Property118 Founder Sends Open Letter To Chancellor Philip Hammond

by Mark Alexander

9:17 AM, 15th November 2017
About 2 years ago

Property118 Founder Sends Open Letter To Chancellor Philip Hammond

Make Text Bigger
Property118 Founder Sends Open Letter To Chancellor Philip Hammond

Dear Mr Hammond

On behalf of the UK Private Rented Sector represented by the Property118 online community our requests are both simple and straight forward to implement and have no cost implications to HM Treasury.

Please help all UK private housing providers (AKA buy-to-let landlords), who wish to do so, to professionalise and corporatise their businesses.

Relief already exists under section 162 TCGA 1992 to allow businesses to roll their capital gains into company shares at the point of incorporation. This relief was confirmed as being available to some, but not all, private housing providers in the Tax Tribunal case of Ramsay v HMRC. However, ambiguity in regards to what constitutes a business remains. Please see the final paragraph in https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65715 to quote …

“You should accept that incorporation relief will be available where an individual spends 20 hours or more a week personally undertaking the sort of activities that are indicative of a business.  Other cases should be considered carefully.”

Our first simple request is that you acknowledge that all private housing providers are a business, and hence entitled to claim this rollover relief.

Further, SDLT relief exists when property rental partnership businesses transfer assets into a company as part of an incorporation process. We feel this should be extended to sole owners of rental properties.

These proposals will facilitate immediate property trading opportunities for landlords.

Many landlords initially built their property portfolios by purchasing properties which are better suited to owner occupiers. The majority of these properties now produce low rental yields but landlords are trapped into ownership through capital gains. Our proposals provide a release from this trap at no cost to HM Treasury.

No CGT revenue will be lost, because capital gains are merely being rolled over.

Additional Stamp Duty revenue will be raised as a result of freeing up the market and additional trading.

The opportunities afforded by incorpration will encourage many landlords to trade properties better suited to owner occupiers for investment into the creation of many more HMO’s.

Properties which are sold by incorporated landlords are more likely to be purchased by owner occupiers. This is because such properties are unlikely to appeal to landlords as investments due to the comparitively low rental yields.

Houses in Multiple Occupation provide much needed additional housing for job mobility, students and those who cannot afford or are not ready to consider home ownership.

You will doubtless be aware that recent tax attacks on landlords have resulted in many former Conservative supporters turning their backs on the party. We feel the above proposals could bring many of them back onside.

Yours sincerely

Mark Alexander – founder of Property118 “The Landlords Union”

Show Form To Book A Tax Planning Consultation

Form To Book A Tax Planning Consultation

Consultations include new client compliance checks, fact find via email with complimentary software, expert analysis, a detailed written report and recommendations and a 30 minute Q&A session via Skype or telephone. We GUARANTEE total satisfaction or a full refund.
  • Please provide an overview of your circumstances and what you are looking to achieve.


Comments

Lindsey

11:08 AM, 16th November 2017
About 2 years ago

My concern with this letter is it seems concerned purely with the landlord as portrayed in caricature on HPC - viz. I'm rich and successful and trying to protect my empire.

I'm afraid I have much more sympathy with the small landlord who has already lost a ton of money because s/he bought in the last few years, is in an area with no capital appreciation, has been shafted every which way from Sunday by the legislation that protects bad tenants, and does not have the portfolio size to absorb these costs. They now can't rent, can't sell, can't give up the day job and can't keep it.

I appreciate that CGT laws in this country are not the most sensible or comprehensible; but I fear that the story of the little people going bankrupt will be subsumed in the picture of landlords complaining about tax on profits actually made, albeit in capital gain - as opposed to tax on profits which in some cases are losses. The two will get lumped together in the public opinion - and if we're honest, they are really not the same level of injustice at all.

