A homeowner is given the choice as to whether they should obtain a CP12 annual gas safety certificate. This should also be applied to tenants, not imposed upon landlords.
5) A homeowner is free to evict a lodger subject to providing “reasonable” notice, without having to refer to the Courts. This is very fair and prevents the Court systems from clogging. This should be extended to private landlords.
6) A homeowner is not required to protect a lodgers rent deposit in an approved government scheme. This should also be extended to private landlords.
7) Homeowners may choose to have as many people as they wish living in their home without the requirement to purchase a licence. If that home is considered to be overcrowded then Councils have the means to deal with that issue. The same rules should be applied to tenanted properties. Whilst the UK is subject to a Housing Crisis it is important to remember that every person needs a roof over their head. The finances of those people in need of accommodation dictates where they can afford to live. The solution to preventing over crowding and leaving people with no choice, other than to suffer in poor quality housing, is a simple one; provide them with affordable choices. The only reasons that people live in poor conditions is lack of choice and affordability. The cause of the problems associated with overcrowding, sub-standard and unsafe accommodation are quite obviously due to lack of choice. The solution to the problem is to increase supply of property, i.e. BUILD MORE!
8) Homeowners are not required to verify the legal rights to live in the UK of guests invited into their homes. Quite rightly, they leave this to the border agencies. The same should apply to landlords.
Every year that passes whereby Government allow new property development figures to fall behind the need for new housing should be considered a failure on the part of the Government. The blame for such failures should most certainly not be pointed back at society, or any section of it. Constant vilification of landlords is not addressing the true cause of the Housing problem, which is quite clearly the responsibility of Government . The only real power to control immigration and population growth rests with government, as does the development of additional housing.
I do not blame the current Government for the state of the Housing Market, only time will tell whether it is successful in solving the problem. The reason I voted for you, and the Conservative Party, is that I believe you provide the best hope of being able to solve the issues associated with the Housing Crisis and the economy. I have not judged you on the failures of all governments in the last three decades, I expect better of you.
Given that successive Governments have become so reliant on the Private Rented Sector I think the suggestions I have made above are fair. I sincerely hope you will agree and that you will also consider the following:-
1) It has become a lifestyle choice for several people not to own their own property, they prefer the flexibility associated with renting
2) Many people are reliant upon the PRS for work mobility reasons
3) A significant section of society are unable to obtain mortgage finance required to purchase their own home. This is due to being on low wages, in need of benefits so as not to be living below the poverty line or having a poor credit rating.
4) Government have stated they wish to reward hard working people by helping them to make provisions for their own future. Buy to let can be an effective strategy if it is not taxed and regulated into oblivion.
5) Government clearly acknowledge the UK has a ‘Housing Crisis’
My conclusion is that if Government are to be true to their word they must consider a root and branch overhaul of UK Housing and associated legislation and taxation policies.
Yours sincerely
Mark Alexander
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Dr Rosalind Beck
9:38 AM, 1st September 2015, About 9 years ago
Reply to the comment left by "Gary Dully" at "01/09/2015 - 01:48":
Hi Gary. I agree about the prejudice and discrimination behind the decision. It is the only explanation for the way we have been singled out. We have sent in a submission to Government outlining this and rubbishing the myths and stereotypes that are held about landlords in society and which have led to this decision.
Roger Rabbit
11:16 AM, 1st September 2015, About 9 years ago
I will say again what I have said already. Long angry letters with plenty of detail will just go into the bin or worse will harden views against you. Nobody likes to be talked down to especially the powerful.
This change is simply unfair to one type of investor in one type of asset. The rules should apply to companies too. This does not mean HMRC will go and do this to companies. It means they will look at doing it to companies and realise what a stupid idea it is. The FTSE 100 would have a mini crash as companies wonder and price in the risk of this accounting change being apploed to interest on other things. There is literally no chance corporates will be hit with the same rules
so just say to your MP look Mr MP its extremely unfair to have a uneven playing field. You are giving corporate landlords a 10% cut in their tax while you are clobbering families with one or two investment homes. Apply the same rule to corporates and individuals else you are grossly favouring corporates and may find that in a generation there are a few massive corporate landlords and very few individuals to compete with them.
Mike W
16:13 PM, 1st September 2015, About 9 years ago
Mark and others,
I like the theme but I wonder if a bit of analysis on consequences might not go amiss. As one poster has noted HMRC may have made a big mistake and not thought through the consequences.
Consider sitting in HMRC. All the data you have is from the returns. Most returns, but not the short return, give the detail of costs by segment: finance, repairs, insurance, legal, services, other, wear and tear etc. So it is easy to target a section like wear and tear and say we think we will be able to increase tax take by changing the 10% of revenue allowance into replacement cost. But it raises the issue of where the allowance is for the initial and final costs over the rental period. After all a settee bought new for £1000 drops in value to say £500 as soon as it is delivered, assuming that is what you would get for it the day after delivery being sold as second hand. Ok I might exaggerate slightly but I think you see the principle.
