Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Simon Hall" at "14/08/2016 - 22:22":

Perish the thought Simon, Mr Farage is not pasty faced, more like a fish.

Has anyone read this article about using EIS to reduce Capital gains if incorporating? You might need to sign up (free) to AccountingWeb to read it. If so, what do you think?

http://www.accountingweb.co.uk/tax/personal-tax/how-to-reduce-cgt-due-by-8

Reply to the comment left by "Kathy Evans" at "15/08/2016 - 13:55":

I am not even sure that EIS scheme would work

"As it is the gain which is deferred, not the disposal of the residential property, the deferred gain is charged to CGT at the general rates of 20%, 10% for basic rate taxpayers, not at the rates applicable to gains from residential properties of 28% or 18%"

That, to me, seems to be inviting a case that could make its way right to the UTT and I can already think of a lot of arguments that HMRC could make to apply the higher tax to at least that part of the gain that was made from residential property before the money went into the EIS.

And even if it does work, in terms of saving the 8%, crikey, that is potentially a lot of risk, for example

- The liquidity of EIS shares is sometimes very low - being able to sell them at a time of your choosing might not be possible

- There is no guarantee that (all of) the gain will still be there if the EIS shares fall in value, in fact

- It wouldn't be unusual for one or more of the EIS schemes invested in to go skint!

There is no need to be incorporating to consider this option. The gain realised from selling personally held properties can be rolled over in this way.

If incorporating a portfolio that is going to qualify for S162 relief anyway, this is a wholly unnecessary route to even consider.

Overall, I score it 2/10

Scottish news say today Scottish landlords association (SAL) warn of rent increases due to tax changes

http://www.scottishhousingnews.com/10733/scottish-landlords-launch-new-campaign-against-tax-changes/

Hopefully more news stations and reporters will jump on the bandwagon to raise awareness.

So according to the evening standard average rents in london have begun to fall for the first time in six years as increasing numbers of buy to let properties are coming to market. Wasn't expecting that!

Reply to the comment left by "Jim Taliadoros" at "15/08/2016 - 21:09":

It sounds indeed a bit strange - I read that note.
Personally I think it is a result of a large number of properties bought just before 1 April 2016 coming to the market in the same time. Some of them were obviously bought by the cash buyers, so they are not affected by Section 24. As soon as it starts to bite the rents will correct itself. Unless private LLs start selling en-masse to cash investors. We have been the PRS for about 10 years and have never seen such volatility and war on Landlords.

Two interesting pieces to add to the due diligence pile when considering tax avoidance / optimisation schemes

I) This discussion document from the government "Strengthening tax avoidance sanctions and deterrents" which is summarised as "Proposals for sanctions for enablers and users of tax avoidance which is defeated by HMRC and consideration of further ways to influence those contemplating tax avoidance."

https://www.gov.uk/government/consultations/strengthening-tax-avoidance-sanctions-and-deterrents-discussion-document

II) This piece by Jolyon Maugham QC (tax) on his blog that starts

"I have on my desk an Opinion – a piece of formal tax advice – from a prominent QC at the Tax Bar. In it, he expresses a view on the law that is so far removed from legal reality that I do not believe he can genuinely hold the view he says he has. At best he is incompetent. But at worst, he is criminally fraudulent: he is obtaining his fee by deception. And this is not the first such Opinion I have seen. Such pass my desk All The Time."

Full piece here

https://waitingfortax.com/2014/08/07/weak-transmission-mechanisms-and-boys-who-wont-say-no/

Obviously the hottest topic in town!
Apologies if this is a repeat question - I have tried looking back through but can’t quite find what I am looking for…which is…..

Is there a summary somewhere of the current best known mitigations methods of Stamp Duty and Capitals Gains Tax that become liable upon incorporation?

Eg It would be helpful if this was a “sticky” somewhere that got updated as more understanding was gained – maybe it already exists.
One thing I have picked up is that the more inventive the scheme, the more liable to challenge by HMRC it could be.

With the new government I also pick up a note of some hope that the whole thing could be shelved.

BTW I am still waiting for a reply from my MP on the Finance Bill – I asked if he can confirm if it really is possible to end up being a higher rate taxpayer with a £5k pa net income.
I asked several months ago…!

Many thanks

Barry. Good point and question. I guess incorporating tactics and strategies will change and update and it might be useful to start a thread on incorporating specifically.

My take is, as you suspect, any and all "too good to be true" schemes are exactly that "too good to be true" and so are very likely to be expensive to set up and can and will be undone by HMRC or at least investigated and challenged.

Have a look at Ramsey V HMRC and if it fits for you, this in my opinion, is the safe and only proper route. without the hyper expensive costs of actually paying the CGT and SDLT charges to incorporate.

http://www.tribunals.gov.uk/financeandtax/Documents/decisions/Elisabeth_Moyne_Ramsay_v_HMRC.pdf

For me, I have been an landlord for 15 years and I am going nowhere! I will simply collect the Tenant Tax for the government, from the tenants, via increased rents. That is in my opinion the only way the government and the tenants will be drawn to the table on the nonsensical Tenant Tax. By doing what my chancellor has asked me to do (collect tenant tax) I can keep my head up and carry on providing great homes to great tenants albeit at a 35% increased rent to collect the taxes.

I believe also that by collecting the Tax I can focus on being a landlord and persuading the government to change the law rather than finding a expensive dangerous way of breaking it and living in constant stress.

Just increasing rents will not make it obvious to Tenants that it is being increased because of the Tenant Tax, it will just reinforce the populist believe that we are just "greedy" Landlords as peddled by the media.

I am advocating giving Tenants a rent statement which breaks out how much of their rent is going to the Government, of course, it won't really be possible to easily include the tax, e.g. Vat charged by contractors, on other repairs and maintance, nor of the income/corporation tax paid by those goods/service providers.