Summer Budget 2015 – Landlords Reactions

http://www.landlordzone.co.uk/news/hmrc-to-review-small-ltd-co-business-taxation

There we go, DO NOT EVEN THINK ABOUT INCORPORATING" As HMRC to close the loophole so all efforts and expense may go fruitless.

Reply to the comment left by "Simon Hall" at "06/10/2016 - 16:09":

That is just wishful thinking.

If it were only to affect new borrowing, then the Act would have said so and there would have been no need to phase it in.

Hi Simon anything is better than being taxed out of existence I still keep saying option agreements will work I'm sure of it

And it says might do not is doing, anything is better then nothing I really can't believe what they are doing they surely want to wipe out the PRS it's the only answer to this madness

Reply to the comment left by "NW Landlord" at "06/10/2016 - 18:43":

I won't incorporate...as the above article suggests "Regulatory Risk" therefore all expense and effort of going through changes may turn into double edged sword..therefore patience is the "Key".

Wait and See.

Reply to the comment left by "Michael Barnes" at "06/10/2016 - 18:35":

What they say so...does not always mean they do so.

Legislations can be U turned and amended. Sometimes these measures are in place to deter certain affects, in this case it was to deter unsustainable level of Buy To Let Lending to protect Financial Institutions therefore it did have some desired affect by cooling down the market. If you remember announcement was made in July 2015 and it is yet to be affected in April 2017 as they wanted sufficient time to have desired impact.

The government is acutely aware that there is a chronic shortage of rental properties therefore they will do everything to protect this sector but at the same time they will put measures in place to ensure that Financial Institutions are protected.

I have always said Tenant Tax will only fail and change when the tenants rise up. It seems like it's time to be abundantly clear with tenants about the tax that we must collect from them via a schedule of significant rent increases over the next 4 years.

I suggest we do the following.

1st of November 2016 we all issue a standard notice to all of our tenants that there will be a rent increase on April 5th the increase will be 15%.

The standard nationial unified and coordinated notice will explain the abolition of the 10% wear and tear and the introduction of the restriction of finance costs relief. It must be made clear that the government prefer owners to renters and want to fund right to buy and help to buy with the Tenant Tax raised through rent increases.

We must say that we regret the fact that the Tenabt Tax can only be paid for through increasing rents every year for the next 4 years.

I must state that landlords have consulted with their MPs and with our MPs have taken the matter to the end of the line through a legal challenge and there is nothing further we can do to protect them from the tax.

We should invite them to a national day of protest on a significant date in January.

Anyone who was not willing to issued a Standard notice in unity with the rest of landlords should prepare to incorporate all go bankrupt. If they choose the latter please bear thid forum in mind I and others i an sure would be very interested in obtaining your portfolio.

We should also seek to start a national business whereby we all invest and become a major player in the build to rent market rather than act as lonewolves scattered about in the current disparate way.

That business May in some way act to help, assist take 2nd charges or buy properties from any landlord who is struggling to increase their rents.

Mark I agree 100% the sector is still to fragmented even after all the great work being done by 118 etc I'm all for getting together and acting in a cordinated fashion let's see the official response from the tenant tax team and take there lead as I believe they are the best way to start and follow their lead

Reply to the comment left by "Markb " at "06/10/2016 - 20:32":

Mark,
I'd happily partake, but I raised one of my two tenants' rents this year, with a full explanation why, and it all went very wobbly, with them saying they could not afford the rent. They have been with me almost 3 years, and I had not raised their rent previously, and had no plans to until S24.

They are a couple in a 4 bed as eldest son moved out, so I reminded them that may be why they are stretched; because they are in a 4 bed house. The rent is very competitive for the area, so I issued the section 13 and even suggested they could consider renting out a room, and I would check with the lender if they wished to do that.

Eventually (I imagine after they checked elsewhere and realised they'd have to downgrade considerably if they left, and still pay the same rent) they said they'd like to stay and would stretch to the rent increase.

My concern is if I raise rents again next year, I will be stuck with a non-paying tenant I'll have to evict. How long will that take me and how much will it cost me?

I don't want to increase rents either, but that is an issue I'm going to have to get over.

Rachel
P.S. Maybe we should move from "tenant tax" to "rental tax".

I have just posted the following comment under the Financial Times article about today’s bad news:

“Mr Justice Dingemans concluded that individuals and companies have always had differing treatment in the tax system.”

Agreed. But they have never had differing methods of calculating profit.

Up to now, HMRC have applied what they call Generally Accepted Accounting Practice - which includes the deduction of interest from receipts - in calculating the taxable profits of both companies and individuals. The point is that Section 24 will exclude that deduction in the case of individual landlords.

This means that individual landlords will pay tax on a fictitious amount of profit, resulting in a higher tax payment. The extra tax will amount to a levy on interest which incorporated landlords will not pay. That is the discrimination.

The tax due on the real rental profit may exceed said profit - yes, an effective tax rate of more than 100%. The tax will be payable even if a real pre-tax loss is made.

HMRC will bankrupt any individual landlord who cannot pay the tax on the fictitious profit.

https://www.ft.com/content/b18a4e02-8bd2-11e6-8cb7-e7ada1d123b1