Summer Budget 2015 – Landlords Reactions

This is his email address. The more private emails he gets the better:

gavin.barwell.mp@parliament.uk

He is getting the honours for his contribution to destabilisation of the PRS and contribution to the LEAVE campaign.
I just can't believe I am seeing this!

Not directly related to S24 tax mitigation, but worthy of a mention I thought.

The Upper Tax Tribunal yesterday (4 Aug 2016) issued its judgment on a series of appeals made by "Icebreaker Partnerships" against prior judgments in favour of HMRC that the schemes were set up solely to reduce the tax paid by participants.

The earliest referenced scheme covered by the judgment was for the tax year 2005 / 2006.

Think back over the things that have happened since 2005 in your life - it is a long time!

All that time in limbo waiting for the judgment. An 18 day FTT followed by an 18 month wait for the result of that judgment to be published and then a 3 day UTT followed by a 4 month wait for that judgment to be published.

And then the bills: for the tax, for penalties, for interest, for legal fees

IMO it is maybe just worth putting that into the back of the mind and popping it back to the front as part of the things considered when looking at tax mitigation schemes that happen across your desk.

Here, for those needing a chunky read on the finer detail of the reasoning of the UTT, is the judgment

http://www.tribunals.gov.uk/financeandtax/Documents/decisions/Acornwood-v-HMRC.pdf

Reply to the comment left by "Dr Rosalind Beck ." at "05/08/2016 - 13:07":

Thank you Rosalind - we will be writing to him for sure. We will send another letter to our MP too, however I can guarantee that there will be the same loads of governmental tosh ()authored by Gauke), which we already received.
I will keep everyone posted.

Reply to the comment left by "Whiteskifreak Surrey" at "06/08/2016 - 08:22":

Yes, It is a good idea to write to your MP as well and ask him/her to pass your letter on to Philip Hammond. That seems to be the best way to get a response from the Chancellor. I sent this letter, in case anyone wants to adapt it to make life easier:

Hi Wayne

I heard Philip Hammond saying this week that he is going to review fiscal policy, and that he will announce his plans in the Autumn Statement. This provides us with a window for trying to get him to reverse Osborne's war on landlords.

Could I ask you to write to him (and not to David Gauke who will be more inclined to defend his previous stance under Osborne) asking him to repeal Section 24 of the Finance Act 2015/2016 for all the reasons I have previously written to you about, namely:

1. It is anti-competitive favouring certain landlords over others (unencumbered landlords and incorporated landlords are exempt).

2. It breaks the principle of taxing only the profit and not the expense of generating that profit (which is taxed elsewhere anyway). That in turn could see effective tax rates in excess of 100%. I showed you before how I could have an actual income of zero and have to pay £10,000 in tax (a rate of a million percent).

3. It will increase rents sharply (estimates are around 20-35%, based on when a similar move was made in Ireland) making it harder for first time buyers to save a deposit, which is ironic, since that was given as a 'justification' of it.

4. It is also wrong to have a plan to raise unfair taxes across the country, making tenants - including those on low wages and benefits - pay higher rents in order to create a fund for 'Help to Buy' - a scheme which gifts deposits to people who are financially better off and based in London (and which also leads to house prices climbing even higher).

5. It will lead to a massive increase in evictions as some landlords will be forced to sell up (the rates of tax will be so high in some circumstances that they will constitute a form of 'expropriation' of property). Before selling, landlords will usually want vacant possession (as you then get a better selling price).

6. It will therefore increase homelessness, affecting the poorest and most vulnerable in society who receive housing benefit who will no longer be able to afford the higher rent. These will have to be housed in emergency accommodation. The bill for this is not easy to estimate, but is likely to more than eat up the amount allegedly being ring-fenced for 'Help to Buy.'

7. The Government's estimate of the money that will be raised through taxation on the 'fictitious income' of landlords also does not take into account the fact that landlords will sell up and if owner-occupiers buy some of these properties, no taxation will be payable on those houses in the future and also many landlords will in future buy properties through companies and pay 20% where they used to pay 40-45% in many cases.

It is clear to anyone with an iota of intelligence that the Government should be encouraging more investment in all kinds of housing - including properties to rent to families, to single workers and students who need to share housing and also need to be mobile, to migrants who are essential for the success of the British economy, to the low-paid and to those on benefits who cannot find rented social housing as so much of it has been sold off. Instead, George Osborne launched his unprecedented attack on 'private' landlords as though we are somehow doing something bad by providing this essential service.

Anyway, Wayne, if you can pass this on to Philip Hammond for me and also pass it to Labour colleagues, that would be great.

All the best.

Dr Rosalind Beck

http://www.landlordzone.co.uk/news/report-slams-government-tax-grab-on-landlords

Very interesting unless it has already been posted here. (Report by Alliance) stipulating government policies against landlords are complete Bolloc*s

Reply to the comment left by "Simon Hall" at "07/08/2016 - 10:54":

Simon the correct (polite) word is Bollix
"to make mistakes in doing (something) : to upset or ruin (something)"
however I feel that your version of the word more closely expresses the feelings of us all.

Mr Price, I must make confession that, I am often stimulated by your rather dry Sense Of Humour.

Please tell me my figures are wrong and I am scaring myself needlessly:

Let’s assume section 24 does kick in and we are 4 years down the line
Will my figures really look like this? I know it is simplistic and I have assumed 40% tax as I have over 60 properties & due to the turnover I also lose my personal allowance.

Notes: current value is £90k and owe £99k – values have dropped and not recovered in my area meaning I can’t remortgage from the current 4.95% rate

Income unlikely to rise as not the best area and always rented to DSS tenants as working people choose to live elsewhere.

Broadly speaking, I have 25 properties in this dire situation

Income £700 per month net x 12 = £8400 per year
Interest which I can fully offset for year is £4890
Insurance and repairs approx £500 for year
Meaning £3010 taxable at 40% (for arguments sake) = £1204 due to HMRC

So what’s left for me?

Income £8400
Less bank interest £4890
Less insurance etc £500
Less HMRC £1204

Leaving a profit of £1806 x 25 = £45,150 per year

After section 24 is fully functional:

Income £700 per month net x 12 = £8400 per year
Add £4890 Interest which I can only off set 20% (£978)
Meaning income is £13290.00
Less £978 interest
Less £500 insurance and repairs
Leaving £11812 taxable at 40% = £4724.80 to HMRC

So what’s left for me?

Income £8400
Less bank interest £4890
Less insurance etc £500
Less HMRC £4724.80

Leaving a loss of £1714.80 x 25 = £42,870

My apologies if my figures are complete nonsense and any improvement on them would be much appreciated.

If the figures are generally right I need to start evicting and selling now!

There is a calculator on the article below which will work out your tax but u arnt far wrong, for portfolio landlords like you and me this is going to be carnage on 30k net profit now in 2021 u will pay 24k tax it is eyewatering the more mortgage interest u have the more tax u pay its scary stuff that is unsustainable and I can't understand how it's been allowed

http://www.telegraph.co.uk/investing/buy-to-let/my-20pc-per-year-buy-to-let-returns-heres-how-it-works/