15:37 PM, 21st July 2016, About 8 years ago 54
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Dear Mr Hammond,
Upon her welcome ascension to the role of Prime Minister, Mrs May verbally committed the Government to act on behalf of the striving workers of Britain, rather than exclusively for the benefit of those at the top of society. It is therefore in this light, that I feel I must bring the following matter to your attention.
I am one of the many private landlords operating outside of the property hotspot of London. Throughout most of the country outside London rents have remained static, rising nationally at a rate lower than overall inflation. However, the trend with myself and among landlords that I know has been to charge the same rents year-on-year; the aims of this being to cover mortgage outgoings and other costs while insulating our tenants from disruption and hardship. In other words, just to let things “tick over”. It was for this purpose last summer that I re-mortgaged all of my properties: to prevent my rents from increasing (rents paid by hardworking strivers) I re-mortgaged to stop my mortgage outgoings from doing likewise.
Unfortunately, thanks to your predecessor George Osborne pulling the rug out from beneath myself and other formerly Conservative voting landlords (and by definition also our tenants), this effort appears to have been for nothing. Section 24 of the Finance Act 2015/16 will, with each year that passes until 2021, remove our ability to offset mortgage outgoings (our main cost) against tax. The affect of this will be to repeatedly and significantly rachet-up the amount of tax that we pay by reclassifying increasing proportions of a genuine business expense as fictitious profit. This is an utterly unprecedented and frankly dishonest method of increasing tax revenue. It is one of the policies, pushed through without proper consultation by the Treasury and absent from the Party’s manifesto, which caused George Osborne’s reputation among the Party’s grassroots to bomb through the floor and for his departure from the role of Chancellor to be greeted among them with such glee.
Within a year of the Conservatives’ election victory, Treasury policy has been pushing significant numbers of people to have voted Conservative not to do so again. This year’s local elections were the first time in my life that I chose not to vote Conservative: such was my discontent with George Osborne’s activity and the prospect of him potentially leading the Party in future. Every landlord that I know, who was aware of Section 24, also did the same. Through this policy, Mr Osborne also enlarged his reputation for granting favours to corporate vested interests: the reality of Section 24 is that contrary to previous official spin, the wealthiest cash-buying and corporate landlords (many of whom are prominent Conservative party donors) are completely protected from its implications. When subsequently, during his Autumn statement, the then Chancellor quite cockily responded to criticism of this unfairness with a targeted stamp duty hike upon smaller rental providers, he’d truly passed the point of no return… demonstrating the same punitive impulse as which would later drive his ill-famed “Punishment Budget”.
Of far greater importance however are the implications of Section 24 upon the hardworking strivers who Mrs May has pledged to stand up for. Because the projected higher tax bills calculated from fictitious profit will in many cases exceed today’s rents once added to mortgage outgoings, many landlords have no choice but to increase rents. Indeed, those aware of Section 24 have already begun to do so. This is why Section 24 has been dubbed “The Tenant Tax”. Thanks to your predecessor, the country is beginning to experience entirely tax-driven rent increases. This is bad for working Britons and their corresponding ability to save up a deposit of their own. Furthermore, as the minimum rents landlords need to charge rise, in order to cover their outgoings and inflated tax-liability, their ability to let to the poorest and most vulnerable members of society will decrease: particularly so following recent restrictions to housing benefit. Already stretched local councils and housing associations will therefore pay a heavy price for this past year of short-termist landlord-bashing. Those landlords resultingly unable to obtain rents high enough to cover their costs will in turn be forced to evict their tenants and sell with vacant possession, reducing the overall supply of rental accommodation, placing further upward price pressure upon the rental sector in the long-term, and damaging labour mobility within the country at large.
The state will also face further financial costs of its own, namely the cost of investigating the growing number of landlords driven not to declare rental income in order to keep their rental businesses viable, and the cost of defending Section 24 in Court during the upcoming Judicial Review of the measure.
