Mark Alexander - Founder of Property118

I think the next General Election will be a snap election within three years and the outcome of it will be a Conservative/Reform alliance. Only time will tell whether I am right and whether there is still a PRS to save at that point.... Read More

Also, New Zealand’s equivalent to the UK’s Section 24, which restricted the deductibility of interest expenses on residential rental properties, was introduced in March 2021. This policy was in effect for approximately three years. In late March 2024, the New Zealand Parliament passed legislation restoring full interest deductibility for residential investment properties, effective from April 2024. 

Link https://lwb.co.nz/content/yes-landlords-gain-from-the-repeal-of-interest-deductibility-rules-but-it-was-a-flawed-law-from-the-outset/... Read More

Somebody told me recently that the average NRLA member only owns 4 properties. If that is true, it's a sign that most of the serious players in the market do not see the NRLA as being a representative voice for them, and/or that they are just not listening to the people they should be targeting as members.... Read More

Shares can indeed be gifted, just as properties can, but not without crystallising any CGT they might be pregnant with.... Read More

Incorpration doesn't "avoid" CGT. Instead it rolls capital gains up to the point of incorporation into the company shares. This can be particularly helpful if the company plans to sell some properties to reinvest elsewhere or to de-leverage. The CGT only falls due if the shares in the company are disposed of or if the company is liquidated prior to death.

Incorporation does not avoid IHT either, but it can make IHT planning far more manageable. For example, the value of the founders shares can be frozen at incorporation and the future growth can accrue to a separate class of shares owned by a Discretionary Trust for the bloodline of the founders, or indeed by the founders next generation.

The above is not to be regarded as comprehensive advice, but instead is intended to provides some further insight into what is achievable.... Read More

The X Tweet that the Crusader is referring to has blown up on Social Media. I first saw it posted on a landlord Facebook Group and it got 86 comments in a matter of minutes.

As soon as I saw it I reported it to Facebook as Hate Speech and also for inciting criminal activity including theft.

I would urge all landlords in Scotland to familiarise themselves with the name and face of this individual and his friends to avoid the carnage that would undoubtedly follow from a bad decision to give him the keys to their property.

In fact, I was so incensed that I did a bit more digging, found the details of his full name, employer and other affiliations and came up with a few extra ways (all perfectly legal and above board) to serve some well deserved karma back to him.... Read More

Apparently, he's a practicing barrister at https://gardencourtchambers.co.uk/barrister/nick-bano/ and works with the homeless.

It looks to me like he lives with his clients too!... Read More

On the day of purchase then yes. However, in future the property value and the mortgage may have increased. In that scenario, the calculation is more complex. A persons positive capital account balance is the amount of money they invested into the business AND retained from profits/losses over the life of the business MINUS the amount of money they withdraw from the business including payments of tax.... Read More

They need to bring back CGT indexation allowances and taper relief.

Indexation Allowance and Taper Relief were regarded as fair because they aligned the taxation of capital gains with principles of equity, particularly by ensuring that only real economic gains were taxed and by encouraging long-term investment. Here’s why they were seen as fair:

Indexation Allowance:

Protection from inflation: Indexation adjusted the base cost of an asset in line with inflation, meaning that taxpayers would not be taxed on “paper gains” that arose purely from inflation. This was seen as equitable because it ensured that CGT applied only to actual increases in the asset’s real value, not the inflationary increase.

Neutrality: By factoring in inflation, the allowance helped maintain fairness across different economic periods, ensuring that individuals and businesses did not suffer from high taxes in periods of rising inflation, where asset values increased only in nominal terms.

Taper Relief

Encouragement of long-term investment: Taper Relief incentivised holding assets for longer periods by reducing the taxable gain based on how long the asset had been held. This was seen as fair because it rewarded patient, long-term investors who contributed to economic stability, as opposed to those making short-term speculative gains.

Progressive reduction in tax burden: The tapering effect meant that, over time, individuals could expect a lower CGT rate on their gains, which was particularly appealing for entrepreneurs and business owners looking to grow assets over the long term. The longer the asset was held, the more tax-efficient it became, which was viewed as fair to those who made lasting investments.

