Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "James Fraser" at "01/04/2016 - 22:49":

*Gasp!*

*ahem*

Erm ... maybe you can be our mole?!

You can certainly write to your boss, once we get together the list of those who know what they're talking about and have pointed out the obvious ludicrousy of C24.

It's discriminatory and serves three purposes: 1. To win popularity by riding on the anti-LL band wagon; 2. Raises taxes which are needed since George, as it turns out, hasn't got a scooby how to sort the economy out; 3. Benefits big business and the wealthy elite, and George gets off on that.

The consequences are that:
1. Rents will rise;
2. Those unwilling or unable to buy will become homeless and a burden on LAs and the state;
3. The housing market will readjust (not a totally bad thing in terms of affordability, but a serious problem to banks and lenders who are still trying to stabilise their asset banks since the last recession);
4. Housing development becomes less feasible due the reduction in property values. Since (as evidence by the Tata Steel debacle) the Tory's are driven solely by economic criteria, and not social issues, or people, I'm really confused about this part. Housing development will hit breakwater.
5. BTL market is obliterated and I'm yet to see any evaluation of how this will affect the finance institutions; brokers might be getting a feel for this.
6. Those, like myself, who've chosen BTL as a pension investment are now rendered insecure and unprepared for the future, thereby moving back onto state dependency at retirement age;
7. Increased comparative viability for slum housing as opposed to investment in improving quality of rented housing stock.

Reply to the comment left by "Rachel Hodge" at "01/04/2016 - 23:09":

I agree. But to be fair to myself, I have been energetically campaigning against this from the moment it was announced! There isn't an avenue or a level I haven't tried, believe me.

Maybe that explains why they haven't asked me for money?!

Here's my reply:
You have got to be joking - by a vicious and discriminatory policy against small landlords you will destroy my business and make my tenants homeless, while I am liable for tax on profits I have not made. You have added insult to that injury by imposing discriminatory Stamp Duty on any further purchases and are maintaining a discriminatory level of CGT if I try to escape by selling up. As many other have said, get stuffed! The only reason I will maintain a party membership at the minimum subscription is to have a vote I can use in favour of any candidate other than Osborne, G. for the leadership when David Cameron stands down.

Reply to the comment left by "James Fraser" at "01/04/2016 - 23:30":

Yes of course James, sorry. I was using you to vent my communications to your comrades!

It's clear whose side you're on. And I'm sure many many members of the Tory party feel the same way you do. It's quite frightening to see how fast George and Dave have repelled their supporters since the last election. They seem to be swayed by size, and not quantity.

I have a very close, clever leftie friend. Not a LL, but big in the care sector; within a major company contracted to the care sector. He has enjoyed portraying me as a fascist nazi over the years in debate, but he knows I care as mush as he does about those not able to take the opportunities we have; those held back in some way (poor, sick, elderly), and that's why we're friends.

Anyway, I've noticed he has listened to my arguments over the years, and has moved a tiny bit to the right of extreme left. But most surprisingly, we met for a drink a couple of weeks ago, and began the usual heated political debate which we really should avoid, and whilst he spoke about how depressing it all was (defeatist for him), I said we must never let Tories take control again. Coalition is the only way. the Tories cannot be trusted. They are treating us peasants (anyone from upper middle-class down) like absolute minions. They have no idea. So different from Thatcher and Saint Major.

Anyway James, I was only teasing. It must be soul destroying for you to have given your time, and pledged your allegiance to now see what is happening.

Reply to the comment left by "Ros ." at "01/04/2016 - 22:03":

Hi Ros, George wrote to me today too - except, of course, if you click on the email address it is a generic address to which is added a name to make you think that they are someone they're not. Sound familiar? Anyway, at the bottom of the email I discovered that George has his own Face Book page, so here is what I posted for him:

facebook.com/GeorgeOsborneOfficial

Hi George,
I have just received an email from you. I actually receive emails from the Conservative Party on a fairly regular basis. I do respond to them; however, it seems that my responses, and much of what the very people who were instrumental in electing the Conservative Party say, fall on deaf ears. To give you a flavour for my responses, this is one I sent recently after receiving an email from Alan Mabbutt in response to him inviting me for tea (see below).

