10:35 AM, 12th November 2015, About 6 years ago 10
I say: what about supporting the tenants?
Labour, by supporting Clause 24, in effect, continues to support the Government’s attack on landlords who have borrowed to purchase properties. This is despite the fact that it is now generally agreed, the decision will lead to rents rising across the board in the private rented sector. This is an extract from a speech this week, by the Labour Lord Davies of Oldham. It is followed by a reply by Dr Rosalind Beck, landlord at Property118:
Lord Davies of Oldham said:
‘We also recognise the relief for finance costs related to residential property businesses in Clause 24. That will ensure that relief will be at only 20% for those landlords claiming on mortgage interest payments. Some of them in the past have claimed 45%, which approaches a level of being scandalous. We are glad that that loophole has been plugged.’
‘Dear Lord Davies of Oldham
I refer to your comments during the Second Reading of the Finance Bill. Unfortunately, you have been completely hoodwinked by the Government’s ‘spin’ on this. In fact, Clause 24 disallows the offsetting of 100% of finance costs (with a later ‘gift’ back to the landlord of 20%); it is not about 45%, 40% or 20% taxpayers. It is related to all landlords who borrow in order to purchase properties to rent out.
You have fallen into the trap of thinking and repeating the falsity that this will affect ‘the wealthiest landlords.’ It will do no such thing, as landlords have repeated ad infinitum. The wealthiest landlords – those who have inherited vast amounts of wealth and own and rent out property, in central London, for instance – will remain untouched and not pay a penny extra in tax. These are the most significant ‘45% taxpayers’ against whom you would be better suited to direct your venom about ‘scandalous’ behaviour and ‘loopholes.’
What have you to say about this? Do you deny that this is the case and that these wealthiest landlords remain free to receive vast amounts in rent and not pay a penny more because of this measure?
I would draw your attention to the fact that the measure affects those who OWE the most. Look carefully at that word. It is not OWN; it is OWE. Since when does owing money make you wealthy?
In fact you are supporting a decision which disallows business people from offsetting the largest cost of their businesses, which then produce a taxable profit. You want the tax from the business; but you do not want the business person to be able to offset the costs of producing that taxable profit. You are supporting a tax on a massive part of landlords’ turnover.
How do you think the vast majority of landlords were able to purchase properties to rent out? How does anyone, apart from the very rich, purchase property? They get a mortgage. All of a sudden, when private landlords do this it is deemed to be a quasi-criminal offence. This is despite the fact that landlords, in doing this, provide a service which is indispensable, especially at a time of great housing need amongst all tenures.
Do you realise that portfolio landlords – many of whom have filled the gap left by selling off social housing and who now provide an essential service to many, including the low-paid and unemployed – will be ruined by this?
Even relatively uneducated people with whom I speak can see that it is patent nonsense to tax people on money they have paid out to a third party. If this were introduced across business in general there would rightly be a furore. Landlords have been picked off as a result of irrational prejudice and discrimination, based on unfounded myths and stereotypes about who we are. If you took the trouble to study surveys of landlord-tenant relationships for instance, you would see a high level of satisfaction in the private sector. But you have chosen not to inform yourself in this way. Instead you side with a Government that has introduced what has been described by the respected Telegraph financial journalist, Richard Dyson, as the kind of tax one would expect to be introduced in a third world country by a lunatic dictator.
On a personal level, if interest rates remain as they are my situation will be as follows. I currently earn £50,000 per annum (the most I have ever earned, and this is due to the current low interest rates). I am taxed on this, so that my net income is approximately £42,000. Under the new regime, whereby I will be taxed on a new fictitious profit, which includes the finance costs I have paid out to the mortgage lender, I will net £34,000. This is quite a big hit to take.
However, if interest rates rise by 3% at any time, my actual income will fall to £5,000, but because interest costs will be re-defined as part of my profit (when they are obviously not), I will be deemed to be a high earner, earning £90,000. I will be required to pay £9,000 tax (it would be more like £25,000 if not for the ‘gift’ back to me of 20%). How do you think that is fair, logical or sustainable? Why does it only apply to landlords who are not registered as a company? Why does it not apply to holiday lets? Why does it not apply to B&Bs? Why does it not apply to the whole business sector? You will have no reasonable answer to this, because the whole thing defies logic.
Do not bother to reply. I have written so many of these letters and I am absolutely disgusted at both the Conservative Party, who have betrayed many of their natural supporters and also at the Labour Party, which has joined in with the ‘black is white’ absurdities inherent in this decision. I am not surprised the Labour Party has supported this attack on landlords, but to betray the tenants of this country is such a way is unforgivable. Do you not realise that tenants in the private rented sector will now see exponential rent increases, as the first remedy available for landlords to prepare to pay tax on a non-income will be to increase rents? We have already started.
So, thank you from the landlords and tenants of this country. You have played your part in an invidious and destructive attack on the private rented sector. Congratulations.
I will be publishing this as an open letter; the nonsense you spoke in the House of Lords is there for all to see and my reply will also be there for the public record.
Dr Rosalind Beck’
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