In short – irrespective of Brexit, Mrs May becoming Prime Minister, and George Osborne’s departure – if the Treasury does not reverse the recent legacy of your predecessor and dustbin the impending cock-up that is Section 24 of The Finance act 2015 (“restrictions on finance cost relief for individual landlords”), the situation for both hardworking strivers and the reputation of the Parliamentary party among grassroots Conservatives will continue to deteriorate.
Thank you for your attention with this matter.
Yours sincerely,
Gareth Wilson
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Open Letter To The New Chancellor – @PHammondMP – https://t.co/8474MKsqaO pic.twitter.com/iFjssUErbV
— Property118.com (@Property118) July 21, 2016
Property118 Action Group is doing its bit and has proven that the power of a crowd can make a difference.
For example, £27,500,000 of overpaid mortgage interest was refunded to landlords in 2016 as a result of legal campaign undertaken by 300 members of Property118 Action Group against West Bromwich Building Society. Between them, just over 300 landlords raised just over £601,000 to take their case all the way to the Court of Appeal.
Just imagine what thousands could achieve!
Our target is 50,000 members paying £10 a month. This will generate a fighting fund of £6,000,000 a year.
We are calling upon all letting agents and professional advisers to recommend membership to all of their landlord clients.
Many are already benefiting from tax planning and business restructuring strategies discovered and shared amongst Property118 Action Group members, which are now saving them a fortune in tax.
Our latest legal campaigns are targeting refunds of an estimated £600,000,000 of mortgage interest overcharges made by Bank of Ireland and Skipton Building Society as well as a reversal of legislation increasing tax on landlords with mortgages, many of which will pay more tax on rentals than they receive in profits.
For just £10 a month YOU can be part of Property118 Action Group, TOGETHER we can influence the future of UK housing and we can all benefit by sharing enthusiasm and best practice.
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We also run quarterly competitions for Founder Members whereby the person who helps us to recruit the most members wins a 5 star holiday in Malta for a week.
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Our vision is crystal clear, as are the steps we need to take, but we need YOUR help.
If just a few hundred landlords can take on the might of a rogue financial institution (and WIN!), just imagine what thousands of us can achieve!
When Property118 Action group took on the legal campaign to challenge the actions of West Bromwich Mortgage Company there were obviously doubters who said we would never raise the £500,000 required to go to Court, and even if we did we would lose. We proved them wrong!
The Financial Ombudsman Service had previously ruled in favour of the mortgage lender!
Property118 Action Group has committed to pledge £100 to the “Axe The #TenantTax” campaign for every Lifetime Founder Member.
The #TenantTax is arguably the greatest threat to the private rented sector due many landlords considering selling up. Any reduction in supply of quality rental property will negatively impact letting agents and well as increasing demand amongst tenants, thus driving up rents.
In addition to providing funding towards the intended Judicial Review of #TenantTax Property118 Action Group has undertaken significant research and lobbying as well as using our official Google News Publisher website status to promote the cause. The Property118 website attracts more than 1.8 million unique users a year and is considered to be a centre of influence amongst mainstream and regional media groups.
There are many examples of landlords having been victims of fraud by abuse of position committed by their letting agent where Police and CPS have dropped cases due to lack of resource.
We have several cases ongoing where agents have used client money to pay themselves huge bonuses before putting their businesses into administration. As a result of the Police failing to get involved Property118 Action Group has been helping to raise the funding necessary to mount private criminal prosecutions on behalf of our members. Many of these are now coming to trial.
Property118 Action Group pay all initial costs associated with private criminal prosecutions where groups of 15 or more of our members have been victims of crimes perpetrated by the same business. The Crown picks up legal costs once Magistrates agree that a trial is in the interests of the public, regardless of whether the accused is found innocent or guilty.
