Are the Torys real Torys?

angrypirate

michaels wrote: »

Back to the original point, Osbourne has rushed to occupy the centre ground vacated by the Labour party.

The BBC have revelled in painting the Tories as the party of slashing govt expenditure where as actually the govt share of GDP remains well within historic bounds.

So the govt was never very right wing and has recently tacked right to the centre - despite what those with a VI to claim otherwise on both sides of the political spectrum would tell you.

I agree. Osbourne and Cameron have shown themselves to be the true heirs to Blair. For any centre left - wingers who were fans of Labour in 97-05, the current Tory party is the closest thing we have to it, arguably even closer than Ed would have been. I think there are a lot of Tory MPs who are finding the current PM too red and they'll use the first opportunity they get to boot him out (losing the EU referendum perhaps?)

BananaRepublic

kinger101 wrote: »

The tax code disagrees with you. Letting residential property is a business, but not a trade. There are many holding companies whose sole activity is holding investments which are also classified as businesses.

But let's think about the interest deduction another way. What about Enterprise Rent-A-Car. If they borrow money from the bank to purchase vehicles, the interest element is a deductible expense. But you don't get car owners complaining that Enterprise are getting a subsidy. And do you also complain restaurants are getting a discount on food just because they have debt on their balance sheet?

Your assertion that letting properties does not create wealth is also incorrect. The bank will provide a mortgage. The landlord may use a letting agent. Who will use the services of credit reference agencies. The landlord will also need to repair and maintain the property.

If everyone who needed to rent a home had one provided by the council, can you tell me how much income tax, stamp duty and capital gains tax that would generate?

And selling off council houses didn't benefit the lower paid. It benefited people who were lucky enough to be born at the right time.

A loan for a car is not comparable, a car is not an investment in itself, it only generates an income if hired out.

What is insidious about BTL is the mortgage interest tax relief, which costs more than the minor benefits you list. By the way owner occupiers repair and mantain properties, usually to a higher standard. For almost all landlords BTL is an investment, with someone else paying off the loan. The fact that a huge fraction of all sales are for BTL tells us the tax system is far too generous.

And an owner occupier is in effect investing money when paying off a mortgage, instead of stuffing the pockets of a landlord. That is true Toryism. So they will be wealthier when old and less likely to need benefits on retirement. Often people downsize to release capital. A tenant on retirement will probably receive state benefits to pay the rent, massively offsettng the tiny gains you list. And what we currently lose in tax relief we could spend on helping the poor onto the housing ladder e.g. Interest free loan for coppers, nurses, teachers.

I just don't see why I should subsidise BTL landlords who do relatively little work given the huge gains.

As for council houses, I thought the low paid lived in them, clearly you know different. Also council estates were usually no go areas. When sold off they were modernised, people developed pride in them. They stopped being no go areas.

mwpt

kinger101 wrote: »

But let's think about the interest deduction another way. What about Enterprise Rent-A-Car. If they borrow money from the bank to purchase vehicles, the interest element is a deductible expense. But you don't get car owners complaining that Enterprise are getting a subsidy. And do you also complain restaurants are getting a discount on food just because they have debt on their balance sheet?

Because cars are not a scarce resource, production simply scales according to demand. They are also not one of humans basic needs. They also have not been priced out of reach of most average working people.

kinger101

mwpt wrote: »

Because cars are not a scarce resource, production simply scales according to demand. They are also not one of humans basic needs. They also have not been priced out of reach of most average working people.

I realize houses are more scarce than cars, but the fact remains purchasing a property with the intention of letting it out for a profit is a business. It doesn't become less of a business because you find it distasteful.

mwpt

kinger101 wrote: »

I realize houses are more scarce than cars, but the fact remains purchasing a property with the intention of letting it out for a profit is a business. It doesn't become less of a business because you find it distasteful.

I don't particularly care which semantics you use to describe BTL, business or investment. I'm saying why I think there is a justifiable difference between writing off debt interest on BTL and why people don't complain about rent-a-car doing the same.

kinger101

BananaRepublic wrote: »

A loan for a car is not comparable, a car is not an investment in itself, it only generates an income if hired out.

I was trying to explain the reasons for interest on debt being an allowable expense for a business, which BTL is in the eyes of the law. What's not comparable is private purchases with those of a business.

What is insidious about BTL is the mortgage interest tax relief, which costs more than the minor benefits you list. By the way owner occupiers repair and mantain properties, usually to a higher standard. For almost all landlords BTL is an investment, with someone else paying off the loan. The fact that a huge fraction of all sales are for BTL tells us the tax system is far too generous.

It doesn't cost anything. Tax "relief" is a misnomer. Businesses are taxed on profits, not turnover. I don't doubt some owners spend more on repairs and maintenance. I was simply pointing out that BTL does create other business which you implied it didn't.

And an owner occupier is in effect investing money when paying off a mortgage, instead of stuffing the pockets of a landlord. That is true Toryism. So they will be wealthier when old and less likely to need benefits on retirement. Often people downsize to release capital. A tenant on retirement will probably receive state benefits to pay the rent, massively offsettng the tiny gains you list. And what we currently lose in tax relief we could spend on helping the poor onto the housing ladder e.g. Interest free loan for coppers, nurses, teachers.

I just don't see why I should subsidise BTL landlords who do relatively little work given the huge gains.

As for council houses, I thought the low paid lived in them, clearly you know different. Also council estates were usually no go areas. When sold off they were modernised, people developed pride in them. They stopped being no go areas.

When the council houses were sold off, the vast majority of the population would have described themselves as working class. I grew up on such a council estate and while a lot of the people were on relatively low incomes, it certainly wasn't a no-go area.

There's a reason people today need to rent from the private landlords you so despise. Because the social housing which was available previously was sold off at a massive discount to the previous generation. You might not like private landlords, but they are not the reason there's no alternative in the rental market.

kinger101

mwpt wrote: »

I don't particularly care which semantics you use to describe BTL, business or investment. I'm saying why I think there is a justifiable difference between writing off debt interest on BTL and why people don't complain about rent-a-car doing the same.

I don't disagree with the tax code being used to tip the balance in favour of owner-occupiers. I just get annoyed with inaccurate comments about BTL not being a business, or it being subsidized by the taxpayer. The whole reason it is taxed is because it is recognized under the law as a business. And the "investment" side of it is taxed by CGT.

I think the main reason the government has shown inertia in the past on this issue is precisely because BTL generates much more tax receipts than OO could. I don't think any chancellor wants to discourage this market too much. They're not in it for the long game

princeofpounds

Another interesting question, of course, is why businesses are permitted to write debt interest off their taxable income, whilst individuals are taxed on their revenue.

Thrugelmir

princeofpounds wrote: »

whilst individuals are taxed on their revenue.

Taxable profit isn't necessarily book profit. Never has been.

kinger101

princeofpounds wrote: »

Another interesting question, of course, is why businesses are permitted to write debt interest off their taxable income, whilst individuals are taxed on their revenue.

This is not technically correct. Individuals pay income tax on;

Profits from land (Schedule A)
Profits from trades, profession or vocation (Schedule DI/II)
and income from employment (Schedule E).

[and of course, dividends, interest and capital gains too]

A self-employed accountant with a BTL property wouldn't pay tax on "revenue". Wages and salaries cannot be directly compared with business profits for many reasons.