Now lets look at finance costs. I am sure you will agree there are sectors of the country where the gross rental income return on property is low, eg London, and other areas where it is high. A reason for this is the high prices of property in London and the South. A friend is currently renting a 2 bed flat in London at 1800pm. The property is worth £650,000 - a 3.3% gross income return. Most finance costs (interest and fees) today are at 3.5% plus, possibly 5 to 6% for high LTVs. Yet there are other areas of the country where gross returns are double or higher. These areas tend to have lower property prices. I don't have the figures but I would probably be right in guessing that those investing in London are likely to live in London and the SE or overseas. In other areas of the country I suspect in general investors probably are from the same region. I would also guess that most of those in London/South are higher rate tax payers and most of those in other areas are in the 20% band.
Now what is the 'generalised' effect of this? Investors in London currently make little annual profit on an income basis as a significant proportion of their overall property return is in capital appreciation. But if through this ludicrous HMRC measure these investors suddenly find they are making a significant annual income loss, they are likely to sell. How many BTL investors are there in London? Once a lot of property goes on the market prices will fall. Once a lot of BTL property gets sold there will be a rental property shortage. Once foreign investors find that London property is not going up at previous annual rates they too will sell. Investors from Hong Kong are used to selling shares and property but getting out of UK property quickly is not easy as those who remember the financial crisis know only too well.
I wonder whether HMRC looked at the property location of the 'claimed' 19% of affected landlords. They didn't - the location of the property is not on the return. I wonder whether the 19% of affected landlords are mostly in invested in London? Maybe its 90% of the 19%.
Now I know it is not 100% because I too am affected but I have not invested in London largely because of the low income returns and I have always felt the capital increases could not continue for ever.
So if the vast majority of affected Landlords are invested in London does HMRC seriously think this is not going to have a major impact on London house prices? Maybe they do think it will have an effect. Why are they 'phasing' it in? Turning the screw year by year. Possibly in the hope that they phase in the sales?
I think this measure is a determined attempt by the government to terminate the BTL business in London.
Just a thought.
Maybe a lot of posters will tell me where I made a mistake in my assumptions.
Linda Price
19:53 PM, 1st September 2015, About 9 years ago
I sent a letter to our local MP early days asking him who was going to house my tenants when I ended up losing my properties. I have yet to receive a reply.
Dr Rosalind Beck
20:35 PM, 1st September 2015, About 9 years ago
Reply to the comment left by "Linda Price" at "01/09/2015 - 19:53":
Hi Linda.
I'd say that was unacceptable - he/she is supposed to represent you. I'd send a reminder with the original email attached, saying you'd like a reply. He/she might just say they've been on recess, but it's my understanding that that isn't literally a mega-long holiday.
Having said that, I usually get an acknowledgement postcard from the House of Commons and then out of three emails I received a reply to one. I don't mind that as I'm going to see him and I'll take copies of all my emails so that he can take another look at them and answer my questions. He asked me to provide him with questions for the Treasury, which I did and I've heard nothing about what happened with them.
Roger Rabbit
21:35 PM, 1st September 2015, About 9 years ago
Reply to the comment left by "Linda Price" at "01/09/2015 - 19:53":
Linda please get real if you sent such a letter your MP it would have done no good at all.
simply tell you MPs that its extremely unfair this tax (which is actually a change in accounting rules) is only applied to family investors and not corporations. It should be both or neither.
Roger Rabbit
21:41 PM, 1st September 2015, About 9 years ago
Reply to the comment left by "Mike W" at "01/09/2015 - 16:13":
You raise some interesting points Mark. London will be impacted more than any other region simply because there are more private rentals in London and because houses are more expensive in London than in any other region
Personally I dont think prices will fall in London due to these changes but they may see a five year period of flat prices (whereas if these changes were not made it might have been +30% increase in prices diring those 5 years.
Mark Shine
22:16 PM, 1st September 2015, About 9 years ago
Reply to the comment left by "Roger Rabbit" at "01/09/2015 - 21:35":
Roger. they definitely will not 'level the playing field' between non-incorp and incorp because (1) harder for them to achieve and (2) why would they consider it if part of this measure is to make way for their large corporate chums (equipped with call centre management staff to (ineffectively) respond to tenant issues no doubt) to take over the PRS? References to that on other property web forums today.
But you are definitely right to highlight this here. We all need to push the Treasury via our MPs for THEIR answer to why the different treatment between the 2.
Roger Rabbit
22:28 PM, 1st September 2015, About 9 years ago
Reply to the comment left by "Mark Shine" at "01/09/2015 - 22:16":
Hi Mark
I would be absolutely shocked if they were to introduce this to corporates. They can't it would mess with accounting and all companies would be fully and totally against the stupid measure. Even non proproperty owning companies as it sets up a system whereby this idiocy might be extended to all finance costs.
so in my view asking them why apply this to just individuals and not corporates would allow them to figure out how stupid and illogical it is to redefine a cost as somethig else.
If for whatever reason they feel the need to tax the rental sector more it should be done in a sane logically way not this stupidness.
Linda Price
22:33 PM, 1st September 2015, About 9 years ago
Reply to the comment left by "Mike W" at "01/09/2015 - 16:13":
I wonder how many of us that are going to be affected actually have properties in London? I'm in South Wales. My income is high, as are my mortgages, and with very low capital appreciation it seems that the last 30 yrs spent trying to give us a reasonable retirement are all going to be for nothing.