In March 2013 Bank of Ireland raised tracker rate mortgage margins. Over 13,000 borrowers were affected. Many of these originally took mortgages with Bristol & West which was taken over by Bank of Ireland. Two Barristers and one QC provided written opinion that they believed the Bank were in breach of contract. Sadly, Property118 Action Group didn’t exist then. Many of the affected borrowers initially expressed an interest in legal action. However, when it came to having to commit substantial sums of money to fund legal action their enthusiasm quickly dissipated leaving less than a few dozen of the more militant campaigners with the impossible task of raising the required funds. If each of those affected had only needed to commit to paying a one of fee of £600 or committing to a monthly subscription of £10 a month the position might have been very different, as would the level of media attention on the case as it progressed through the judicial system. Many of the affected borrowers have already overpaid 10’s of thousands of pounds. The Financial Services Ombudsman ruled the bank was within its rights to make the changes. However, following the Court of Appeal overruling the FOS decision in respect of the West Bromwich Mortgage Company rate hike, Property118 Action Group plans to take further legal action on behalf of its member in August 2016. All Founder/Lifetime Members with mortgages affected by this lender will be invited to be part of this legal action at no extra cost.
In 2010 Skipton Building Society unilaterally decided to abandon a contractual commitment to cap their standard variable mortgage rates to 3% over the bank of England base rate. An estimated 135,000 mortgages were affected, many of which had been provided via their subsidiary company Amber Homeloans. The Financial Services Ombudsman ruled the lender was within its rights to make the changes. However, following the Court of Appeal overruling the FOS decision in respect of the West Bromwich Mortgage Company rate hike, Property118 Action Group plans to take further legal action on behalf of its member in August 2016. Again we have the legal opinion of two barristers, both of which have advised that the lender is in breach of contract and that a Court is likely to award a full refund of all payments over and above what the mortgage contract allowed for. All Founder/Lifetime Members with mortgages affected by this lender will be invited to be part of this legal action at no extra cost.
Property118 Action Group is not insurance based, it is more akin to a Union which utilises member subscriptions to protect and fight for the rights of its members. It does not provide legal services but will procure them where necessary.
Successes in the Courtroom enhance our public profile and drive an increasing number of landlords to seek the security and peace of mind that only Property118 Action Group membership can provide.
As many landlords have learned to their peril; when it comes to funding litigation against mortgage lenders or the Government, legal fees insurance policies often prove to be about as useful as a chocolate fire guard. Furthermore, trade bodies rarely have the necessary experience, resolve, finances or other resources to get involved in action beyond referring their members to their preferred suppliers of legal services, the authorities or Ombudsmen.
The UK private rented sector is often described as one of the UK’s remaining “cottage industries”.
Private landlords own around 4.8 million properties providing housing for around 22% of the adult population.
There are thought to be around two million private housing providers (buy-to-let landlords) in the UK
Private housing providers (buy-to-let landlords) often lack the experience and finances to defend their rights. Membership of Property118 Action Group provides a unique and powerful umbrella at a very reasonable price.
Letting Agents are highly reliant upon a healthy private rented sector.
Successfully defending our members’ rights continues to enhance our public profile through media based PR and reporting.
ARLA (Association of Residential Letting Agents) were the first to agree to promote Property118 Action Group at their landlord exhibitions, by having roll up banners on their own exhibition stand, handing out leaflets to attendees and signing up new members. From time to time we look for volunteers from our membership to represent us at events. Obviously we cover their reasonable expenses for this.
Naturally, we encourage our members to share the advantages of being a member of Property118 Action Group through social media, talking to friends, email and so forth.
We also run quarterly competitions for Founder Members whereby the person who helps us to recruit the most members wins a 5 star holiday in Malta for a week.
In 2015 the Property118.com website had over 3 million page views from over 1.8 million unique visitors. The projection for 2016 is over 8 million page views based on the results in the first half of the year, trajectory of growth and the anticipated additional interest off the back of the win against West Bromwich Mortgage Company at the Court of Appeal.
