Wednesday, 12 August 2015

Say "Yes" to George

For some gloriously garbled landlord special pleading, have a look at Say "No" To George, spotted by Thomas Hall.

As Babs says on the Contact page:

I think some of the arguments need to be developed further before significant traffic and inconsistencies need to be checked. For example, in some parts, you say that house prices will drop, and then for first time buyers the argument says that house prices will not drop.

An example of their Doublespeak from the Landlords page:


So is being a landlord a "business" or is it "investment"? For tax purposes, those are two quite separate concepts:

If it is a "business", then yes, they would get a full deduction for the costs of furniture and interest, but rents would be liable to VAT and net profit liable to Class 4 NIC as well as income tax.

And if it is "investment" then there would be no deduction for any costs whatsoever, the same as dividend and interest income.
I left the following comment on their Contact page just now (15.30 pm, 12 Aug). Let's see if they publish it.

I'm old enough to remember the good old days, when landlords were taxed at much higher rates; rents were capped/controlled; there was plenty of social housing as an alternative to private renting. And for good measure, landlords paid higher interest rates than owner-occupiers and owner-occupier mortgages were capped at two or three times income. And we had Domestic Rates (and before that Schedule A taxation on owner-occupiers as well).

The result of all this was that the number of private renting households fell from 90% at the start of the 20th century to less than 10% by 1990 - with an equal and opposite increase in owner-occupation. This increase in owner-occupation levels was always heralded as a Very Good Thing indeed, and nobody mourned the demise of private landlords as a class. The knock-on effect was a more equitable distribution of wealth, a smaller and more stable banking system and a much smoother economic path.

Having been a landlord and a tenant in my life, I can honestly say that landlords serve absolutely no useful purpose whatsoever and provide nothing of value - as evidenced by the fact that a lot of tenants end up buying the home they were renting and absolutely nothing changes. If landlords were actual businesses (like a hair dresser or a car mechanic or a farmer) then we would not be able to just cut them out of the loop. I can't cut my own hair, fix my own car or grow my own food, but I am perfectly capable of calling the plumber, doing a bit of DIY and sorting out the insurance on my own home.

I suspect that you will hotly disagree with this :-)


mombers said...

The simple solution to any of these landlords is to transfer the property to a company. But then they'll find it a lot harder to get away with tax evasion on rents and won't be able to do the old caper of letting a place out for years then making it their primary residence for a while to avoid CGT.
Of course it is laughable what they say about rents rising, prices not falling but actually falling, multiple WTFs...

Ben Jamin' said...

If landlords provide a useful economic function, how about we stop taxing wealth creation and make up the difference with a 100% tax on monopoly rents?

Surely Landlords, as wealth creators and business people would love such a proposal?

Btw, I notice they are threatening to put up rents if their costs go up.

Random said...
"The distribution of property wealth is much more uneven than that of income. The Gini coefficient for household income after tax in the UK is around 0.35. For annual pre-tax income it is up at 0.5. (See previous post.) For property wealth, though, it is 0.64."

Kj said...

A survey done by Rentify shows that 56% of Landlords intend to increase rents as a result of the proposed change and another by the Residential Landlords Association had a finding of 65%. We think that as the reality of the change hits the sector, the actual figures will be much higher.

Come on then, do it, and why wait until the costs go up, you obviously believe you have tenants who can pay that much?

But then they'll find it a lot harder to get away with tax evasion on rents and won't be able to do the old caper of letting a place out for years then making it their primary residence for a while to avoid CGT.

Exactly. If people don't want to establish it as a normal business that has to do proper accounts and transfer assets in and out of the "business" with tax consequences, HMRC is giving them a choice.
And fair enough, to simplify a bit, for the homeowner that owns one additional house that they rent out, which is a pretty large demographic, they can give them this little handout: you are relieved of CGT on the second home, if you have never claimed mortgage interest relief, and you're taxed on the full, assessed, imputed rental income from your second home (- a 10% or so standard allowance), whether you rent it out or not.

Mark Wadsworth said...

M, but that triggers come SDLT and possibly CGT and is a nightmare with banks. Not the worse plan in the world, but fails for practicality.

BJ, rather magically, their rental income is all "hard earned business income" and so on.

R, yes I read that, top is man is Flip Chart Rick.

Kj, "You cut, I choose" I like it.

DBC Reed said...

