odecar Posted June 30, 2007 Report Share Posted June 30, 2007 Topic been on before with various different items regarding reduction of tax relief etc. Media view seems to be that BTL investors are driving new buyers out of the market and keeping prices high. Increase in house prices are the big concern and are a Bubble thats going to burst. The continuing jump in house prices is causing concern and interest rates have to keep rising to try and stem this. In limiting tax reliefs it is an effective way to drop prices and control them. In the late 80's there was Mortgage Interest Relief per person of £30,000 on a property and the elimination of this caused a huge bubble which collapsed and brought the rest of the market with it. Will it happen ? Answer is yes it will in some form as a trial and to assess the impact. Many ideas are floated to get comment well before the budget time but this is one that I believe will happen within 2 budgets. Media campaign of targeting fat cat landlords not paying tax will ensure little public sympathy available. Link to comment Share on other sites More sharing options...
Melboy Posted June 30, 2007 Report Share Posted June 30, 2007 Funny enough I have just completed my Tax Return............. I have been a Landlord for some many years now and I sometimes wonder if it's worthwhile these days to continue carrying on, like take the money and run! no hang-on I have more or less done that 'cos you do reach a point when you have to take your gains and remove the hassle of Tenants and get out there and spend it all before Inheritance Tax kicks in and robs you of all your hard earned Dosh! and believe you me they will!... ask Sherena......next to Sherena I am almost an expert on I/Tax and it's bloody frightening what they will relieve you of as you croak your last gasp. Mel. Link to comment Share on other sites More sharing options...
plym77 Posted July 2, 2007 Report Share Posted July 2, 2007 I went on the NFRL conference last Thursday and Friday in Birmingham and the interest relief issue is a wide-spread worry for everyone. Many properties are very heavily geared. My initial reaction was that they wouldn't do it. My reasoning is that a letting business is still a business - and as it is the reliefs are already less favourable when compared with other trading businesses. It is however a business just the same. The old MIRAS relief was available a few years back, however, this was a tax relief for purchasing and holding property, rather than running a business. I think you may be right and that the removal of tax relief on interest may be considered, I do however feel that this will be heavily lobbied as the tax relief is there against a loan in connection with the business. If you had taken a 25 year loan for your trading business then tax relief would be available full stop. A BTL is a letting business and a mortgage is a business loan against it. This said, Labour are and have always been bias against the landlord.... and it may well be that removal of relief will happen. I would however expect us to have some advanced warning of this - and not have it sprun upon us like the Trust legislation changes! Quite frankly, if it does happen I shall be seriously considering getting out of the BTL business! Partly as the relief reduces my income tax exposure substantially, and partly through the worry of the knock-on effect of the removal of interest relief - people unable to see BTL as a viable business anymore, causing an influx of BTL-come-first time buy homes back to the market and the possibility that this in turn will reduce property prices! And Mel is right... one of the best ways to avoid IHT is to spend the money!! Sherena Link to comment Share on other sites More sharing options...
Simon Dewsberry Posted July 2, 2007 Report Share Posted July 2, 2007 Hi Sherena So if they do remove relief - what reorganisation can we make to reclaim - as you point out it is a loan against a business asset - we will be taxed on non received income - i have nearly £4million on mortgages and, guess what, i cant afford for them to ignore the fact that i pay interest on that lot every month! Simon Link to comment Share on other sites More sharing options...
odecar Posted July 2, 2007 Author Report Share Posted July 2, 2007 There will be some type of allowances as an overnight tax would destroy the financial markets as property prices would dive very quickly, followed by lots of IVA's and Bankruptcy of good tax paying citizens. Lenders would reposess assets where sale price was 50% of o/s mortgage and mortgagee had declared bankruptcy so the whole financial markets would get hit badly. Hence why a drastic change is unlikely. Link to comment Share on other sites More sharing options...
plym77 Posted July 2, 2007 Report Share Posted July 2, 2007 Hi Simon At the moment... the jury is out I am afraid! As I have said before, I cannot see this happening without some advance warnings. The thing is until we know whether this is likely to happen and what the alternative allowances are likely to be I am unable to consider any alternatives as I have nothing to work with. I have a couple of thoughts involving structuring, however, I just couldn't say until we know more about this, what the perametres will be, whether there will be alternative allowances etc etc. But rest assured that if it does happen (and I shall keep my ear to the ground!) that I and other advisers shall be doing our best to provide the 'next best alternative'... thats IF it happens - and I am still not entirely convinced that it will happen full scale. It may be that mortgage interest relief is capped for example, rather than completely withdrawn, or given as a percentage of income (like wear and tear for example) - however that is purely speculation I should add! The complete withdrawal of relief in its entirety could cause a serious financial downturn and ultimately political suicide! 2 years until the next election and counting... Sherena Link to comment Share on other sites More sharing options...
