Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Landlord Lucan" at "17/03/2016 - 09:46":

Hi L L

Thanks for the link to the explanatory notes. They do include a carry forward of excess finance costs where relief is restricted due to adjusted total income. I wonder why the original explanation seemed to exclude the latter by only referring to the relief restricted due to the business profits.

I have sent a reminder to Megan Shaw of my email of 25 February asking for confirmation of the situation.

Reply to the comment left by "Appalled Landlord" at "17/03/2016 - 12:58":

I think the real question is: "how will historic losses on finance costs be treated in the future?".

For example, if I make a loss on mortgage interest in 2015-16 (prior to the start of the transitional period), can I then carry that loss over to 2016-17 and beyond, and subsequently claim the full tax relief on it (as opposed to a partial tax credit) as and when I start to make a profit? (Hypothetical question, but it may well apply to some).

My understanding is that loss is deducted from profit at the end of each accounting year, so once it has been deducted, it becomes one homogeneous total to be carried forward ad-infinitum. One would therefore expect, by default, that that running total would be unaffected by the creeping effect of the rule change, unless otherwise explicitly stated.

Of course, a loss on finance costs in, say, 2020-21 (once the rules are fully in force) would not result in any deduction from profit at all. Instead, it would attract a tax credit under what is effectively a completely separate system. But again, my understanding is that the rule change only affects the accounting process for that particular year.

This question, in itself, seems to be the source of a lot of confusion and concern, especially among those who are already carrying substantial historical losses. For everyone else, it could materially affect how they run their business in the next 4 years. (E.g. if you need to have a void period for maintenance / renovation, best take the hit now rather than in a couple of years time!)

Reply to the comment left by "Ray Davison" at "17/03/2016 - 12:56":

Hi Ray,.
Left of field is exactly what we need. It would be good if we could have others' ideas on your point. I'm not sure if it's been discussed before, but I can't remember any discussion of it.

Mortgage interest IS a cost of purchase, in that we couldn't purchase the houses without it and up until 8th July 2016 it seemed that if something wasn't claimable as revenue it was claimable as capital (although I'm no expert, as we all know).

Reply to the comment left by "Ray Davison" at "17/03/2016 - 12:56":

Sure someone will figure out a Sharia Mortgage that charges no interest, but the up front or settlement cost represents the finance instead.

Or, Mr A transfers his beneficial Interest to Mr B, who pays off A's Mortgage, insures the property, and bills Mr A for an all-inclusive package, which of course would be deductable as a legitimate cost.

B pays tax on it as earned income, but avoids the double taxation of the mortgage co. AND the LL both paying tax. B Would need a Charge on property for security. Someone will find a way to buck the system, like Scumbags Tory donating pals do............

Reply to the comment left by "Appalled Landlord" at "16/03/2016 - 22:26":

Well, as my only income is rents and savings interest, I assume that means no 20% "tax relief",as I don't have any other income over the personal allowance.

Reply to the comment left by "Landlord Lucan" at "17/03/2016 - 13:17":

Just to clarify my last paragraph, above:

If you can carry losses forward without them being affected by the new rules, then it doesn't make any difference when you incur them, because the finance cost for each year will effectively be treated under the rules under which it was incurred. (In other words, the right to claim relief on historic finance costs will be preserved).

However, if your ability to claim relief on past losses is going to be eroded in the future, then it's definitely best not to make any losses for the next 4 years, otherwise you will permanently lose relief on the finance costs associated with those years.

Reply to the comment left by "Kathy Evans" at "17/03/2016 - 13:26":

Perhaps there is scope to cut the rents for any new AST by 50%, then charge for 'welfare services' as an income stream for the other 50%, like letting admin, gas, EPC, welfare inspections, arranging insurance, RtR etc.?

Reply to the comment left by "Ray Davison" at "17/03/2016 - 12:56":

Here Here!
A COST SHOULD BE CLAIMED SOMEWHERE.
If it's not revenue expense then it HAS to be capital expense. I suggested the same back on 10-8-15 Perhaps we have missed a trick here and this should have been included in the Judicial review. I like your thinking, fight the thief at every turn.

Reply to the comment left by "Kathy Evans" at "17/03/2016 - 13:26":

Kathy,

If your gross income is less than the personal allowance (£10,600 for 2015-16), then you don't pay any income tax anyway, and therefore there's nothing to deduct from your non-existent tax bill.

If your gross income is more than that (including all interest, rental *profits*, earnings, etc), then you will be paying at least 20% tax on anything above £10,600. The amount over £10,600 is the amount that you can claim 20% tax relief on.

E.g. if you earn a total of £15,600, then your 20% marginal tax rate applies to the £5000, resulting in a £1000 tax bill. The most you can deduct from that for any costs is therefore 20% of £5000 = £1000.

Reply to the comment left by "Shirleyannn Haig" at "16/03/2016 - 23:28":

http://www.rla.org.uk/taxcentre/tax-calculator.shtml

This seems a pretty good calculator for the new tax relief laws