Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Jon Pipllman" at "30/09/2015 - 12:54":

"So you are going to take the hit on the extra costs – i.e. not putting the rents up to compensate for the larger tax liability?"

No Jon , I will be be putting rents up as high as the market will bear. I am also looking at extending altering properties to create extra rooms, along with selling a few lower yield props & buying higher yield props - i dont really want to hold anything that is returning less than 10%. Also restructuring ownership into a ltd company.Also reducing borrowings. and whartever else i can identify to improve matters

Cant rem who asked this
can anyone comment on how partnerships work. apparently you can be a partner with a ltd company

so could a landlord with a portfolio of say 100 homes become a partner with a LTD and run the business together?

Lets say the LTD owned 90% of the share of the partnership and the Human 10%. How does the accounting work then? interest as a cost is ok as a LTD is involved?

also would 90% of the profits then be paid to the LTD which would pay 18% on it and 10% of the profits to the human who would pay income taxes on it

My accountants answer
The main issue here would be that since April 2014 mixed partnerships (ie where there is a corporate partner) have specific rules regarding the allocation of profits. Historically this structure was a popular planning startegy to mitigate tax but the new legislation prevents execessive allocation of profit to the ltd company partner and therefore some of the historical benefits of this structure

Official statistics published in December 2011 marked the end of the long-term
downward trend in the number of households in temporary accommodation; seasonallyadjusted
figures had fallen in each successive quarter since peaking in 2004. The most
recent quarterly statistics published in June 2015 recorded 64,610 households in
temporary accommodation at the end of March 2015. This marks the fifteenth quarterly
increase in the seasonally-adjusted number of households in temporary accommodation.
The number of families with dependent children placed in B&B style accommodation
increased from 630 at the end of March 2010 to 2,570 at the end of March 2015.
Various initiatives have been pursued to try to limit the use of unsuitable B&B type
temporary accommodation. For example, local authorities have focused on securing
private rented housing through lease agreements with private landlords. Authorities,
particularly in areas of high housing demand, argue that their ability to do this has been
affected by Housing Benefit reforms meaning that landlords can secure higher returns
from letting their properties on the open market to non-Housing Benefit claimants
(although not all homeless applicants are in receipt of Housing Benefit). One response has
been for authorities to seek temporary accommodation outside of their own areas. A
Supreme Court judgement handed down on 2 April 2015 may have implications for
authorities that have gone down this route.

Shelter’s June 2004 report, Living in Limbo, which was based on a
survey of more than 400 homeless households living in temporary
accommodation in England, found that living in temporary
accommodation had a “devastating’ impact on the health, education
and job opportunities of the homeless.” The authors estimated that
temporary housing was costing the taxpayer over £500 million each
year at that time:
• £300 million on higher rents and additional housing benefit costs
• £90 million on additional take up of out-of-work benefits (income
support)
• £50 million on out-of-school provision for children
• £30 million on additional take up of sickness benefits (incapacity
benefit)
• £10 million on additional visits to the GP due to health problems.
Following a series of Freedom of Information requests, the Bureau of
Investigative Journalism reported that Westminster Council would spend
£41.8m housing families in temporary accommodation in 2013/14:
Cuts to housing benefit are having a reverse effect on costs for
Westminster Council, which is predicting its bill for homelessness
In September 2013 Westminster Council faced criticism from the Local
Government Ombudsman (LGO) for keeping around 40 families in B&B
for longer than six weeks. Westminster offered to pay the affected
families £500 each.14 In October 2013 the LGO published No Place Like
Home: Councils' use of unsuitable bed & breakfast accommodation for
homeless families and young people which set out lessons councils can
learn from complaints around the use of inappropriate B&B
accommodation.
will rise 63.5% since last year when temporary accommodation
cost the council £25.5m.

Reply to the comment left by "Trendo " at "30/09/2015 - 03:10":

Sounds like Tenant Tax, smells like Tenant tax. it is a tax that will have to be paid by Tenants = probably is Tenant Tax...... but keep it quiet as some don't like the term Tenant Tax....

Definitely is Tenant Tax!

