Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "mark andrews" at "20/03/2016 - 20:44":

Got it thanks. Interesting. What version of their mortgage conditions is that taken from?

Reply to the comment left by "NW Landlord" at "20/03/2016 - 20:46":

If you breach your covenants they'll be coming for the keys anyway. Keeping the deposit and auctioning the properties. A nice little earner for the bank. I don't trust them an inch, which is why I find the advice given to SH quite strange in that it encourages keeping details of changes in beneficial interest from the bank.

Reply to the comment left by "Nicholas Dickinson" at "20/03/2016 - 20:52":

http://www.themortgageworks.co.uk/includes/pdf/T726_06_14.pdf

Reply to the comment left by "mark andrews" at "20/03/2016 - 20:58":

Thanks Mark. It certainly looks like TMW do not allow such transfers without their consent. At least not in respect of those mortgages that are governed by the 2012 Conditions. I haven't seen this clause elsewhere but this is why it is so important people get good advice before proceeding.

Reply to the comment left by "mark andrews" at "20/03/2016 - 20:58":

Mark. I have studied this more closely and clause 11.1 (q) refers only to companies and the change in the legal or beneficial ownership of the company's shares. See wording between clauses (m) and (n)

So a lender would want to know if beneficial interest is transferred from a company, but not an individual? Doesn't make sense to me. Especially considering the person would be moving the beneficial interest from an individual INTO a limited company? It's clear providers distinguish between individuals and companies, and I can't see any reason for a lender not to want to know what entity holds the beneficial interest in a property that they are providing a mortgage for.

Reply to the comment left by "Appalled Landlord" at "17/03/2016 - 14:28":

I have received a reply to my email of 25 February to Megan Shaw.

She confirms that even if all of a year’s deemed rental profit is set off against losses brought forward from previous years, so that the taxable income profit is zero, that year’s finance costs can be carried forward to the calculation of tax relief/reduction of the following year.

“RE: Losses brought forward when Clause 24 is in force

• megan.shaw@hmrc.gsi.gov.uk

Thank you for your email and sorry for the slow reply.

Brought forward property losses must be set against property profits in subsequent years. In future, the way your property profits are calculated will be changing, such that they won't include a deduction for finance costs. From 2020/21, the property profits (using your example) will be £110,000. So the brought-forward losses must be used against that profit.

In that circumstance, your taxable property profit will be nil, so you are correct that you will be allowed no finance cost relief in the form of the basic rate tax reduction.

Instead, the full £66,000 finance costs will be carried forward and used as a basis for calculating your tax reduction in the following year (together with any finance costs incurred in that following year).

Please see the example below which should help you see how the finance cost restriction will operate in practice once it's fully implemented (using an £11,000 personal allowance and a £43,000 higher rate threshold):

After restriction (20-21) £

Salary 40,000

Property income 110,000
Less b/f losses (110,000)
Property profits 0

Taxable Income 40,000
Less Personal Allowance (11,000)
Tax due on 29,000
Tax on 29,000 @ 20% 5,800
Total Tax 5,800
Less Finance Costs of 0 @ 20% (0)
Final Tax 5,800

Megan Shaw
Product Owner - Property Income
HMRC, Room 3/64, 100 Parliament Street, London, SW1A 2BQ
03000 585628”

I then asked her about landlords with no other income, and with deemed rental offset against losses brought forward:

“If the landlord had no salary nor any other income, would the amount of excess finance costs carried forward be reduced by the personal allowance?

She replied: “No, all the excess finance costs that cannot be used in a year are carried forward.”

This confirms that the explanatory notes are right and the original Policy Paper was misleading.

Reply to the comment left by "Appalled Landlord" at "16/03/2016 - 23:44":

Last July’s Policy Paper was misleading. The explanatory notes state that you will be able to carry forward of excess finance costs where relief is restricted due to adjusted total income:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/445521/EN_FB_2015.pdf

Therefore you will not have to make a real profit that at least equals that year’s personal allowance, or draw some pension income or get a job. in order to be able to carry excess finance costs forward.

