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Landlords

9th Oct 2013
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None of us can of course be truly free until the last landlord is strangled with the guts of the last priest, but that looks a little way off yet, so perhaps some interim measure is called for, says Simon Sweetman.

HMRC, being kindlier disposed, is offering private landlords a last chance (they should make them pay a returnable deposit and then make up an excuse for not giving it back).

As a parent all of whose children at one time or another have suffered at the hands of private sector landlords, I find sympathy hard to come by – perhaps even less for those who piled into the buy to let market with easy credit from the banks and helped fuel roaring house price inflation.

And my experience suggests that HMRC are on to something here, because it seems that the income most likely to be omitted from many people’s returns is just that rental income. As people will say

  • Well, the mortgage repayments are more than the rent (yes, but some of it is capital)
  • With the time I spend it doesn’t make a profit (oh yes it does)

It is often true that a buy to let property doesn’t make a profit for a year or two and by that time the thought of declaring the income has faded

And don’t get me started on the likelihood of income from the little French property being declared either here or in France (well, we only let it to friends).

Buy to let was always marketed as a get-rich-quick scheme, with the hook being that the rent covered your mortgage (plus a bit) and then you managed a lovely big capital gain thanks to house price inflation. And borrowed some more and carried on.

It would not have been possible without shorthold tenancies and housing benefit, so you could throw your tenants out and if you were lucky the council paid their rent for them.

So it added competition to the housing market, helped fuel the bubble, and helped keep young people from owning their own homes. Quite a lot of people who did it went bust. And now we’re doing it all again.

So if HMRC manages to put people off this particular road to ruin, more power to their elbow. 

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Replies (5)

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This is me
By LVW4
10th Oct 2013 10:02

Rather a big generalisation...

Your blog implies all landlords are 'rackmanesque' scumbags, out to rip off unwitting tenants. 

This attitude does nothing for the hardworking private sector landlords who treat their tenants well, often at a cost to them.

You make no mention of the difficulty facing landlords when they need to evict a tenant who has refused to pay rent for months on end, or pays a little to delay the notice, then stops paying again.

You make no mention of tenants who destroy properties when they are evicted, at huge cost to the landlord (yes, repairs can be claimed but the rental void cannot!).

You make no mention of the fact that tenants on benefits have their benefit paid direct to them and, unsurprisingly, they fail to pay their rent.

You make no mention of who will provide the housing for non-social housing tenants.

You make no mention of how numerous BTL private landlords and increasingly, the retired, are being ripped off by unscrupulous Freeholders.

You talk a lot about how BTL landlords have inflated house prices, preventing first time buyers getting on the housing ladder, but make no mention of the fact that renting is less costly than owning your home (on a mortgage) and is responsibility-free.

I could go on, and on...

The law is now firmly on the side of the tenant.

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By User deleted
10th Oct 2013 10:42

Both sides have issues …

Private landlords on the student circuit are not great in one’s experience - 8 room house pulling in £25kpa, bucking the yield trend; failures with repairs etc. Let’s not forget the rents payable during holiday periods to retain digs - maybe reasonable but basically the whole lot is being underwritten by the Government (taxpayer) with student loans subsidising this market

There are many landlords who actively seek DHS properties for a number of reasons and if they can get the rent remitted directly to the landlord then that is a bonus - after all the yields on this type of property are comfortable

'.. landlords have inflated house prices, preventing first time buyers getting on the housing ladder ..' - However, fails to mention that rents are generally a per cent of property price & somewhere around 3%-5% (yield again). Therefore a fall in house prices would be reflected in rents, if there were fewer BTL pushing up prices and instead possibly any more would be channelled into home owners

BTL has become popular because of absurdly low interest rates - encouraged by this Government, and in doing do so has locked out a number of normal market entrants who simply wish to own their own home.

All this is compounded by flogging off council houses (very bad idea unless the money is used to build more) - and so we now have the affordable bandwagon. This means that in most cases is the state abrogating responsibility in favour of quasi private sector landlords 'associations'. They expect building permission to be granted under 'Rural Exemption Policies' on green field sites and the land pretty much for free (agricultural rates). With an overall funding payback period of maybe 70 years. So council (social) houses by the back door with special planning rules all of their own

Then the right to buy possibly kicks in

And so it goes on with an endless roundabout of one unworkable idea after another

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By Alan Davies
10th Oct 2013 11:18

Please stop

Your blog has moved from respected tax advice and anecdotes to offensive extreme political views.

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Jennifer Adams
By Jennifer Adams
13th Oct 2013 11:19

Yes - too much generalisation and just one viewpoint...

I have clients who jumped on the BTL bandwagon for the very reasons given but I myself did it because I dont and wont have a pension. I am of the age where many many accounting firms did not give a pension. I never worked for one under PAYE who did and now I run my own Ltd Co.

I never ever take on students. My letting agent wont allow me to for a start! Too much grief.

The vast majority of landlords are responsible landlords. And if you dont believe me just attend a meeting of the local National Landlords Association. (An association which is worth the annual subscription four times over!) At these meetings you will find that many of the speakers are from the local council. They join with the landlords keeping in touch with and advising of any new policies and rules. Plus the council meet landlords who will be able to house people who have been thrown out by their mortgagors so they can at least have a roof over their head - the council know who to contact amongst the private landlords they have met at the meetings.

I would agree that many current landlords do not declare their income in the belief that the mortgage covers anyway so NIL profit (usually a loss). And they are usually right as up until the recession you couldnt get the repayment mortgage only an interest-only one.

BUT HMRC are on to this one...here is an article I wrote for accountingweb on Property tax evasion earlier this year. The article centred around property sales, however, at the bottom I gave a list of methods by which HMRC are catching landlords as well - 

https://www.accountingweb.co.uk/article/how-hmrc-chooses-property-tax-evasion-cases-investigate/5382234

 

 

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Locutus of Borg
By Locutus
16th Oct 2013 13:32

This blog always gives me chuckle

Although I frequently disagree with the political views implied in this blog, it always gives me a chuckle ... and at least Simon Sweetman isn't trying to sell anything, like half the other blogs on here.

His latest posting just goes to show that ex tax inspectors never lose that "we know they're all at it, we've just got to catch them at it" attitude!

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