Well perhaps not a reprieve per se, but it was pleasing that the recent Budget gave landlords respite from further changes to the tax regime.
Back in October, after a failed legal battle from landlords against the imminent tax relief changes for buy-to-let properties, I surmised that landlords had been dealt a poor hand, with the additional rate of SDLT payable on additional property purchases, and subsequent restriction to mortgage interest relief being claimed at basic rate only.
When the changes are fully phased in, there will be cases where the most heavily geared residential property owners will be paying tax at an effective rate of well over 100% of post interest net rental income. There are no symmetrical proposals when we look at companies who own and rent residential property, which creates a disparity which is unfair.
The first attempt to challenge the law, instructed by the ‘Axe the Tenant Tax Group’, was unsuccessful, but theGroup vowed that they wouldbe focusing 100% of their attention and resources on taking the case more forcefully, more powerfully and more directly, right to the heart of government. Their goal is simple: to abolish this tax or to remove the retrospective nature of it.
In the meantime, there is a trend of Landlords looking to incorporate their portfolios and we at Francis Clark Tax Consultancy are seeing a growing number of enquiries in this area.
Getting properties from an unincorporated to incorporated entity is not easy, and there is no ‘one size fits all’ solution. The transition is fraught with difficulties and will only be tax efficient in limited circumstances which are explained in more detail in our fact sheet on the subject, which can be found here.
At FCTC, we waited with baited breath for the Budget, apprehensive of restrictions being imposed on Landlord incorporations but were pleasantly surprised by the absence of such notions.
We expect a further surge of incorporations, at least for the upcoming year, and we would be happy to assist with the tax analysis of doing so. In the first instance, we would always recommend a full review of the individual circumstances, which will be unique in each case, to ascertain whether there is a ‘business’ to incorporate and whether that ‘business’ in carried out is Partnership with a view to making a profit.