In the comments to an article entitled "Homeowners explore ways to avoid looming mansion tax in UK", KLNs abound. In particular, one Geoffrey Gardiner writes:
Property taxation in the UK is on the occupier, not the owner, as the default rate is lower than if. like the Americans, one taxes ownership. Is it intended that the mansion tax should be on owners not occupiers? That requires a completely new tax department. If it is on ownership are joint tenants or tenants in common (such as husband and wife) to be taxed relative to the value of their shares? What if the property is long leasehold? Is the tax to shared between the lessee and the reversioner? Is a mortgage to be deductible?
None of these points have been mentioned by Miliband, presumably because his knowledge of property law is zero.
As pointed out in the article, the tax lowers the value of the property as the tax is effectively rent. All property taxes are in truth a way of nationalising without paying compensation (1). An annual tax of £3,000 should lower the value by around £100,000 in present circumstances. (2)
One can tax by reference to a property value, but the tax has to come out of income or some cash flow, such as from a sale, for no power on Earth can convert a house into food, heat, lighting or clothes for old age pensioners. The state is mainly by taxation appropriating part of the income (GDP) of the nation and the tax on property, despite its name. falls on the income of the tax payer. If he does not have the income he has to sell to someone who is capitalising income, that is saving.(3) The mansion tax will precipitate many sales as owners decide to trade down.(4) That will raise prices at the lower, aggravating the problems of first time buyers.(5) There is a limit on property taxes, the net annual saving of the personal sector (4).
1) in which case income tax is nationalisation of labour
2) so making the property more affordable. That's good, isn't it?
3) Poor widow bogey
4) Your evidence for that is?
5) Yeah, right, how many first time buyers are in the "just under £2M" market? Human shield.
He's probably right about Miliband, though.
Thinking ahead
1 hour ago
16 comments:
What I completely cannot understand with LVT objetors is their almost wilful blindness to the fact that 'all profits return to rents'. Once you get your head around that, and its implications the only answer can be 'LVT now!'. I concede that this won't be welcomed by rent seekers - e.g. BtL'ers and the Government - but really the rest of us should be shouting for LVT from the rooftops.
He is correct however about the issue of occupiers not ones being liable for property tax. Affected couples are already transferring titles to the non-working spouse and gardens and garages etc are having sub-leases created etc. No upfront money is being paid by those below the higher rate tax band according to the latest Ed Balls announcement.
Property lawyers are already advertising these new strategies. A whole new business in tax avoidance has just begun I suspect. Leasehold, self-contained granny flats will be appearing everywhere.
Probably unnecessary, as I don't see this policy seeing the light of day through Parliament as opposition in London is significant and a further autumn election is likely.
"Property taxation in the UK is on the occupier, not the owner, as the default rate is lower than if. like the Americans, one taxes ownership."
Bollocks. You get a much lower default rate if the owner is legally liable. But I suppose you get the lowest default rate if owner and occupier are jointly liable.
But the man is a smart arse idiot.
"Is it intended that the mansion tax should be on owners not occupiers?"
Yes.
"That requires a completely new tax department."
Lies. They already do this for council tax. The tenant is liable until he moves out and then the council tax bill is sent by default to the owner. Fact.
"If it is on ownership are joint tenants or tenants in common (such as husband and wife) to be taxed relative to the value of their shares?"
Same as any other tax law - default assumption is 50/50, unless spouses declare otherwise.
(Although it would solve a lot of complications if we did husband and wife joint taxation like 99% of other countries).
"What if the property is long leasehold? Is the tax to shared between the lessee and the reversioner?"
Fair point. That's the weakness of a tax with such a high entry value.
With LVT, all land is taxed at the same rate. We know what the total rental value of the leasehold flat is and what the ground rent payment is, so…
a) Leaseholder pays on total land rent minus ground rent payment to freeholder
b) Freeholder pays on ground rent payment from leaseholder.
"Is a mortgage to be deductible?"
