A return to MIRAS - what do you think?

dopester

No

silvercar wrote: »

You used to be able to get £30k MIRAS each as a couple, but only one lot of £30k if you were married. I remember people moaning how they were losing out by getting married. I don't think the WIKI article has the dates quite right. I thought it was finally abolished before 2000, possibly as early as 1990. I remember it was restricted to basic rate and then 15%, possibly down to 10%, then abolished.

It was partly the advance notice that Nigel Lawson gave about the ending of the combining of allowances (£60K - MIRAS) on joint mortgages which led to a surge of glorious HPI, which led to a subsequent mini-crash in prices/recession.

I agree with Carolt's OH... prices found their heights without MIRAS since 2000, so we don't need MIRAS interference trying to support house prices. Although the old levels of interest relief are a joke when compared against today's hyperinflated house prices.

1988 Nigel Lawson Abolition of dual MIRAS Fiasco

Mortgage Interest Relief at Source, or MIRAS, was a scheme introduced by the government of the UK in 1983 in an effort to facilitate a greater level of borrowing for house purchases; it allowed borrowers tax relief for interest payments on their mortgage. This was available for the first £30,000 of a qualifying mortgage and up until 1988, those with joint mortgages were able to combine their allowances to £60,000.

The Chancellor, Nigel Lawson in his budget of 1988 gave a two month window for the abolition of Joint MIRAS - which completely predictably gave rise to one of the fastest examples of House Price Inflation the UK has ever seen (i.e. a 2 bed house in an average West Wiltshire town that cost 50K in the April of 1988 was worth 70K by the August). After this point the market stalled and in the early 90s collapsed under the onslaught of rising interest rates (such that the house in the example above was worth only 38K in 1991)

http://www.housepricecrash.co.uk/wiki/Financial_Crisis

Andy_L

No

Kohoutek wrote: »

Well the original point I made was that unlike other businesses, BTL landlords don't create jobs or provide useful services like a plumber or electrician.

So being able to rent somewhere to live isn't a "useful service"?

Kohoutek

Andy_L wrote: »

So being able to rent somewhere to live isn't a "useful service"?

Well if you read the rest of my post, it would make more sense. Can't you see there's a difference between creating a business that provides services, and assuming ownership of a property and using it to provide rental income? Did the BTL landlord create the property?

Housing associations and other registered social landlords provide social housing, but the difference is they are run on a not-for-profit basis. That's why I think they should quality for tax relief, and BTL landlords shouldn't.

CLAPTON

Kohoutek wrote: »

Well the original point I made was that unlike other businesses, BTL landlords don't create jobs or provide useful services like a plumber or electrician.

So, according to you, there's no difference between gaining control of land and using it to extract rent, and useful, productive commerce?

The state should encourage job creation and business that provide useful skills, why would it want to encourage people to take out mortgages and get a tenant to pay back their mortgage + profit? I think it would be more appropriate for the government to support housing associations and local authorities to expand the amount of social housing available, not individuals with rent-seeking tendencies.

Tax clearly has been a tool used by governments to encourage or discourage things that they like or dislike; whether or not their decisions encourage 'useful' or 'productive commerce' is a very different matter. (concorde comes to mind)

The state should provide an environment where people can go about their reasonable and lawful business. Unless something is specifically harmful then it should be allowed (so one would have to consider banning alcohol, drugs, dangerous sports, car travel etc as examples of harmful behaviour). In any event one person 'useful' skills and anothers 'useless parasite'.
How do you justify 'tax allowances' for things like reality TV shows, Facebook, pubs, horse racing, 4x4 cars but find only rented accommodation as the villian of the peace.

Providing rented accommodation doesn't seem either a harmful activity or an intrinsically a 'state' monopoly any more that the provision of food should be.
The state has no track record of successfully providing rented accommodation in a cost effective or efficient manner.

Kohoutek

CLAPTON wrote: »

Unless something is specifically harmful then it should be allowed (so one would have to consider banning alcohol, drugs, dangerous sports, car travel etc as examples of harmful behaviour).

When did I say it should be banned? I simply said it shouldn't have tax relief on mortgage payments. Tax relief is a form of redistribution of wealth from the taxpayer to recipients of tax relief - that's why it's important for example that all registered charities are genuine.

CLAPTON wrote: »

In any event one person 'useful' skills and anothers 'useless parasite'.
How do you justify 'tax allowances' for things like reality TV shows, Facebook, pubs, horse racing, 4x4 cars but find only rented accommodation as the villian of the peace.

I don't know about the specifies for those examples. Is there really tax relief for 4x4 cars? I find that hard to believe.

I think there's an argument that any business or entrepreneurial activity at an early stage that might encourages jobs creation should be qualify for subsidy - e.g. relief on loans to but capital equipment.