MW Brilliant letter published or not.I will copy it out and use it as and when, crediting you as Tax Expert and Founder of Young People's Party. You really should be on Keiser: they are doing a Solutions (to the present mess) series of programmes at the moment.

Mark Wadsworth said...

DBC, thanks. I call it Georgism lite.

Steven_L said...

I left this more simple comment:

If landlords can just increase rents to cover the tax, why on Earth are you all making such a great big fuss about it?

I think this is my favourite bit of their website:

However as the full impact of the change hits home it could lead to Landlords selling lots of properties and therefore having a negative impact on house prices. For some it will not be possible to sell as they will need to pay Capital Gains Tax and penalties for escaping mortgages early. They will have to wait for their properties to be repossessed as they fall into arrears.

Nobody can really be sure how far they may fall but when it starts the house builders will react quickly by decreasing output. If they fall enough then the builders will cease altogether.

In the UK we have an annual shortfall of 100,000 new build houses which will then increase, which is very bad for the economy, very bad for people that want to buy a home and very bad for future generations that will struggle to get on the housing ladder.

If prices fall enough it could lead to a lot of homeowners being trapped in that dreaded situation of negative equity and no way out ...

Ben Jamin' said...

He (John McKay) says housing is the same as tomatoes, therefore, increased costs means both supermarkets and landlords have to put up prices.

What can you say? Entertaining comments page though.

Mark Wadsworth said...

Mombers, Benji, StevenL, fair play to him, he published our comments.

And responded with the usual contorted Homey fuckwit shit.

Bayard said...

"but rents would be liable to VAT"

Surely VAT on rents is at 0%?

Mark Wadsworth said...

B, yes of course, when it comes to VAT, all of a sudden land ownership is not a proper business so it gets loads of exemptions.

To cut a long story short, if BTL were taxed like any other business, they would pay about five times as much tax.

Ben Jamin' said...

@ MW,

You credited him with too much intelligence. He only published our comments because he is utterly convinced we are wrong and need a public schooling on the subject.

It is funny, but at the same time sad and a little worrying.

Steven_L said...

My reply to his reply:

With a 2% interest rate rise and with the tax proposals fully implemented, he will need to find £32k pa from his public sector salary to meet the extra tax. In his own words “that’s impossible” ... in his case he’ll be evicting elderly and disabled tenants, which he doesn’t want to do, and I daresay you wouldn’t want him to either.

But if the Chancellor can't collect enough tax, how will he pay for all of the pensions, disability benefits, healthcare and other services our ageing population needs?

It's always unfortunate if your landlord wants to sell up and so evicts you. But UK housing law allows landlords to evict on 2 months notice anyway. And vulnerable tenants are always being evicted.

Private landlords are already exempt from VAT and business rates. All George is asking is for them to contribute a little bit more, to help pay for state pensions, the NHS, the help that disabled people need and reduce the deficit so we don't end up like Greece.

As you rightly point out, most landlords have a social conscience, so won't oppose these measures. If you are truly concerned with elderly and disabled tenants then I would encourage you to put your efforts into lobbying for reform of assured shorthold tenanies and better security of tenure in the private rented sector.

Steven_L said...

And the response:

Thank you for your comment Steven.

Alas like some others I don’t think you quite understand what is being proposed with this tax. It’s taken many Landlords time to get their heads round it too, but this isn’t about paying ‘a bit more tax’. The proposal is almost (but not quite) a tax on turnover not on profit, so there is tax to pay even on a loss. Are there any other businesses taxed in that way. Indeed is anything else taxed on a loss? If it was about paying a bit more then it is a completely different argument.

As in the example I gave you, the Landlord is running at a loss because of the tax so will sell up and the tax will be lost.

Private Landlords are not ‘exempt’ from VAT. They are not allowed to register for VAT. Of course they have to pay business rates if they have premises.
Thank you for your encouragement to lobby elsewhere. I encourage you to do similar.

You s

Mark Wadsworth said...

Nice one!

Random said...

"He published our comments"
MW, according to the latest link the contact page no longer exists! LMAO if true! Or is it just me who can't see it?
Have any screenshots?

Random said...

Do any of you have access to Google Archives etc? Or new URL? ;)

Mark Wadsworth said...

R, he has indeed.

The last available page in Google Cache is this one, before we al started goading him

Ben Jamin' said...

Maybe he's had an existential crisis :(