Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Ian Simpson" at "16/07/2015 - 14:23":

The knock on effects of altering the way taxable profits are calculated for buy-to-let landlords have far reaching effects. For example, how will the CSA view the apparent jump in taxable profits?

New housing development is also likely to slow down.

The Institute for Fiscal Studies quoted the Chancellors own words .....

“The Budget red book states that this means that “the current tax system supports landlords over and above ordinary homeowners” and that it “puts investing in a rental property at an advantage”.

In response the IFS stated ....

"This line of argument is plain wrong. Rental property is taxed more heavily than owner occupied property. There is a big problem in the property market making it difficult for young people to buy, and pushing up rents. The problem is a lack of supply. This change will not solve that problem”

Over the last two decades the development of new housing stock has been heavily supported through buy-to-let landlord purchases. Disincentivising buy-to-let investment will have a knock on effect to the development of social and low cost housing, which runs in tandem with most new developments.

Given that so many buy-to-let landlords will end up paying more tax than they are making in profit and that CGT is likely to render them insolvent if they sell up; how will this impact the banks balance sheets? At the moment the arrears book on BTL lending is comparatively strong against other forms of secured debt such as homeowner mortgages. The new taxation policy is likely to have a significant negative impact on this. The makings of a new banking crisis perhaps?

How can any of this assist the economy or the growing housing crisis?
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Reply to the comment left by "Dom Glynn" at "16/07/2015 - 14:27":

Until now they have refused to work together on all issues I've been aware of, effectively refusing to get involved if the other picks up the gauntlet.

Let's hope, for the sake of the PRS, such a childish approach isn't taken by the NLA on this occasion.
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Reply to the comment left by "Mark Alexander" at "16/07/2015 - 14:33":

That's ridiculous! If I were a full member of the NLA and thought they weren't lobbying on this I'd cancel my subscription immediately.

Reply to the comment left by "James Tallis" at "16/07/2015 - 09:11":

If that is the aim , then clearly it needs to apply accross the board to all BTL investors , wether they be soleT/partnership/incorporated/pension fund/ trust funds or housing association -

why single out a small sector of BTL investment with a very shady plan that undermines the whole basis of PROFIT=INCOME-EXPENSES.

...because individual LL are an easy target - that is why.
Are non incorporated entities now all at risk from ridiculous measures like these being applied ....they need to purchase or rent premises to function, have finance to grow is abilty to set that off against income to be removed as well in the near future. The concept is absurd and doesnt do what it says on the tin.

Reply to the comment left by "Dom Glynn" at "16/07/2015 - 14:40":

I didn't say that, I said they don't join forces.

A classic example of that is they didn't promote our legal action against West Brom. Instead they advocated complaints to the FoS and look where that ended up!

At least we're off to the Court of Appeal.
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Reply to the comment left by "syed shah" at "16/07/2015 - 13:47":

Hi

It's because there is way to calculate you tax relief based on three clauses. Of the three clauses it's the lowest clauses that gets chosen. In basic terms the three clauses say

a) Your property finance costs.
b) Actual profit of your business + your property finance costs i.e. what I've been calling taxable profit
c) Your actual total income from property and other sources + your property finance costs - the personal allowance of 11K

Your example has no income and is falling foul of clauses C so it's 60K minus your personal allowance of 11K and you're getting the relief on 49K. We've yet to have someone confirm that interpretation of rule C but it's been mentioned several times and no-one has come up with a different interpretation.

Jason

Reply to the comment left by "Ian Simpson" at "16/07/2015 - 14:23":

Wow, Ian that's impressive.
I'm trying to put something together to send to a newspaper. The main points I have so far (in summary) are:
1. To list the massive contribution landlords make to the economy - providing housing, but also through all the other businesses we support (tradespeople, DIY shops, mortgage companies, letting and estate agencies, lawyers, conveyancers.....)
This will all be in jeopardy if:
2. Landlords will go bankrupt because of not being able to put the main cost and expenditure of their business in their tax return.
3. This is discriminatory - the same business done by a 'ltd company' and all other businesses are not expected to pay tax on a cost. (this is a dangerous precedent and is illogical and unfair)
4. As it is discriminatory, landlords are likely to start a class action against the Government.
5. It is also discriminatory because it is based on a false idea that BTL is not a business. Actually, for many of us it is a full-time job. And if it is considered a business when wrapped in the legal definition of a limited company, it is also a business when it is done on a 'self-employed' basis.
6. The IFS have argued that the proposal will not achieve the aim of helping first time buyers. Building new affordable housing is the solution to that. Also, if the aim is for a level playing field why not (re-) introduce 'tax relief' for first time buyers or all buyers?
7. It will not achieve the aim of raising vast amounts of revenue - or at least if it does it will only do so while landlords aim to sell off their houses or move them into limited ocmpanies.
8. There are likely to be other massive consequences for the economy because of the knock-on effects - a house price crash, which will affect owner-occupiers too, landlords being unable to afford repairs, houses going out of the rental domain, so maybe more homelessness?
9. Suicides as a result of the enormous stress of having to pay out money that you haven't got - because you're being taxed on money that goes out of your account (regardless of semantics, this is how it works in practice for landlords).
That's what I've got so far. Good luck! I hope you can have some influence. That is what it's all about in trying to get this outrageous proposal thrown out.

Reply to the comment left by "Ros ." at "16/07/2015 - 13:50":

Hadn't been my intention to be or sound defeatist ros.

More a 'pick your fights' approach supporting position that change shoildn't be retrospectively applying to existing debt.

I've written to my mp with a Scottish slant given Scottish Government have just done a second consultation on reform to prs which, i feel, these changes change the goalposts on. I shall share when i get a chance.

Reply to the comment left by "Ros ." at "16/07/2015 - 15:32":

Sorry Ros but I do not agree with your first point. Regardless of who owns the properties, the majority of the service providers you have listed will still be required by the owner.

We must be careful not to offer up arguments that are so easily knocked down.

If every landlord on the planet died or was repossessed in an instant there would be no less houses would there?

However, property developers are highly reliant on sales to landlords and for prices to grow in order to sustain new development. This new development doesn't just create more private sector housing, it also creates new social sector and low cost housing that would otherwise not be built.
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Okay, Mark. Obviously, I must have also missed out some of the important points that could be raised, and I would suggest that people add to the issues that Ian can bring up with Michael Gove.
I'm aiming to get my letter off to George Osborne tonight, (and have put my near-final draft on the other thread for people to copy and amend if they wish) followed by letters to other relevant ministers. I have just checked which Ministers would be relevant in this and have come up with Sajid Javid, Anna Soubry and Brandon Lewis, as well as Nick Boles, who I previously suggested.
Incidentally, Michael Gove is the Secretary of State for Justice and as this is a very unjust measure, it might be worth Ian mentioning that...