We continue to form strategic alliances with many more organisations representing large numbers of landlords or letting agents.
We have produced leaflets, logo’s, website widgets, and roll-up banners for use in offices, shops and exhibitions. These, along with other support in terms of copy-writing, Press Releases and joint PR are all available free of charge to any organisation that wishes to form a Strategic Alliance.
If you work with such an organisation please see this link
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NW Landlord
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Sign Up9:21 AM, 22nd July 2016, About 8 years ago
Great letter
We need to lobby him direct through the various action groups as the problem we will have is its at the bottom of the pile in priorities. I do believe it will take time for it to bite before action is taken so all landlords need to plan accordingly Ie incorporation etc
Dr Monty Drawbridge
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Sign Up12:20 PM, 22nd July 2016, About 8 years ago
Unfortunate that this begins by differentiating London landlords from others, possibly allowing it to be inferred that the tax may be justified in London but is having adverse effects elsewhere. London rental returns on investment are amongst (if not actually) the lowest in the UK and London landlords are consequently disproportionately adversely affected by clause 24. If we want MPs to understand then we should be careful not to muddy the issue. We should try a little harder speak with one voice.
Christine Reynolds
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Sign Up12:54 PM, 22nd July 2016, About 8 years ago
I may be being very stupid but I can't see why landlords should have tax relief on interest when buying Buy-To-Lets when people buying for their own residence no longer have this tax relief perk. Doesn't this mean that home buying is being squeezed out as it's more advantageous financially to buy Buy-To-Lets and is this fair?
Dr Monty Drawbridge
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Sign Up13:51 PM, 22nd July 2016, About 8 years ago
Hi Christine,
It is the difference between owning something for your own personal use and owning something for a business - very different purposes (whether it is residential property or anything else). Businesses (incorporated or not) are all set up to make a profit from providing a service. That's pretty much the only reason they exist.
If you bought a car for your own use with a loan, the interest on that loan would not be deductible from your taxable income. Neither would any of your car's maintenance costs.
But if you used the loan to buy a car which you then hired to people (a car hire business), you would be taxed on the profit you made doing so. And in calculating the profit you made you would take the amount of income you received in hire charges and deduct the cost of the loan you needed to buy the car (as well as maintenance costs, etc).
This would be the same for pretty much anything else that you purchased. Other than residential property.
If your argument is simply that business and private ownership should treated exactly the same for tax purposes (and I don't see any obvious examples of this principle elsewhere in taxation) it would follow that landlords should pay not capital gains on the increase in value of the property over time - just to be like owner occupiers. Or indeed owner occupiers would need to pay 28% tax on their profit when they sold up just to be like landlords.
Mandy Thomson
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Sign Up15:17 PM, 22nd July 2016, About 8 years ago
Reply to the comment left by "Dr Monty Drawbridge " at "22/07/2016 - 13:51":
I made this argument to someone on Twitter the other day. The response I got was "BTL isn't a business". Well, to anyone who says it is not I would say it is for the following reasons:
- the responsibility (compared to the upkeep of your own home) is far greater - not just in the legal sense, though landlords have much more legislation to comply with than owner occupiers, but in the MORAL sense - no decent person feels comfortable taking rent money for accommodation that isn't up to standard, and the "accidental" landlords who think they CAN cut corners often learn the VERY HARD way that they can't. As a landlord, I have had sleepless nights worrying about ongoing maintenance issues, that would just be an irritation if I was an owner occupier.
- the work: I recently had to undertake an end of tenancy refurbishment and find new tenants. I could only afford to pay professionals to do some of the jobs, the rest I did myself. I spent several weeks skimming, painting & tiling. I then used OpenRent to advertise and found and referenced my own tenant, ensuring that all the legalities were complied with. In short, I had be a handyman, removal man, letting agent, referencing clerk, inventory clerk, PAT tester, cleaner, and finally, a landlord. Larger landlords pay others for these jobs through their rental profits, but even so, they still have the expense and the buck still stops with them - either way, it is work related to a business.