The issue of the BICT has driven me mad with frustration and over-thinking for some time. The last few days have been hellish.

Who to believe? Mark Smith as a barrister, or the mortgage conditions? I've got 5 or 6 with TMW and found this exact clause. If I do the BICT I can incorporate for around 50k in SDLT plus fees. If I don't do it by 1 April it's £200k and thus no realistic chance of EVER incorporating.

It also strikes me that mortgage conditions tell us not to rent to benefits, nor to alter or extend the property, but I'm sure many landlords have done that without a second thought!

No time left. What the hell do we do?

Reply to the comment left by "James Fraser" at "20/03/2016 - 23:21":

James if you have 50k to waste then go ahead - send it my way.

However, It strikes me that the only sensible, legal and right thing to do is to put rents up to pay the Tenant Tax. Anything else is going to unravel on you catastrophically for sure!

Of course, put new properties in a limited company! However don't compromise your integrity with a less than honest get rich quick incorporating trick that will not just bite you in the bottom, it will rip both cheeks off and come back for more!

I have a lender currently putting my feet to the fire and is threatening to call in the debt because they think there are 6 people in the property when their rules say 5. I can remortgage and tell them where to get off if i wish as I have never done anything that would cause a lender not to lend to me. AND, I never will do so knowingly, either. I am clear what I agreed to when i took the mortgage with my lenders. I have extended and improved and I let to whom i want but I know the difference between a misdemeanour and fraud.

AND I will not spend 50K to buy my own properties from myself (wish it were that little)

Nor will I risk the lender coming to take the property away as is certain to happen. Of course lenders need to lend, but they will not be tricked or fooled and lied to. Tell them what you want and why and see what they say.If they have a product for you, then great, and if not, look else where. But do not think them fools air lightweight in calling in mortgages from people who have deliberately set out to hide or pull the wool over their eyes.

Think they may not notice...? - It is nice to have the freedom to piss people off - if necessary. Remember, one day you will seriously piss someone off and that is when they will call or write to the lender and tell them about you. Then, on top of dealing with a pissed off person you have to defend your empire and a fraud charge against a well financed and well placed lender. Who will lend to you then?

For me, the real cost of incorporating is loss of great interest rates I have many BOE+ 1.5% rates. If I were to incorporate, when I were forced to remortgage, as i will be, the rates will be 3-7% higher than now with significant fees!. I would also have to find £830K+ in capital gains and SDLT to buy my own properties form myself. WTF why would I do that? AND.. if incorporated, when i do want to sell, I'd have to pay more capital Gains Tax - yea right... not happening!

What appears sensible to me is to put up rents up by 15% this year 8% next and 8% the following year. (35% compound) If you have crap properties and can't increase the rents then spend that 50K on making them good so you can increase the rents. Then wait for the sh*t to hit the fan, as it will when the crap accountants realise they were wrong and all landlords are in big trouble and start panicking - as they will. Also it will be a complete sh*tstorm when renters realise George Osborne and their own MP have demoted them to second class citizens because of the tenure of their home. When these renting new sum class of citizen realise that they are not as good a citizen as a buyer citizen, and their government believes they should pay a 35% Tenant Tax so that the better buyers citizens can have houses that they are not fir for and can not afford.

I think the renting sum class of citizen may have something very serious and significant to say about that when they realise what has happened to them and they work out why they have no homes and no money and pay a Tenant Tax.

Saving second class citizens that George Osborne has created is not worth my liberty, integrity or fortune. I shall keep my powder dry. with honour and honesty I have and will increase rents and will collect the Tenant Tax for my government as i am obliged to do and I will let George and the renters sort it out between themselves - and they will!

The tenants can pay the Tenant Tax as they should if it is law and if not, and i have to sell, then Malta is good I hear! 830K of my own money to spend and 5 years out of blighty - fair deal!