lauralivesartnouveau Posted July 2, 2007 Report Share Posted July 2, 2007 Hi I agree with Sherena the list of consequences are extensive. The banks will be hit especially specialist lenders like Paragon also the mortgage advisory industry with advisors such as landlord mortgages. That a lot of quality jobs This would then escalate to the building industry followed by the DIY sector and a housing crash also affects all the interior design sector. The homelessness ensued would be in the millions as landlords evict in order to sell with vacant possession. Universities would suffer as student private accommodation disappears. The resulting immediate crash would definitely cause a full scale and prolonged recession. Then there is all of the other businesses and industries which have property mortgages such as hotels, nursing and residential homes, shops and pubs. If they allow some of the above to retain mortgage interest relief then it may be possible to alter the business format in order to benefit one example of this could be sheltered housing. The consequences are too large for a sudden inception without warning. Oliver Link to comment Share on other sites More sharing options...
Simon Dewsberry Posted July 2, 2007 Report Share Posted July 2, 2007 With any luck Guy Fawkes will rise from the dead and finish what he set out to do last time !!! Link to comment Share on other sites More sharing options...
Simon Dewsberry Posted July 2, 2007 Report Share Posted July 2, 2007 Been thinking..........................again ........................!!!!!!!! If they do decide to remove this relief we are going to need to come up with some very creative ways of reducing the "rent fig" (to reduce tax liability) and "making" it something into something else............any preliminary thoughts anyone .......... Simon Link to comment Share on other sites More sharing options...
lauralivesartnouveau Posted July 2, 2007 Report Share Posted July 2, 2007 Hi Simon I like this idea I own blocks of flats so I could reduce rents and increase management charges. The only thing is though all income is tax liable !!!! However I was thinking if tax relief was still available for nursing and rest homes I was thinking of changing tenants to elderly or mentally ill adding a care element and reclassifying as sheltered housing. Oliver Link to comment Share on other sites More sharing options...
Simon Dewsberry Posted July 2, 2007 Report Share Posted July 2, 2007 Be careful "mentally ill" could net you a pile of government tax policy advisors....haha...!!!!!!!!!!!!! What about an offshore management co with monster fees ? (which possibly you could have an interest in ?) Plym? Simon Link to comment Share on other sites More sharing options...
lauralivesartnouveau Posted July 3, 2007 Report Share Posted July 3, 2007 Hi Simon Your up late again I see I have done some research on this and if you go off shore you get stung by “The Non-resident Landlords Scheme”. Link below http://www.hmrc.gov.uk/cnr/nr_landlords.htm I think diversification is the key I would be interested to hear Sherena thoughts on this Oliver Link to comment Share on other sites More sharing options...
lauralivesartnouveau Posted July 3, 2007 Report Share Posted July 3, 2007 Hi It seems that the tax call on loan interest continues… The BBC in breakfast this morning have complained SAGA paid no corporation tax because it offset its tax liability against loan interest….. I have the story link below http://news.bbc.co.uk/1/hi/business/6263866.stm Pressure seams to be building in the wrong direction would be interested in all of your comments. Oliver Link to comment Share on other sites More sharing options...
Simon Dewsberry Posted July 3, 2007 Report Share Posted July 3, 2007 Not good - at all .......... Simon Link to comment Share on other sites More sharing options...
Pauly Posted July 3, 2007 Report Share Posted July 3, 2007 Yes, the BBC often adopt communist points of view and are strongly against any individual or business that makes money, especially from people less affluent ie Tenants. Howver, they overlook the fact that landlords can be part of the solution in reducing massive council housing list backlogs, but they need to realise that we aint doing this for love. Link to comment Share on other sites More sharing options...