Reply to the comment left by "KATHY MILLER" at "30/09/2015 - 19:29":

Hi Kathy.
These are exactly the kind of data we need to keep an eye on. We should brainstorm the indices we need to watch:
the number in B & B accommodation, as you've mentioned; regional house price changes; the number of new BTL mortgages taken out and the amounts each month (this should slow to a standstill); regional rent rises (they won't be falling); number of repossessions (that will come later though); number of new houses being built; number of landlords leaving the sector (can get an idea by looking at outstanding BTL loans, although that will relate to properties); number of owner-occupiers buying with or without the Help to Buy; share prices of property-related businesses; also how mortgage lenders will try to adapt to slowdown Can anyone think of any more? If Clause 24 goes through in November, we have to keep up the pressure to reverse it before it kicks in in 2017 - or get amendments agreed at that point if not before. We have to do whatever we can now, but we also have to play the long game.

Reply to the comment left by "Ros ." at "30/09/2015 - 08:33":

Latest from Richard Dyson - Thanks Ros

I know you don't like it and won't use it... But Richard has arrived at the inevitable conclusion & he is also calling the tax what it is..... TENANT TAX...

Reply to the comment left by "Ros ." at "30/09/2015 - 16:53":

Hi Ros

What it means is that he is desperate. He has probably seen how his earlier justifications for the change have been rebutted. It’s a mixture of envy, resentment, hypocrisy and muddled thinking.

It is a marvellous example of doublethink “simultaneously accepting two mutually contradictory beliefs as correct”. In this case, that individual landlords should not be allowed to deduct finance costs, but incorporated landlords should be.

It’s also a marvellous example of hypocrisy. Gauke bought a second home in London with a mortgage in 2007: http://www.telegraph.co.uk/news/9684441/Minister-in-cash-row-keeps-27000-profit-from-sale-of-second-home.html and made a gain of £67,500 when he sold it 5 years later.

He claimed the mortgage interest as part of his MP expenses. He could have rented a property and claimed the rent instead, but presumably he did not mind in those days “incurring” a gain on the investment that was larger than it would have been without the mortgage.

Or it could be sour grapes because MP’s are not allowed to keep the capital gains any more.

Wikipedia: https://en.wikipedia.org/wiki/David_Gauke states that he also claimed £10,248 in stamp duty and fees involved in the purchase of his second home. This seems extraordinary to me. These are capital items, part of the cost of acquiring the asset - they are not an expense. They would have been deducted in calculating the capital gain.

Reply to the comment left by "Darren Bell" at "30/09/2015 - 10:32":

Darren you wanted a letter for tenants.... Try this....

Dear tenant.

Thanks you for your continued business. I would like to acknowledge your business as a tenant but also to let you know how much I enjoy working for and with you as your landlord.

You'll have seen that in the 8th July 2015 Budget this year, the Chancellor introduced a new tax that prohibits me from claiming the mortgage on your home against my takings. It has been spun as a Restriction on Finance Costs Relief for Individual landlords or clause 24 of the Finance Bill 2015. It is effectively a Tenant Tax as the cost has to be passed on to you and it relates directly to the mortgage on your home.

I know that you pay your rent from already taxed income but it seems the Chancellor wants you to specifically pay the interest charges for your home in the same way owners pay their interest on their home. The chancellor thinks this is only fair.

In order to pay the new Tenant Tax, I of course have to increase your rent in line with the new tax £ for £. I therefore have to increase your rent today by £xx which i assure you will all be paid to the Chancellor as Tenant Tax. If interest rates rise then there will of course be further revision to your rent as the tax will increase in line with the mortgage on your home.

Again, I thank you for your business and understanding in this matter and the introduction of a fairer tax system. In the event you believe your rent increase is unjust and or you believe the Chancellor has not introduced a fairer tax system with this measure, please don't complain to me as I have no option but to pass on the tax. If you wish to complain please do so by e-mailing XX who is your MP. His/her e-mail address XX.mp@parliament.uk

Reply to the comment left by "KATHY MILLER" at "30/09/2015 - 19:29":

Hi Kathy

“The number of families with dependent children placed in B&B style accommodation increased ……to 2,570 at the end of March 2015.”

But on Monday, 6 months later, John McConnell said that “100,000 children in homeless families will sleep in a B&B or temporary accommodation tonight.”

That would be an average of 39 children per family. Thank Heaven for Honest Politics