Alex Russell

9:10 AM, 18th November 2017
About 2 years ago

Reply to the comment left by Lindsey Sharratt at 16/11/2017 - 11:08
Lindsey your description is me in a nutshell. 4 properties in Liverpool bought 9 years ago, no growth what so ever, in fact can't sell them for a lot less (tried 3 times over a 3 year period) , rents that have gone down in some cases and the future with S24 and probably rising interest rates which I can't fix because my LTV has gone down. But I keep hearing how many people want to buy property (get on the property ladder), well they don't in some parts of the country. And yes I am a good landlord that keeps upgrading my properties so the tenants live in a nice home, even if this is at my personal cost because the yields are so bad. So the capital gains argument is not much of a concern to us small landlords.

Mark Alexander

9:16 AM, 18th November 2017
About 2 years ago

Reply to the comment left by Alex Russell at 18/11/2017 - 09:10
Hello Alex

If you haven't made a capital gain, what is it that is making you nervous about moving your properties into a company?

If you are a partnership there will be no SDLT and the BICT structure will defer the requirements for you to refinance until YOU are ready to do so.

I have always argued that s24 is wrong, there is no other logical argument. However, whilst the Government are hell bent on keeping it in place we need to become solution conscious.

Matt Cole

10:12 AM, 18th November 2017
About 2 years ago

Hi Mark,
I'm in general agreement with Lindsey and Alex but fully appreciate the amount of times you have banged the drum on S24.

The situation for many very small portfolio landlord's (1-4 properties) is that there just isn't the spare cash to sometimes refinance never mind financing the efforts to become a company! Many of us (myself included) dont understand all the tax rules and fear any change to how we currently operate, will leave a painful bill at the end. I'm talking about worrying over hundreds not the thousands!! Of course, my naivity and lack of understand to become a company may show my concerns to be unfounded?

My situation echoes Alex's in that the geographical situation does not mimick the story of other more lucrative areas. Housing is difficult to shift in the North, difficult to refinance and in some cases difficult to generate reasonable income. To exacerbate the situation, many house building companies now offer very good incentives for first time buyers making renting and even purchasing older properties less desirable.

My main point on all of this is that many landlord's live hand to mouth, making a mere few hundred quid a month if lucky (in total) which then gets absorbed into general family life, with the hope that the original plan of investing in property will pay off for a better retirement or go be passed down to the next generations.

Matt

Mark Alexander

10:13 AM, 18th November 2017
About 2 years ago

Reply to the comment left by Matt Cole at 18/11/2017 - 10:12
You make a number of very fair points Matt, and that is why I remain opposed to s24 and continue to campaign against it despite the fact that I am now unaffected by it personally.

James Lovell

10:28 AM, 18th November 2017
About 2 years ago

Reply to the comment left by Mark Alexander at 18/11/2017 - 09:16
Hi Mark,

What makes me nervous about moving our properties to a company was brought to my attention by my accountant. ATED. Annual Tax on Enveloped Dwellings is currently set to start at properties valued at £500k + at a cost of £3500 a year, but what is stopping the government waiting till most LL's have moved their property to companies and then changing the threshold to say £250k or even £100k? Suddenly you are faced with a £1000 + tax per year per property.

There is more information about it here https://www.gov.uk/guidance/annual-tax-on-enveloped-dwellings-the-basics

Mark Alexander

10:29 AM, 18th November 2017
About 2 years ago

Hi James

ATED does not apply to rental property businesses, regardless of property values - please see https://www.property118.com/yet-another-financial-blow-landlords-ated/

Alex Russell

23:47 PM, 21st November 2017
About 2 years ago

Reply to the comment left by Mark Alexander at 18/11/2017 - 09:16
Hi Mark,
I think like Matt said I am worried about moving my properties into a company for two reasons, how much is it going to cost me and also a lack of knowledge at how it will actually benefit me. I am sorry for my lack of knowledge but I don't know what SDLT and the BICT structure mean. I won't be able to refinance for a long time which means if interests rates do raise (even though I don't think they can because all the banks would be insolvent) my mortgages go up, which just puts more pressure on my already 0% profit margin. What would the cost be to put 4 properties into a company and how would this protect me?

1 2

Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

Am I visiting my daughter as Mum or Landlord?

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More