Matthew Posted July 6, 2007 Report Share Posted July 6, 2007 I am very surprised nobody has or is mentioning the real problem here. Many Landlords pay very little tax, which I agree is not fair. However, most landlords don't make huge profits while renting properties out, and if they do they are taxed appropriately. It is when a property is sold the huge profits are made, and there are loads of releifs. I think that the capital gains releif of about 8K per person should be removed and there should be no taper reilief at all, currently max of 40% after ten years. Then landlords would be paying the right amount of tax. I would also go alot further than this and increase tax to 60% on capital gains for landlords due to the nature of the business, it is stealing equity from potential homeowners. I beleive that this would deter alot of the Rosie Millards of this world from investing in property, and encourage lanldords to make the business profitable without just veiwing the properties as something to just sit on, do nothing and count the untaxable income at the end. Any thoughts? In addition to this, removing interest relief, without other policies, would encourage more landlords to keep properties empty as the gain from letting would not be worth the effort any more. This seems to contradict what they actually want, which is less of these properties empty. Link to comment Share on other sites More sharing options...
Simon Dewsberry Posted July 6, 2007 Report Share Posted July 6, 2007 Hi Mat Give yourself a good shake !!!!!!!!!!!!!!!!!!!! What are you proposing? I imagine that they will do the sme thing as they did with "miras" and phase it out slowly dropping the % claimable over a period - Slightly less painful but making it very difficult for anu one with more than a couple of houses to operate at all..........unless very sml mortgage or owned outright............. With the above in place -i fail to see how a simple BTL can be viable ................ Simon Link to comment Share on other sites More sharing options...
odecar Posted July 6, 2007 Author Report Share Posted July 6, 2007 I think Matthew has a fair point as if you manage it properly you can pay little tax on BTLs and the equity gains at the end can be managed to ensure minimum CGT. Link to comment Share on other sites More sharing options...
Matthew Posted July 6, 2007 Report Share Posted July 6, 2007 Hi all, Not sure I was clear, but I was saying the interest relief should stay, but CGT should be looked at. Your business (Simon) will still be just as viable, but you wouldn't make anywhere near as much money when you sell a property. The current CGT system is just so unfair, why should the CPT reliefs exist??? Pym? Link to comment Share on other sites More sharing options...
Matthew Posted July 6, 2007 Report Share Posted July 6, 2007 Hi all, Not sure I was clear, but I was saying the interest relief should stay, but CGT should be looked at. Your business (Simon) will still be just as viable, but you wouldn't make anywhere near as much money when you sell a property. The current CGT system is just so unfair, why should the CPT reliefs exist??? Pym? Link to comment Share on other sites More sharing options...
GPEL Posted July 6, 2007 Report Share Posted July 6, 2007 Too little tax? Not fair? Says who? Tax evasion wrong; tax avoidance right. It's a level playing field for everyone and the current shambolic government has done a very good job so far with its stealth taxes and door shutting policy. Link to comment Share on other sites More sharing options...
J4L Posted July 6, 2007 Report Share Posted July 6, 2007 'Tax evasion wrong; tax avoidance right' I need to think about this one. Link to comment Share on other sites More sharing options...
GPEL Posted July 6, 2007 Report Share Posted July 6, 2007 Evasion=slammer Avoidance=legitimate profit A good accountant knows the difference Link to comment Share on other sites More sharing options...
Simon Dewsberry Posted July 6, 2007 Report Share Posted July 6, 2007 Yep Tax Avoidance fine - no problem - Plym makes (probably a very good!!) living from this very complex operation I think 40 % CGT is plenty high enough - thank you very much ! Why not just turn full Philanthropist and just pay all "citizens" the same income regardless of effort risk blood sweat tears and cash invested ? It grips my Sxxt when i see wasters who have never worked a day in their life - sitting in luxury apartments with all mod cons at the expense of hard grafting risk takers like us LLs. So as you write your cheque out to HMRC just think of the last toerag you had to evict and the money you never got back and the disgraceful state the prop was left in - which you were on your hands and Knees cleaning -When you should have been at the park or beach with the kids............ Nope 40% is plenty - For nearly half your "profit" to be taken by a silent non risk taking "unathorised" partner is shocking so not to arrange one's affairs to minimise the impact of this is, i feel, a bit silly........ Simon Link to comment Share on other sites More sharing options...
J4L Posted July 6, 2007 Report Share Posted July 6, 2007 If it was legitimate it wouldn't be called avoidance. I'm annoyed now because I've paid loads last year!! And i've got a really good acountant. And for those of you who tut tut, I'm pi**ed off with spongers and anyone who 'pretends' to be legal. It's just as much the avoiders that cost ME aswell as the layabouts that claim they don't work!!! Link to comment Share on other sites More sharing options...
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