Of course it fucking isn't, I would have thought that is clear from the context. Or else everybody would just take out a mortgage to push down their net equity to just under the threshold.
You might as well ask "If I buy a car on HP and pay my petrol with a credit card, am I exempt from car tax and fuel duty?"
"Is a mortgage to be deductible?"
I missed that gem.
Its very easy to avoid the mansion tax. very very easy indeed.
All you have to do is sell the mansion and buy somewhere cheaper.
should we ever have a proper LVT, then all you would need to do is sell your house and live on a boat.
Tax avoidance made easy :-)
B, you did the main six, but as your post title suggests, this was a multi-level KLN smorgasbord bonanza. Presumably he checked up at KAALVTN and tried to cram as many in as possible.
L: "should we ever have a proper LVT, then all you would need to do is sell your house and live on a boat."
That all depends where you want to moor it. Mooring fees i.e. location rent in high demand areas are just as high as the corresponding LVT on a small flat.
See e.g. here.
Or hoist the mansion from its foundations place it on a low loader and drive it to a new location
"Mooring fees i.e. location rent"
There's a lot of service charge in mooring fees, e.g. in your example,
"16a/32a electricity at each berth
Water points on every pontoon
Heated toilets and showers
Disabled access to pontoons & toilets
Pump out facilities
Harbour Master"
If you moor in the middle of the river with no services, you pay a lot less for the same location.
yes, but thats just it with a boat, you dont have to moor it. also its quite easy to move from one port to another one, so if you dont like where you are, you just sort of well move
of course my fantasic idea of tax evasion would not work so well if your boat was on a lake like Windermere, but then, cant have everything :o)
Din, apparently the Yanks do this with timber-framed buildings up to a certain size, but with a typical British home which is brick built on questionably foundations, it's not really an option.
B, yes, but... [You know perfectly well what I mean].
J, but most households are hefted to one location, parents have got to go to work; kids have got to go to school.
And I'm not sure you're just allowed to stick your boat any old where on Lake Windemere, if you anchor in the middle, the extra hassle of rowing to the shore and back a few times a day would completely negate the point of it.
And it doesn't matter, if enough people decided to trade down to a boat, competition would drive up mooring fees in good locations and rental values of physical land would fall and it all evens out.
Fair play to him, though:
"As pointed out in the article, the tax lowers the value of the property as the tax is effectively rent."
It's not 'effectively' rent, it *is* rent; and privately collected rent is tax. They are the same thing. As is mortgage interest.
I'm really puzzled about the lower default rate comment. Property tax is secured on the deed in the US. If you default, the local government gets first lien on the property. Probably a reason why banks typically collect a direct debit of property tax + mortgage payment, to make sure that the owner does not fall behind on the former and compromise the bank's collateral. I wonder if a similar thing could be done here in a roundabout way. If the council tax is in arrears, a call out to the fire brigade results in a first lien charge against the property to cover the entire cost of the firefighting operation. Ditto for the removal of squatters. The bank would very quickly move to include the council tax in the mortgage payment or whack up the interest rate a whole bunch.
Mark, my entire live on a boat proposition was not exactly supposed to be a serious proposition. Its a bit like "yeah sure can avoid income tax, just simply resign"
For what it worth, current moorings on Windermere are around 1800 per season (season is 8 months) and no you cant anchor in the middle of it. But you can stop for a week in whitehaven, move to maryport, then to workington every weekend for essentials and anchor off a moor in the harbour. Only works if you live on the coast though. :)
The lake was used to make my plan even more stupid.
M, that comment is not "puzzling" it is just another outright lie which the Homeys spout in the vague hope that somebody will be stupid enough to believe it.
You are presenting real life hard fact evidence to show it is clearly not true, these people don't do 'evidence'.
J, we've had Hpmeys on here seriously arguing that water is not land so would be exempt from LVT, hence everybody would live on a boat or something insance.
No amount of telling them that mooring fees = rent = LVT made any difference.
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