CLAPTON wrote: »

Providing rented accommodation doesn't seem either a harmful activity or an intrinsically a 'state' monopoly any more that the provision of food should be.
The state has no track record of successfully providing rented accommodation in a cost effective or efficient manner.

I never said it should be a state monopoly. There's a huge difference between the state banning an activity and merely not subsidising it. Subsidy is the state actively giving money to somebody to encourage them to do something - I think you need very good reasons to justify when this should happen.

CLAPTON

Kohoutek wrote: »

When did I say it should be banned? I simply said it shouldn't have tax relief on mortgage payments. Tax relief is a form of redistribution of wealth from the taxpayer to recipients of tax relief - that's why it's important for example that all registered charities are genuine.



I don't know about the specifies for those examples. Is there really tax relief for 4x4 cars? I find that hard to believe.

I think there's an argument that any business or entrepreneurial activity at an early stage that might encourages jobs creation should be qualify for subsidy - e.g. relief on loans to but capital equipment.



I never said it should be a state monopoly. There's a huge difference between the state banning an activity and merely not subsidising it. Subsidy is the state actively giving money to somebody to encourage them to do something - I think you need very good reasons to justify when this should happen.

The examples I gave are simply examples where companies can offset COSTS agains TURNOVER to determine PROFIT.
It is PROFIT that is taxed.
You are choosing to use the word 'subsidising' where others use the word 'costs'.
The production of 4x4 cars, TV programmes, lapdancing clubs, pubs are all allowed to offset COSTS against their TURNOVER and so reduce their PROFIT and hence tax... in your words they are ALL being subsidised by the tax payer.
Its just NORMAL taxation policy in the UK that INTEREST (not mortgage payments) are considered COSTS of running a business however worthy or unworthy the business may seem.

So, I assume that you feel its completely acceptable for the interest payments on a property used as a lap dancing club should be 'subsidised' by the taxpayer but not the interest on a property rented out.

Kohoutek

CLAPTON wrote: »

So, I assume that you feel its completely acceptable for the interest payments on a property used as a lap dancing club should be 'subsidised' by the taxpayer but not the interest on a property rented out.

Well why not? A lap dancing club creates jobs that weren't there before, a lap dancing club creates entertainment that wasn't there before.

If you acquire a property by a mortgage for the purposes of paying the mortgage payments by renting it out, what useful product or service have you created? The property already existed - it can be utilised for the purposes of providing a place to live regardless of whether it is owned by a freehold owner using it as a place to live, a housing association, a local authority or a BTL landlord etc. If anything it's better if a housing association owns it, because they're run on a not-for-profit basis and any surplus income can be reinvested into programmes to develop more social housing.

CLAPTON

Kohoutek wrote: »

Well why not? A lap dancing club creates jobs that weren't there before, a lap dancing club creates entertainment that wasn't there before.

If you acquire a property by a mortgage for the purposes of paying the mortgage payments by renting it out, what useful product or service have you created? The property already existed - it can be utilised for the purposes of providing a place to live regardless of whether it is owned by a freehold owner using it as a place to live, a housing association, a local authority or a BTL landlord etc. If anything it's better if a housing association owns it, because they're run on a not-for-profit basis and any surplus income can be reinvested into programmes to develop more social housing.

So lets assume the lap dancing club was already there and successful.
Some-one then came along and borrowed money to buy the fully functioning lap dancing club.
No new employment is created, no new entertainment is created, but the new owner is 'subsidised' by taxpayers as he/she can offset the cost of the interest payments against profit. How fair is that?


Through a family situation with an elderly relative, I have had a little exposture to the management of not-for-profit housing associations and am less than impressed. Also I note that the directors pay themselves very well indeed for doing a risk free job, but that's another story.

StevieJ

Don't see what the argument is, the govt receive tax income from the profit on BTL, end of - No subsidy there.

Kohoutek

CLAPTON wrote: »

So lets assume the lap dancing club was already there and successful.
Some-one then came along and borrowed money to buy the fully functioning lap dancing club.
No new employment is created, no new entertainment is created, but the new owner is 'subsidised' by taxpayers as he/she can offset the cost of the interest payments against profit. How fair is that?

Well, I don't know how tax works on mergers and acquisitions, it may not be the same offsetting interest payments on loans taken out for capital expenditure. If the new owner will maintain the business and keep it healthy, then jobs are being preserved

Look - my point was that if you buy a property on a BTL basis, you are not creating any new accommodation if you simply buy a property from the pre-existing owner and rent it out - what Fergus Wilson did.

Perhaps it's different if you build a property from scratch, or redevelop it - e.g. convert a townhouse into flats because you are actually increasing the amount of accommodation available on the market. That is useful and should be encouraged, but people like Wilson operating on a purely selfish motive shouldn't.