Overall, these reliefs were seen as reflecting economic reality and promoting investment behaviour that was considered beneficial for the wider economy, while avoiding taxing gains that were merely nominal due to inflation or short-term price movements.... Read More

There are always pre budget rumours. Only time will tell which ones are true... Read More

It sounds like you used a process called novation as opposed to SIS.

Without significantly more information it is not possible to comment on your directors loan. Did you actually inject cash into the company? If if was just a balance sheet transaction with no cash actually changing hands at the point of incorporating the CGT should have been paid then.

If you rolled capital gains into shares using s162 relief the CGT you deferred will not fall due until you dispose of the shares or wind up the company.... Read More

This was not written to attract new clients.

Good luck with your planning.... Read More

Unfortunately, I very much doubt we will be vindicated in time.... Read More

I think you’ve posted your comment on the wrong thread... Read More

Understood, thank you 🙏🏻

How do you rate this general overview in this thread? Please bear in mind that our full Skeleton Arguments run to over 50 pages.... Read More

It would also upset the Governments build to rent friends, you know, the ones that make large donations to them... Read More

Time will tell.

I don't think the Government could make this work even if they wanted to.... Read More

For personal taxation, rental income is indeed classified as unearned income, which means it is subject to Income Tax but does not benefit from certain reliefs and deductions available to earned income.

However, when property rental income is received by a Limited Company, it is treated as trading income, subject to Corporation Tax rather than Income Tax.

The different treatment of rental income between individuals and corporations highlights the benefits of considering incorporation for landlords, particularly those with larger portfolios or long-term investment plans. It also underscores the broader debate on how the private rented sector (PRS) is taxed, as you’ve mentioned. The landscape continues to evolve, and it’s true that government policy has placed increasing pressure on individual landlords in recent years.... Read More

How would you envisage that happening?

Section 24 provides a tax credit against finance costs to the rate of basic rate income tax. However, Limited Companies do not pay income tax. Instead, Limited Companies pay Corporation Tax.... Read More

You raise valid points about the uncertainty surrounding tax rules and the concerns many landlords have when considering whether to restructure their property businesses. Let me address each of your points:

“So far as he honestly can”: This is indeed a critical aspect. Any tax planning, including the Substantial Incorporation Structure (SIS) and Capital Account Restructure (CAR), must be grounded in legitimate commercial purpose. HMRC focuses on whether the arrangements are commercially driven and compliant with both the letter and the spirit of the law. The key is to ensure that the restructuring is based on genuine business needs rather than being purely tax-motivated, which is why it's essential to work with experienced professionals who understand the intricacies of these models.

Loose Rules and HMRC's Approach: It’s true that some rules can seem open to interpretation, and HMRC does sometimes leave room for interpretation, which can lead to uncertainty. However, that is why the professional advice and support from experts familiar with these structures are so important. Properly implemented, SIS and CAR structures are based on sound legal and commercial principles, and many landlords have successfully adopted them. The uncertainty you mention is why Property118 ensures that clients receive tailored advice, ensuring that the structure is appropriate for their specific circumstances and compliant with current regulations.

Costs vs. Long-Term Savings: The costs associated with transitioning to an SIS or CAR model, including legal, accountancy, and refinancing fees, are legitimate considerations. However, the potential savings can outweigh these initial costs, especially if the structure enables better long-term tax planning and business management. These models are not just about short-term tax savings but about securing the future of your business. By protecting beneficial ownership and offering flexibility with refinancing, SIS and CAR can offer commercial advantages that make the initial costs worthwhile in the long term.

Choosing the Right Professionals: It’s natural to be concerned about who to trust with such an important process. This is why Property118 works with a network of highly experienced professionals, including legal and tax experts who specialise in property incorporations and restructuring. These professionals ensure that the process is managed properly, reducing the risk of errors and ensuring compliance with HMRC’s requirements.

Government Tax Policy: You’re right to point out that tax policy is subject to change, and governments do frequently look for ways to increase tax revenues. However, the SIS and CAR models are designed with commercial resilience in mind, helping landlords manage their portfolios effectively even as tax laws evolve. While no structure can be completely future-proof against government changes, these models provide flexibility and security in the face of shifting regulations.... Read More