Summer Budget 2015 – Landlords Reactions

CBA in rewinding and listening to it again (so if someone can be bothered they can put me straight if I got the following wrong), but I thought what I heard was that he is annoyed that people are incorporating as this means tax receipts are down, as the self-employed pay more - as we know. And he talked about the need for things to be standardised so that people involved in the same activity paid the same amount. He talked about the need for the 'tax system to be fair.' I shall be sending him the table in my report showing the differential tax treatment of unincorporated landlords, incorporated landlords and holiday lets. He will obviously be aghast when he sees these differentials and will make a separate announcement to reverse Section 24,since it goes against his firmly-held beliefs about what is right and it will also then halt landlords' moves towards incorporation - which he doesn't want! (or that's how I heard it) He also quoted the IFS so I shall remind him of what the IFS has said about s24 being 'plain wrong', and the arguments about 'levelling the playing field' between owner-occupiers and landlords also completely twisted and wrong. Paul Johnson also wrote yesterday in the Telegraph:

'There are several elements to this dysfunctional tax system. I would argue that one of the problems, actually, is that it continues to favour owner-occupation over renting.'

Reply to the comment left by "Dr Rosalind Beck" at "23/11/2016 - 14:12":

Yes Ros, I garnered the same, in that they want people in the same occupation to be treated in the same way by the tax system. However, who's to say this doesn't mean they will disallow interest relief on residential properties held in a limited company?? I have no clue what we're supposed to do now in order to survive.

Reply to the comment left by "Lee Humby" at "23/11/2016 - 14:27":

Lee, I would maintain my previous post in relation to what I heard. Mark Alexander also seems to agree with my previous post but you never know different people hear different things...so we shall wait and see. Please see below:

https://www.property118.com/autumn-statement-2016-landlords-reactions/92459/

Albeit Mark does not see this as a positive news.

Reply to the comment left by "Simon Hall" at "23/11/2016 - 14:02":

We can get round SDLT and CGT in some circumstances, but my reply was couched in terms of having a period of assistance from the govt to do this.

I would recommend anyone speaks with mark smith he will give good advice my trust is going to be up and running April and I have had no SDLT / CG I really don't see what the alternative is if you have a decent sized portfolio a few of my partners are already running there's no brainer for me

Reply to the comment left by "NW Landlord" at "23/11/2016 - 15:19":

Thanks NW. You mentioned in a previous post another idea which you'd run past Mark Smith which involved options. I am contacting Mark and I would love to hear more about this if you feel you can share it with me. I'm open to all ideas. Many thanks!

The comments seem to have dried up. Is everybody in the pub drowning their two sorrows, S24 & SDLT?

Reply to the comment left by "NW Landlord" at "23/11/2016 - 15:19":

NW Landlord, I may have spoken to u on the phone in the past.

I'm friends with Mark Alexander in our private life, he knows me & my houses.
I'm gonna' have a chat with Cotswold when I get time.

But I'm asking u impartially, what are the NEGATIVES with into a company? I have dozens of houses, not a load of mortgages.
I guess you've looked into it. What if I want to take out £100,000 in 2 years to buy a Ferrari? Or £300,000 in 5 years for a villa?

I know we better off with houses in a company, I get that, I need to know if I want my money out?

Reply to the comment left by "Mick Roberts" at "23/11/2016 - 18:49":

Mick, you have asked very good question/s. As long as you keep money invested or reinvest in company such as buying further properties, paying down mortgages you benefit from what we call it rollover relief therefore you are only liable to Corporation Tax which currently stands at 20% and by 2020 this rate of Tax will reduce to 17% saving you further Tax.

However, if you wanted money out of company and bought Ferrari and if this Ferrari is not used "Wholly and Exclusively" for business use then you would be liable for further tax at your marginal rate of Tax in other words "double whammy" as such on the face of it in this particular instance you would probably think that there was no really a point in incorporating however, with the emergence of s24 despite double whammy Tax treatment in corporate structure you are still likely to be better off by incorporating as companies are exempt from Mortgage Interest Relief Restrictions, furthermore your employment income (if you have any) is kept completely separate from company income therefore in my opinion the only way to survival would be incorporation!

In relation to your comment buying a Villa for £300K by all means you will be able to buy a Villa, providing it has been bought with the intention of "Buy To Let" then you would be able to offset any Mortgage Interest or whole £300k however, if it has been bought for exclusive personal use then unfortunately you will not be able to claim any Mortgage Interest Relief nor any Business Expense and you would be taxed accordingly.

I recommend you speak to Mark Alexander he should be able to recommend most suitable strategy by having regard to your full circumstances.

PS: You are unlikely to benefit from incorporation if your rental/INCOME is less than £43000 PA

My accountants have advised me of another possible threat to incorporation

Possible New look Through Entity

In the march budget it was announced that the Government are considering the introduction of a completely new system of small company taxation and have asked the Office of Tax Simplification[OTS]
to consider this possible new system in more detail

It is proposed that the new system if introduced would apply to micro-entities with 9 or fewer employees and would tax shareholders directly on their company profits in proportion to their shareholdings as if the company was a partnership or LLP.For example if Mr and Mrs Screwed each owned 50% of the share capital of Screwed trading ltd and the company made £120,000 profit there would be no corporation tax to pay but they would both be taxed on their £60000 whether or not that amount was distributed to them
It is felt this would level the playing field between the taxation of a small ltd company and an unincorporated business.The Government and OTS are also considering the introduction of protected asset status for unincorporated businesses to align the owners liability with that of limited company shareholders.
Both proposals may have significant tax and commercial implications and we await further developments