Potential Budget CGT relief and profit split for selling to long term tenants?

by Property 118

9:18 AM, 8th October 2018
About A week ago

Potential Budget CGT relief and profit split for selling to long term tenants?

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Potential Budget CGT relief and profit split for selling to long term tenants?

On Friday we reported on the RLA Press release RLA ask for longer term tenancy tax incentive

However, over the weekend the Sunday Times has reported that government may consider adding an incentive to Landlords for selling to their long term tenants in the Budget on 29th October.

The Article said: “Under plans that have found favour in Downing Street, landlords would not pay capital gains tax when selling to tenants who have lived in a property for three years or more.

“The plan is designed to spur landlords to offer longer tenancies and then to sell on to a new generation of homeowners. Conservatives say a plan could be unveiled their think tank, “Onward” and is under consideration for inclusion in the Budget”

Potentially landlords would be eligible for CGT tax relief with the profit split equally with the tenant, who could use it as part of their mortgage deposit.

News from the Onward Website, Click Here to view, said:

“A new policy paper on the private rented sector in England, argues for a new route to ownership for private renters and greater incentives for landlords to offer long-term tenancies.

“The paper argues that Ministers should give Britain’s private renters a new Chance to Buy their rented home by rewarding landlords who sell to long-term tenants.

Onward’s  3 proposals:

  • Existing buy-to-let properties would be eligible for 100% capital gains tax relief if the property is sold to a sitting tenant who has lived there for 3 years or more.
  • The gain from this tax relief would be split evenly between the landlord and the tenant, giving the landlord a windfall when they sell and the tenant thousands of pounds towards their mortgage deposit.
  • Onward proposes that the Treasury should pay for this policy by tightening other tax reliefs for buy-to-let investors, including reducing the Private Residence Relief period from 18 months to 6 months and abolishing Lettings Relief of up to £40,000.

Therefore, for Landlords there will be some element of giving in one hand but taking from another.



Comments

terry sullivan

9:29 AM, 8th October 2018
About A week ago

no thanx

Simon Williams

9:43 AM, 8th October 2018
About A week ago

Total rubbish policy so far as landlords are concerned. The benefits in lower CGT will be shared 50/50 with tenants, but the costs of the policy (more taxes on landlords in other areas) will be 100% borne by landlords. Overall, if implemented as per think tank suggestion, this is just another tax grab on landlords.
Also, the benefit will fall on very few properties as there will need to be the happy coincidence that (a) your property is saleable to a first time buyer (i.e. not an HMO or larger property (b) you and your tenant can actually agree a price (always difficult in a private sale) (c) the tenant can actually raise a mortgage and afford to buy it (d) you actually want to sell it.
If gov decides to go ahead with this, I hope they won't patronise us with some drivel about it being a "reward" for "good landlords"

Douglas Barley

9:50 AM, 8th October 2018
About A week ago

You have to be kidding - The kremlin has arrived at number 10 in the shape of the Tories. Once again no joined up thinking a great vote catcher but it does nothing to solve the housing crises. If the Tories really wanted to solve the housing crises they would make it easier for landlords and developers to borrow cash, obtain planning and then tell them to go and build!!!

Janet Carnochan

10:18 AM, 8th October 2018
About A week ago

My worry here is if it turns out like the agricultural sector where long term tenants have a right to buy. They can force a sale at a reduced rate. No thanks. I set up my buy to let business to provide myself and future generations with a pension scheme. I provide good quality housing at market value. I am available to tenants 24/7 and all issues are fixed quickly. There is a shortage of good rental properties in my area. There is a need for what I provide. Some of my tenants don't want home ownership. They don't want a 2000 pound bill for a new boiler or replacement windows. They just want to pay their rent and know what they have left is theirs. I feel as if my business is now being penalised at every step. If it gets much worse I will join the rafts of landlords who are quitting the sector and that isn't good news for my tenants.

Colin Dartnell

10:52 AM, 8th October 2018
About A week ago

Wow you must be joking, this is the first step to Right to Buy!

Whiteskifreak Surrey

12:02 PM, 8th October 2018
About A week ago

Even more taxing is on the way: https://www.propertytribes.com/think-tank-proposes-new-type-of-property-tax-t-127636775.html
I just skimmed through this article, so do not realise full consequences. It appears that the system here is going to be like in France, where the tax is different every year.
Time to pack up and leave the sector and this country too. I do not want to live in the pure communism under Tories - they became even worse than Corbynov...

Dr Rosalind Beck

12:20 PM, 8th October 2018
About A week ago

What they should do is bring back taper relief. It is my understanding that in Germany, after 10 years' ownership, landlords pay no CGT -as used to be the case here, I believe. This is designed to encourage landlords to remain fairly long-term in the business and thereby also give more security of tenure to tenants. It also can encourage landlords to then sell if they want to as there is no CGT to pay. Why landlords who may have owned the given property for decades, should then split the benefit of not having to pay CGT with their last tenant 50/50 is beyond me - how is that fair on anyone? It is also very misleading to present it as 100% relief. For the landlord it would cut it from the discriminatory rate of 28% (as landlords now have to pay the higher rate of CGT compared to others) to 14% - so not far off the 18% that everyone else pays. Big whoop. As others have said, it would also have a minimal effect as most landlords I know say that their tenants are not in a position to buy or as others have said, this would not work for HMOs.

Looking at the report it is riddled with flaws. But having spent what seems like a lifetime exposing these amateurs' interference in our business, I'm not wasting my time on it.

Appalled Landlord

15:21 PM, 8th October 2018
About A week ago

The summary on page 7 of the report states “Finally, we argue that other tax reliefs available on the sale of buy-to-let properties should be tightened to pay for the policy and support responsible landlordism. These include reducing the 18-month grace period for Private Residence Relief to six months, abolishing Lettings Relief entirely, and making Wear and Tear Allowance conditional on the landlord offering long-term tenancies to tenants”

Wear and Tear Allowance had nothing to do with the sale of buy-to-let properties, and in any case it can’t be made conditional because it was abolished in April 2016.

The second sentence starts with “These include” rather than “These comprise”. Yet the report only recommends two changes: reducing the grace period for PRR and abolishing Lettings Relief. Is this just poor writing and editing, or do the authors have some other tightening in mind? Is this proposal to reduce CGT on sales to tenants a Trojan horse with a sting in the tail which will nobble landlordists?

Beware former government advisers bearing gifts.

Rod

15:40 PM, 8th October 2018
About A week ago

Reply to the comment left by Dr Rosalind Beck at 08/10/2018 - 12:20
It may be wise to email your many good points you make direct to Philip Hammond MP as I have already done so with mine.

Mark Alexander

11:02 AM, 9th October 2018
About A week ago

A few years ago I offered all of my tenants an opportunity to buy the property I was letting to them at a discount. None of them were the slightest bit interested in home ownership. That's one of the reasons I moved abroad, i.e. to be able to sell my properties to whomever I choose, at a time that suits me and only pay CGT on the increase in value after April 2015. The sun is still shining brightly here in Malta 🙂

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