Dear Mr. Mabbutt,
I voted for the Conservative Party in the last election. However, I will never vote for the Conservative Party ever again. Neither will my parents, my brother, many of my friends and hundreds of thousands of hard working landlords. Landlords, like myself, who have taken responsibility to provide financial security for themselves and their families, and / or pensions so that they did not have to rely on others in their twilight years - including the State.

You will know that in his Summer 2015 budget, George Osborne chose to introduce a measure stolen directly from the Green Party manifesto, which was a piece of work compiled by a 26 year old Geography graduate - not even a Phd. The measure, which removes the ability to deduct finance costs from gross rental income, after other allowable expenses, in order to arrive at a taxable profit, will destroy hundreds of thousands peoples pension provisions and livelihoods. For me it will mean that I will start to lose my personal tax allowance, pay more tax on my property income than I actually earn and take a 28% drop in my take home pay.

Every other business in the UK is able to deduct the finance costs of running the business, including incorporated landlords operating in the same sector and carrying out the same business activity.

The measure will, of course, have been at the advanced planning stages prior to the General Election. However, no mention was made of the plans in the Conservative Party manifesto. Why? Well, the answer to that question is obvious to everyone - in a cynical and calculated move, the Conservative Party did not wish to divert the large number of landlord votes it knew it would lose if those plans were announced prior to the election.

The statements made by David Gauke to justify the move are, at best, misleading and at worst untruthful. Let me give you two examples:

1. It will only affect the wealthiest landlords. The opposite is true - it will not affect wealthy landlords at all. Wealthy landlords do not have mortgages. It will affect landlords with mortgages only, and the higher the mortgage, the more affect it will have. I guess it depends on your definition of wealth. If your definition of wealth is debt, then why is George Osborne so obsessed with reducing the deficit?

2. It will only affect higher rate tax payers. That statement is technically true. However, it fails to explain that hundreds of thousands (146,121 Source - National Landlords Association) of landlords will be moved from lower rate tax payers to higher rate tax payers.

So, rather than supporting your efforts I, and most of the 2 million landlords in the UK, will be actively working towards ensuring that the Conservative Party is not re-elected and that George Osborne does not become the next leader of the Conservative Party.

In closing, I would like to ask you to support our campaign instead - to fight the “Alice in Wonderland” Buy to Let Tax Grab – https://www.crowdjustice.co.uk/case/clause24/

Regards, Chris Cooper.

Judicial Review of Clause 24
Join us in fighting what we believe is a grossly misguided, discriminatory and unlawful breach of…
CROWDJUSTICE.CO.UK
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Reply to the comment left by "Rachel Hodge" at "01/04/2016 - 23:56":

Rachel, don't apologise, I wasn't at all offended and was only really teasing you back.

I feel utterly wretched, to have given endless weeks of my time to the Tories at the election to get myself and them elected, only to get knifed in the back at their first budget and subsequently. I am deeply ashamed of my allegiance after 33 years of support. Never again. I have had several meetings about resigning but have decided to stay for now whilst refusing to offer them any further help or promotion. I know many other elected Conservatives feel the same way, particularly at local level. These policies are a disgrace on every level.

Reply to the comment left by "James Fraser" at "01/04/2016 - 22:49":

Hi James

If you post a comment on http://www.conservativehome.com/thecolumnists/2015/08/lord-flight-the-stealth-taxes-in-osbornes-latest-budget-would-have-made-gordon-brown-proud.html

or http://www.conservativehome.com/thecolumnists/2016/01/howard-flight-the-government-is-wrong-to-attack-buy-to-let.html

you will have to register your email address. Then you can look forward to unsolicited requests for money from Cabinet Ministers. Since posting on that site I have had requests in the names of M Fallon., D Cameron, T May and G Osborne.

Reply to the comment left by "James Fraser" at "02/04/2016 - 00:19":

I strongly believe that that is why I haven't received substantive response from Grant Shapps. He's not stupid, but he's changed. I had an email conversation with him during question time when Labour were in power. Now, he he untouchable. He is toeing the party line whether he wants to or not, but that's it for me.

He's been my MP for absolutely years, and I've always voted for him in local elections, if not national. He has been helpful and communicative in the past. But not now. He is totally detached and corporate. Doesn't seem to give a damn anymore. There is no way I'm voting for him next time. He has completely let me down. I think there's a very good chance he may lose his seat here next time, and we're safe Tory. Everyone is utterly fed up.

