BTL tax giveaway

amcluesent

Pretty clear we are seeing Gordon flying a kite here to see how a 'tax crackdown' policy on BTL 'toffs' would play on the doorstep in the key marginals. If I was a BTL landlord, I would be expecting a tax'n'grab by 'prudent' Gordon and revising my business plan accordingly.

Gorgeous_George

Even GB cannot tax something that does not exist. He can tax profits but legitimate expenses will always be allowable for tax purposes.

Maybe rent should attract VAT.



GG

mystic_trev

This idea about scrapping the offset has been doing the rounds for ages so I wouldn't be surprised to see Landlords hit one way or the other. Funnily enough I'd be more than happy to see the offset scrapped as I have no mortgages on my BTL's and I assume rents would go up if this happened!

Gorgeous_George

It cannot be scrapped unless all other justifiable business expenses were also scrapped.



GG

keeperbear

wecanhelpu wrote: »

2 billion pounds - the tax relief for buy-to-let landlords

0 pounds - the tax relief for first time buyers

http://money.guardian.co.uk/property/buyingtolet/story/0,,2109150,00.html

So what? As companies can right off loan interest against profits so can individual landlords. What a nothing story.

What about the flipside? A FTB buyer can sell and take any property gain tax free. A BTL investor has to pay capital gains tax on any property gains from selling.

Ad

I come back from a hard days work and the presses are still churning.

There certainly seems to be growing anger at property speculators. Regardless of whether one views 'Buy to let' as a business its a business that has resulted in socially excluding millions from owning their own home and having the security that comes from it.

I think we are being prepared for something. Something is defiantly afoot...

wecanhelpu

Jonbvn wrote: »

A link from the gruaniad is hardly the basis for unbiased policy regarding BTL. After all, I'm sure that I can provide links from the torygraph showing how wonderful BTL is.

What, like this one?

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/01/13/pword13.xml

HugoSP

The truth is that BTLs work on the same basis as any other business asset.

Entrepreneurs are always able to claim relief on the cost of an asset. This includes loans etc to buy it.

In practice the cost of maintaining finance taken out to buy capital equipment comes off the bottom line of the profit and loss account as Interest Payments. Long term loans go onto the balance sheet as Liabilities. There is no reason why letting businesses should be treated any differently, unless GB wants to appeal to the anti BTL lobby.

BTL landlords are already subject to CGT. And, whilst there are opportunities to avoid or reduce the CGT liability, it is not easily done. Most business capital reduces in value over time and hence this capital write off is allowed as relief. There is no such luxury with BTLs.

The Gardian has just simply focused on this for sensationalism. The reporter who wrote this knows damn well how businesses operate. Unfortunately a number of people who will read this artical don't have the same insight.

As for controlling the Great British BTL buy up, there are a number of other options here.

Mortgage companies already charge more. Differences of around 0.5% are fairly common with a given lender.
BTL investors do not have the same level of tax breaks as do other business investors. I see no real reason to bridge the gap here.
Government could give tax breaks to BTL owners who sell their house for a reduced price to private buyers or housing association in a scheme that locks future price increases to maximum of inflation. For example, if a BTL were to sell his house at market value and pay CGT totalling 20% of the sale price, he could be offered CGT exemption if he sold it at say 80% to a private buyer under this scheme. The future sale price of the house would then be capped to inflation depending on when it was sold. Furthermore occupiers could be limited to owner occupiers or tenants paying low rents.

I was very unhappy when the MIRAS was phased out. I thought that this was a grave mistake. I suspect it was done to try to quell the housing market, but all its done is to cause people to struggle. The housing market remained largely unaffected, but will probably rise in response to any effort to bring this back in, unless the government choose a stagnent or falling market to reintroduce it.

As a result we now have a situation where BTL investors are managing their mortgages from their own homes onto newly purchased BTLs to claim full relief on mortgage payments.

pjala

I read the article and was intrigued to note the comparison between none business housing loans and "business" loans.

What I thought was missing was the detail, which I thought was absolutely necessary to explain the polemic against buy to let investors, and landlords.

What happens is all businesses only pay tax on profits, and sometimes this is much less than the 40% top rate tax, i.e. corporation tax which is around 10% less.

Now the interest from a mortgage is a business expense. Also upgrading the property and maintenance is a business expense. The only part of the business of being a landlord that would be subject to tax, is the part that amounts to profit on the investment that a landlord makes. This is the rent that is over and above the expenditure that the landlord makes.

So if a rent is 600 a month, and the mortgage is 600 a month (interest only mortgage), then there is no profit. But landlords who have this situation also MAY have a capital increase as the house price goes up.

This is only brought into the region of profit when the house is sold, so buy for 100,000, sell for 200,000, and the 100,000 profit is subject to Capital Gains Tax. But this is risky, as it may not go up in value. Therefore most landlords want a return on the rent on top of the mortgage they have - usually at least around 10% or so to make it worthwhile, which they will be taxed on.

This is all well and good, and in line with all business practice, but unfortunately the logic of it all does not all stand up. It is just a process to encourage business, a trick to encourage people to keep the capitalist wheel turning. If tax relief was allowed on mortgages for ordinary people - after all we also need to buy a house and it is a loss making enterprise, then very little taxes would be collected by the government. It would not work. Why not declare yourself a business? Because the tax office won't let you do this on the house you live in. In fact the point of business, none business is arbitrary largely, and down to interpretation by the tax office.

The problem is largely when companies seek to avoid tax by pulling into the business personal expenditure, which happens a lot, then their personal taxation is covered by company expenditure - hence none business people loose out, and less tax is collected.

Just my thoughts on the article. I really thought an opportunity was missed by the guardian with this, a shame really.

real1314

What I always find somewhat puzzling about most anti-BTL arguments is that they are mostly targetted at small scales landlords, typically the 1-10 property owners.

Why are people with relatively small scale holding treated in this way when those who own 100s of properties, some of which they leave empty for long periods, are treated as "ok"?

Getting a few properties to ensure a decent retirement is bad / living a luxury life off tenants is some sort of charitable enterprise.