What do you think will be the imapct of B2L tax rises?

lisyloo

Unreasonable behaviour is not leaving the dishes in the sink overnight or leaving the top off the toothpaste, it's on the level of domestic violence And iThe behaviour has to be sufficiently bad to cause the marriage to end, which patently isn't true.

I'm not a lawyer but I don't agree it can be achieved honestly and whilst I'm very keen on legal avoidance, i think it's evasion.
We'll have to agree to disagree on that one.

the_flying_pig

i doubt there'll be what you'd call a seismic change.


impact on owner-occupation - a modest increase in supply, no change in demand, overall slightly more transactions at very slightly lower prices.


impact on renting - modest reduction in supply, very modest reduction in demand, overall slightly less renting at very very slightly lower rents.

Conrad

wotsthat wrote: »

AIUI there's no such thing as a sham divorce.

I'm afraid to say there is, it's another common ruse I encounter (it's due to my job that I get these insights).


It's particularly prevalent with 2 London communities, but that's another story.


The reason divorce / separation is engineered is usually to enable one party to be housed using housing benefit to cover a new rental place. However, they do not move in (apart from on paper), and instead sub-let it for cash. Bare in mind the remaining spouse might also already be HB funded. Also 2 separated spouses tend to be entitled to higher benefits / tax credits, or the non earning spouse can greatly increase her benefits if she is 'alone' with kids.


The secondary benefit of this is that where the spouse is housed in council or HA accommodation, a RTB discount becomes available later on.


Very common for me to have had RTB enquiries where it turns out the applicant has never lived there.


In reality they are not separated at all.

Conrad

lisyloo wrote: »

I would have thought if you lie to gain a tax break then it becomes illegal evasion and not legal avoidance.

Almost no one gets caught round here, the gains far outweigh the risk. Even if lets say the council did get round to doing a physical property inspection and finds the couple living together, they can just pretend they've just 'got back together, what a joyous event eh'.

lisyloo

the gains far outweigh the risk

That depends entirely on what you have to lose.

I'm not up for perjury/contempt of court charge or even up for lying on moral grounds.
For the other people described of few means there may be few risks.
For me personally the risks are a contempt of court prosecution, potential loss of IHT relief, loss of tax free transfer between spouses, loss of spousal benefits on dividends, potential job loss, estranged family members becomng next of kin and making important medical decisions, loss of spousal pension benefits (this could be a pension for life) etc.

Even if it didn't involve lying on the divorce paperwork I think the risks outweigh the gains for me.

Thrugelmir

Conrad wrote: »

There is a significant propensity to avoid tax in the B2L community, this will be just another extension of that behaviour. Lots of LL's don't use managing agents, they are more or less off radar. I owned 2 places in Germany and avoiding tax was far harder, they are much more sceptical and inquisitive and link everything together, for example the land registry and the tax man.


And people wonder why some choose to buy at auction with supposedly clean cash...

I think you are underestimating how much access the HMRC now has in terms of visibility on an individuals affairs. There's also been a unit in existance since September 2013 that focuses purely on property letting. With no limit as to how far back the HMRC can assess unpaid tax liabilities never say never.

Who pays in "cash" these days? Long gone are the suitcase days.

Conrad

Thrugelmir wrote: »

Who pays in "cash" these days? Long gone are the suitcase days.

You're joking, cash is king.


Cab drivers, roofers, carpenters, the list is endless.

wotsthat

lisyloo wrote: »

Even if it didn't involve lying on the divorce paperwork I think the risks outweigh the gains for me.

It depends on circumstances - for most couples it's moot because there wouldn't be any gains.

There was a pension pot of £400k in another thread and talk about a 4% drawdown. If that was held in one partners name there would be £1078 tax to pay (slightly less because some tax allowance can be shared) so net income would be £14,922. If the pot was shared equally there would be no tax to pay and net income of £16k.

An increase of 7% pa for life.

I see absolutely nothing wrong or risky with this although if they used the new unmarried status to get social housing and sub-let I'd recommend the death penalty.

lisyloo

I see absolutely nothing wrong or risky with this

Legally I think you're wrong (and out of curiosity I asked the Motley Fool legal experts).
The crime is either perjury (if it went to court) or contempt of course for falsifying a "statement of truth" if it didn't.
You are alone in thinking it's legally ok to falsify official legal paperwork.

As for risky, you could lose a very valuable lifetime spouses pension benefit.

If your job depends on not having a criminal conviction then you could lose it, so seems like some pretty significant risks to me.

wotsthat

lisyloo wrote: »

Legally I think you're wrong (and out of curiosity I asked the Motley Fool legal experts).
The crime is either perjury (if it went to court) or contempt of course for falsifying a "statement of truth" if it didn't.
You are alone in thinking it's legally ok to falsify official legal paperwork.

As for risky, you could lose a very valuable lifetime spouses pension benefit.

If your job depends on not having a criminal conviction then you could lose it, so seems like some pretty significant risks to me.

If that's the case half of people getting divorced are falsifying statements of truth because they're not allowed to mutually agree to end the marriage contract. Did the legal eagles point to any cases where a successful prosecution has been made? They're just offering an opinion - a court would need to decide and a case like this wouldn't get before a court because it's unlikely to get past any evidential standard. Our intrepid divorcees therefore remain innocent.

The risks are non-existent assuming some fairly basic steps are taken. Getting divorced and sharing assets happens every day of the week - people do this legally if they hate each other but it's illegal if they don't? Good luck proving the difference.