Reply to the comment left by "Appalled Landlord" at "02/04/2016 - 00:27":

I think you meant me! James is on the party payroll 🙂

Reply to the comment left by "Rachel Hodge" at "01/04/2016 - 22:37":

Hi Rachel

I would include the submission of the Institute of Chartered Accountants in England and Wales to the Finance Committee last year:

ICAEW TAXREP 40/15: Finance (No 2) Bill 2015 Clause 24: Relief for finance costs related to residential property businesses can be found at http://www.publications.parliament.uk/pa/cm201516/cmpublic/finance/memo/fb80c.pdf

Apologies to those who have read this before, but for the benefit of new readers I have extracted the key paragraphs as follows:

1. The restriction on tax relief on the interest paid would be fairer if it applied to new borrowings only.

7. The level playing field argument is specifically referenced to home owners not being able to claim tax relief on their mortgage interest, but the playing field is also skewed by the capital gains tax treatment; the home owner pays no capital gains tax on the sale of their home but a landlord pays capital gains tax at up to 28%.

8. The Chancellor introduced the change to “create a more level playing field” but as the measure does not apply to companies far from being level it leaves the playing field with a cliff edge in the middle.

9. Prior to 1998/99 interest paid on residential property lets was relieved as a charge on income; subsequently taxable rental income has been calculated in the same manner as income from a trade or a profession and interest has been deductible as a business expense. We can think of no other business where the cost of funding the capital of the business is not tax allowable.

10. It is a long established principle of taxation that expenses incurred wholly and exclusively for the purposes of the business are deductible when calculating the taxable profit. This proposal contravenes that principle and will result in proprietors of property businesses being liable to tax on an economic loss.

11. Interest paid for purchase of a residential property can only be offset against the rent received, if a rental loss is incurred the loss can only be carried forward, it cannot be set against general income so there is no question of tax relief for interest paid giving rise to a reduction in other taxable income.

WHAT ICAEW IS CONCERNED ABOUT
13. We have compared the proposed legislation changes to our ten tenets as listed at Appendix 4 and found them to fail on several counts:
• Some of the more complex areas like just and reasonable apportionment of interest for mixed use loans will be by guidance rather than statute
• The calculated relief will not be certain, there will be scope for disagreement over the relief allowed • It will not be simple to understand
• It will not be easy to calculate
• The changes have not been subject to proper consultation
• The measure is not fair and reasonable as the way the restriction is applied causes other reliefs to be lost and the resultant tax charge is far in excess of the restriction on the relief for the interest paid, see examples in Appendix 2
• Denying a business tax relief on expenses wholly and exclusively for the purpose of the business is not fair and reasonable Interaction with existing legislation

14. The provisions are retroactive as they impact transactions already undertaken. Taxpayers will have priced and borrowed according to the tax relief they expected and these borrowing decisions would by necessity have a long time line and many taxpayers will not be able to restructure their debt.

15. If the measure is enacted to include existing loans the lead in time is insufficient for most taxpayers to be able to unwind current borrowings and find alternative finance or to evict the tenant such that the property can be sold. The proposed changes to the tax treatment of the interest paid fundamentally change the economics of rental businesses and have the potential to distort the market.

16. Landlords will have to pay tax on real losses as those losses will become profits when the interest restriction is introduced, see example in Appendix 1.

17. The increase in taxable income as a result of the changes will have a significant impact on some taxpayers, the operation of the restriction on finance costs increases the income measurable for several income related reliefs, such as
• Tax credits, with no real economic change in income the credit could be lost
• Child benefit, again with no real economic change child benefit could be “lost” completely or be restricted
• Loss of the £5,000 0% savings rate band
• Personal allowance lost if the income without the benefit of the interest relief exceeds £100,000
• Excess pension charge because the income without the benefit of the interest relief exceeds £150,000 causing allowable pension contributions to be reduced from £40,000 The impact of the change in legislation for many will not be simply a loss of tax relief at the higher rates of tax on the interest paid there will be additional amounts payable due to the loss of other unrelated reliefs, see Appendix 2. There are two additional real life examples in Appendix 3.

24. It is likely that landlords will increase their rents to compensate for the loss of tax relief and the number of rental properties may decrease.