Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Barry Fitzpatrick" at "21/02/2016 - 11:27":

"HRMC don’t allow this apparently". Do you have evidence for that statement?

Reply to the comment left by "money manager" at "21/02/2016 - 11:44":

HI MM - I believe it is covered by IR35

Chris Byways said:

>Individual PRS LL reactions seem to be ‘rents have to go up to survive’ and try to traditionally make increases the minimum possible, if at all, to existing tenants. Laudable.

>IMV, Corporates, seem to be trying to push the envelope, and report gleefully ‘how much they have archived’. Am I right?

....

>Commenting further, Martin Totty said: “Rents in London have continued to rise more quickly than in most areas of the country, but not at quite the pace of 2014; meanwhile, average rents outside of the capital rose more quickly last year than in 2014. As a result, we saw a narrowing of the rent inflation gap between London and the regions last year – is this a trend we will see continuing in 2016 from tenants seeking value for money in the private rented sector?””
http://blog.knightandknoxley.com/?author=2

Good comment, Chris.

ISTM that Knight and Knoxley - unlike Homelet - are being less than straightforward in distinguishing the rised for rents in new lettings from the routinely far smaller numbers for existing lets.

Homelet are very clear that their survey applies to the actual rents on new lettings:

"The data included in the HomeLet Rental Index is gathered from our tenant referencing service. The rental amounts are based on the actual achieved rental prices for new tenancies in the reported month. "

The comments by Nathan Ryder, who wrote the article, and Martin Totty quoted above, are misleading in not making that distinction scrupulously, including in the headline:

"BRIGHTON LEADS THE WAY WITH 18% RENTAL INCREASE"

This is regrettable, because it feeds the narrative of landlord-haters in the media.

Matt W

Reply to the comment left by "Chris Cooper" at "21/02/2016 - 12:03":

It's definitely not ir35.....that relates to disguised employment at a rate similar to employment. Rent as income does not fall under employment. Incidently if you want a other example of discrimatory tax treatment IR35 is it. I know as my business is impacted by it.

Reply to the comment left by "money manager" at "21/02/2016 - 11:44":

I agree in that although am not 100% sure but I think forming a company to service one's own property is effectively you servicing you & therefore would smack of manipulating taxable profits. May be though - if the company is owned by a different set of shareholders (am making this up as I go along) it may be possible, as in other areas of tax law the key is in control. So if you hold say just under 50% of the company shares & say other family members the balance, you cannot control the company and so the ownership is separate from the ownership of the property. But then you have to then get the profit out of the company which begs the question whether £5K is sufficient to warrant the hassle & unless the other shareholders have a different class of share, they'd be entitled to equal dividend payment too.

Reply to the comment left by "Laura Delow" at "21/02/2016 - 12:37":

Why does it matter who owns the service company? I think a more important question would be....are the fees your service company is charging reasonable and in line with market rates? Also dividend tax above 5k would be 7 %....which is still a lot less than 20% personal tax rate.

Reply to the comment left by "Jim Taliadoros" at "21/02/2016 - 13:11":

If you own the properties & also own the Ltd Co, I'm "guessing" this would be seen as tax manipulation if one's "own" Ltd Co is invoicing "oneself" for services. If however the ownership of the Ltd Co is different over which you don't have control and/or you were providing services for other property owners, then the case could/would be otherwise.
Additionally it's not 20% vs 7.5% as you've forgotten the corporation tax your Ltd Co would first pay before dividends are declared ie it will be at it's lowest by 2020; 20% vs not 7.5% but instead vs 25.5% ie 18% Corp Tax + min 7.5% Dividend Tax after one's £5K annual dividend tax allowance (corporation tax on profit is currently 20% reducing to 19% for Financial Year 2017 then 18% by 2020).

Reply to the comment left by "Laura Delow" at "21/02/2016 - 14:33":

My apologies....my maths are off - I meant 20% vs 22.5% at its lowest ie 18% CTax + min 7.5% Div Tax = 22.5% not 25.5%. Forgive me.

Reply to the comment left by "Laura Delow" at "21/02/2016 - 14:33":

The maths of profit extraction/retention within a limited company acting as an agent, and merits there of, will depend on each situation. However I can see no barrier to setting up, as we are likely to do, as a property management company, and charging an unincoroporated entity that continues to hold both title and debt.

There are issues such as auto enrollment to contend with but the conversion of unpensionable rent into pensionable (by the employer and pre NI) pay is interesting on it's own.

To add credence to the strategy, although I am not sure it is neccessary, we are set to offer our services to other LL's to gain from volume discounts and other measures.

There's another thread on this, and it seems that you could not benefit by having the Management co manage your own properties, only those of other LLs. In other words, the company (i.e. effectively 'you') can't charge you to manage properties that you previously managed yourself, solely to alter the income stream for tax reasons.

I'm pretty sure that was the bones of it.....