Christine Reynolds
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Sign Up18:00 PM, 22nd July 2016, About 8 years ago
Reply to the comment left by "Dr Monty Drawbridge " at "22/07/2016 - 13:51":
Thank you. I do understand your points but still think that the fact that landlords can buy houses at a more advantageous rate (factoring in mortgage interest relief) than an ordinary home buyer does help to inflate the house prices and until prices fall more in line with average wages the ordinary working person won't be able to buy their own. I think this makes for a very unfair society. It's good to have a rental market for the young and mobile but I do want a society where children can be raised with more stability of residence.
Mandy Thomson
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Sign Up18:53 PM, 22nd July 2016, About 8 years ago
Reply to the comment left by "Christine Reynolds" at "22/07/2016 - 18:00":
The most favourable loan to value (LTV) rate you can get on a BTL mortgage is 80% - meaning you need a minimum 20% deposit. I suspect the average LTV is even lower than this. The interest rates are usually much higher too, although BTL mortgages tend to be on an interest only basis, and for that reason the monthly payments are lower.
Because of the need for a large deposit, many small landlords are now in fact priced out of London and the SE, and even if they aren't, the returns (after mortgage payments, maintenance charges and other expenses are factored in) simply don't make it worthwhile to anyone who needs to make up their income from their rental profits. All this is BEFORE the infamous Clause 24 kicks in!
Any new landlord entering the market would therefore be best advised to let to students in cities outside of the SE - this is not normally accommodation that first time buyers would want.
Fed Up Landlord
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Sign Up9:07 AM, 23rd July 2016, About 8 years ago
Christine the language used by the Treasury is misleading. It's not mortgage interest tax relief that landlords get. It's the ability to deduct a legitimate business expense ( mortgage costs) from their income to arrive at a profit. Like many landlords I never used to increase rents between tenancies and one tenant was on the same rent she was on in 2002. About £100 a month under market value. This saves her £1200 a year. As a result of the "tenant tax" which taxes me on profits I have not made, she has been advised of future rent increases up to 2020 to bring it up to market rent. Landlords are in business to try and make a profit. And to provide a pension for later life after existing pension arrangements were scuppered by the Gordon Brown era. The tenant tax makes all that much harder and tenants ultimately will have to take their share of the additional burden - which in many cases will still not cover the extra tax. Some landlords I deal with in my letting business have sold up and I have reluctantly had to issue possession notices on their behalf making families homeless. This is the human face of the tenant tax. Bankrupt landlords, homeless tenants, kids moved miles away from their schools. Very very sad and a disaster of the previous governments own making.
NW Landlord
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Sign Up9:49 AM, 23rd July 2016, About 8 years ago
Don't buy into the governments spin. How can you justify getting taxed on money that has been paid to a lender to service the largest cost most landlords have to do business it's farcicle. If every business was taxed this way the country would grind to a halt. The rubbish about landlords outbidding first time buyers is untrue especially where I buy where most FTB buyers wouldn't ie low income low value areas and most landlords wouldn't pay what first time buyers pay as most are looking for deals
Mandy Thomson
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Sign Up10:10 AM, 23rd July 2016, About 8 years ago
Reply to the comment left by "NW Landlord" at "23/07/2016 - 09:49":
Even if a landlord does purchase a property at full market value (and some do), that landlord is immediately at a disadvantage compared to a FTB, who is only expected to put down a 10% deposit at most, though 5% is more likely, and 100% mortgages are available.
I'm sorry to say that I believe Clause 24 is being driven by no more than hatred and envy toward landlords, as a clumsy attempt to cool down the housing market and raise revenue, at a very high cost to housing supply - but we know that no modern government *really* cares about that, and it's a dry subject that people in general don't care about, until it comes to bite them!