Should I sell or risk tenants buying at undervalue price?9:08 AM, 25th September 2019
About 4 weeks ago 48
Last month a couple of unsubstantiated statistics were published in the papers. They both came from the Labour mayor of Newham, Sir Robin Wales, who has an axe to grind. He is fighting the government over the continuance of the mandatory universal licensing scheme that was introduced in 2013 and will end in December. He wants to extend it – at the cost to landlords of £400 a property, instead of the current £150.
Sir Robin joined the Labour Party when he was 15. He was knighted in the 2000 Birthday Honours for services to local government.
In a letter to Philip Hammond, Sir Robin wrote: “It is our understanding that, to date, up to 13,000 Newham landlords are of interest to HMRC, where there are discrepancies between declared income and our records, with potentially significant financial implication for the exchequer.”
This begs the question – what is his figure based on? The only organisation that could know how many landlords may have failed to declare rental profits is HMRC. And HMRC rejected the figure. “HMRC said it did not recognise the figure of 13,000 landlords put to it by the council.” according to the Newham Recorder, and the Independent.
So where did his “understanding” of up to 13,000 come from? The local paper gives the exact number of landlords: 26,254. Was it based on anything more than “I bet half of those landlords are not paying tax you know”?
Note that he wrote “up to 13,000”. So that if even one landlord was not declaring all of his or her rental profit, then Sir Robin’s claim would be correct.
If he had an accurate figure he would have used it. The fact that he did not casts doubt on the “up to 13,000”.
The story was also published by the Guardian. In the latter, Patrick Collinson even claimed that the miscreants had been identified. His article started with “Up to 13,000 landlords in just one London borough have been identified as failing to declare their rental income, prompting estimates that unpaid tax in the capital is costing the public purse nearly £200m.”
He did not acknowledge that HMRC did not recognise the figure. He merely wrote that “HMRC would not confirm the figure”. This could be taken to mean that the figure was right but that HMRC refused to admit it, rather than the figure being wrong and rejected by HMRC.
He continued “The council estimated that unpaid tax by landlords is costing the public purse nearly £200m in London – and far more nationally.”
How did he get from 13,000 landlords in Newham to nearly £200 million across London? Again, the local paper comes to our aid. It said “The letter also highlighted data carried out by Institute for Public Policy Research (IPPR) in 2014 which estimates that the amount of undeclared tax in London totals more than £183 million.”
The source of the £183 million is described in an article from March 2014 by InsideHousing, with the title “Rogue landlords in London avoiding £183m in tax”
It said “Following a pioneering mandatory register of private landlords, Newham Council has built up a database of 20,000 landlords in the borough.
Using these figures it estimates landlords are avoiding £183.1 million in tax across the capital. The data, verified by the Institute for Public Policy Research, suggests £508 million in rent is paid to landlords cash-in-hand in London.”
You have to admire the accuracy of the made-up figure for undeclared rent to the last £8 million, and the accuracy of the tax on this rent to one decimal place. It makes the figures seem genuine, rather than invented. Unfortunately there is no indication of where the £508 million for rent paid in cash was plucked from.
But the tax at 36% of rents seems high. If the assumed tax rate had been 40%, that would only have allowed £50 million of costs (10%), including mortgage interest. If the tax rate was 45%, the allowable costs would have been only about £100 million (20%).
But the IPPR was presumably happy with it, showing comradely solidarity with the mayor. It is a Labour Party think tank.
“Setting up IPPR was a conscious attempt by Labour leaders and Labour sympathisers to promote their party’s modernisation beyond what was discussed by party-internal policy-making bodies e.g. during the Policy Review process.”
The Institute for Public Policy Research has been criticised by the Charity Commission, which said it “had “exposed itself to the perception that it supported the development of Labour Party policy”.
What does it matter if the figures of 13,000 and £200 million are wrong if it means that Newham can extend mandatory licensing – at more than double the price?
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