A Must Read - Lmao! - Sipps' Tax Bill!

[The Masked Tulip]

You bought a £100,000 house for your pension. The Revenue wants £110,000. Rebecca O’Connor and Antonia Senior explain

INVESTORS who rushed to buy new-build houses with their retirement kitty could face a tax bill of more than 100 per cent of the property value after the Chancellor’s U-turn on holding homes in pensions.

Anyone who thought they had bought an off-plan property worth £100,000 for just £78,000 through their pension scheme could end up paying £210,000 under a bizarre loophole created by Gordon Brown’s surprise decision.

Full article:

http://www.timesonline.co.uk/newspaper/0,,...1916243,00.html

[teddyboy]

Full article:

http://www.timesonline.co.uk/newspaper/0,,...1916243,00.html

I hope this aint true coz I have already laffed me c+ck off at the SIPPS anouncement!

I cannot afford to lose anymore bodily parts!

[The Masked Tulip]

Oh, so much I hope it is true.

This reminds me of the little publicised - on the mainstream Media anyhow - change that Brown made a couple of years ago to small businesses where one partner paid a VERY small wage or dividend to his or her partner. This had been going on for years and successive Labour and Tory Governments saw it as part and parcel of running a small business.

Then Brown came along, decided that tax should be paid on this and, ahem, that it should be back-dated. Suddenly there were tens of thousands of small businesses - newsagents, corner shops, book-keepers, cafes, etc, etc - who were getting 50K plus tax bills. I do not recall it being mentioned in the mainstream media once even though the accounting websites and publications were full of it.

This is, IMPO, what Brown does.

[Nijo]

This is, IMPO, what Brown does.

Do you think it's a bad thing? I run a business - I run it as absolutely straight as straight gets. You should never rely on loopholes to turn profit. IMPO.

Edited December 10, 2005 by Nijo

[FollowTheBear]

Love it. It goes to show that the professional landlords generally know what they are doing and it is all the recent amateur property 'experts' who are going to get burned by their belief in easy money.

[right_freds_dead]

easy money is the best bait you can use to cash a fish for supper.

[a j]

George Georgiou, an experienced property investor .... The 28-year-old, who has a portfolio of 40 buy-to-let investments........

How can you be considered experienced in any form of investment at the age of 28?

George Georgiou..... says “I looked into it when the Government first announced the measures, but it looked too confusing

Surely an "experienced property investor" worthy of being quoted by a leading national newspaper could understand a straightforward piece of tax planning?

I wonder how many new builds have been bought with an eye on SIPPS and will be dumped on the market on completion?

[Bedsprings]

I believce it is true - I heard a tax barrister talking about it the other day. As the new rules were not in force, anyone who bought a property to put into a SIPP were just very silly and/or badly advised IMHO.

The "Married Couples" Small Business Tax

s660)A has been in force for a long time: HM Revenue & Customs merely reminded everyone of its existence.

People had been taking the mickey - husband does all the work of a service-type nature, via a company, and pays half to his wife, who owns half the shares in the company, when she does nothing, or very little. If they divorced, the arrangementst are such that she would stop getting anything. Why should they be able to do that?

If they both work in the company, or it's got reasonably significant assets, so either she gets a fair reflection of the work that she does, or she has actually been given the underlying assets, the section doesn't apply. What's unbfair about that?

I have no sympathy with the couple in the Arctic Systems case - he did all the valuable work, as a computer consultant, yet his wife got half the profits out of the company. There were no assets in the company, as it was purely a service trade ie of his time and brains.

[AnotherSTR]

Full article:

http://www.timesonline.co.uk/newspaper/0,,...1916243,00.html

"Anyone who thought they had bought an off-plan property worth £100,000 for just £78,000 through their pension scheme"

Notice how when SIPPS were being hyped you bought a property worth £100,000 for just £60,000. Now of course we've all become basic rate tax payers and it's only £78K.

[large]

"But Gordon Brown’s U-turn means that the tranche of investors caught by this loophole will have to sell the property before it becomes habitable otherwise they will face punitive tax charges."

If GB was trying to engineer a crash he couldn't have done a better job. Even if an investor faces a 30% loss on the price of the property by selling he/she will be better off than keeping it. Several thousand 2 bed flats entering the market early 2006 heavily discounted with a deadline to sell before they are inhabitable will have a dramatic effect on the overall market, which already has an oversupply of 'luxury apartments'. This is why Nationwide are telling everyone there will be falls in early 2006...they want to get control of the spin before opinions like ours are allowed to prevail.

2006...Jan-Mar post christmas retail redundancies and SIPPs fallout, YOY HPI goes -ve for 1st time in all indices.

Apr-June IR rates stay the same or rise due to falling pound, spring bounce never happens and HPI goes negative by a significant amount and FTBers and upgraders finally get the message.

June-October Panic selling in wider BTL and amateur investor market. HPI goes double figure -ve and all papers talk of crash or 'expected adjustment.

Last quarter: Tony Blair ousted, GB does not get the job and some other Labour person gets in, perhaps a real leftie as the party lashes out against years of sliding away from their core values. Run on the pound followed by 10% interest rates as MPC momentarily out of government control as members know new chancellor will sack them.

I wouldn't have believed that we would be without SIPPs a week ago, the above predictions might seem a bit over the top, but I believe next year is going to be a year none of us will forget who have an interest in house prices declining. Unfortunately the wider fallout could affect us too.

[Zen-Master]

Yes, I pointed this out 3 days ago.

The "penalty" charges could be over 100% - the maximum is 104%, but may not be anyhere this figure.

[OLDFTB]

Sipp U-turn makes us see red

Anne Ashworth, Personal Finance Editor

IF YOU ARE FUMING today over the Chancellor’s perverse and inexplicable Sipp U-turn in the Pre-Budget Report, you are not alone. I went to a party on Wednesday night, hoping to feel less cross about this latest attack on our pensions, but met only others also seething at the withdrawal of the right to hold a residential property in a Sipp (self- invested personal pension). “I was so worked up that I looked at the human rights legislation to see if there was any scope for an appeal,” said one tax lawyer. Another commented: “Why be surprised if Gordon Brown treats savers with contempt? The man’s got form — let’s never forget the removal of the dividend tax credit in 1997. That’s been a £5 billion a year hit on pensions ever since.”

http://www.timesonline.co.uk/newspaper/0,,...1916442,00.html

[OnlyMe]

I was so worked up that I looked at the human rights legislation to see if there was any scope for an appeal

Oops, if that little piece of legislation is hope of last recourse (from a tax lawyer) then there really is a stuffing in the wind.

Edited December 10, 2005 by OnlyMe

[Culpability Brown]

"But Gordon Brown’s U-turn means that the tranche of investors caught by this loophole will have to sell the property before it becomes habitable otherwise they will face punitive tax charges."

If GB was trying to engineer a crash he couldn't have done a better job. Even if an investor faces a 30% loss on the price of the property by selling he/she will be better off than keeping it. Several thousand 2 bed flats entering the market early 2006 heavily discounted with a deadline to sell before they are inhabitable will have a dramatic effect on the overall market, which already has an oversupply of 'luxury apartments'. This is why Nationwide are telling everyone there will be falls in early 2006...they want to get control of the spin before opinions like ours are allowed to prevail.

2006...Jan-Mar post christmas retail redundancies and SIPPs fallout, YOY HPI goes -ve for 1st time in all indices.

Apr-June IR rates stay the same or rise due to falling pound, spring bounce never happens and HPI goes negative by a significant amount and FTBers and upgraders finally get the message.

June-October Panic selling in wider BTL and amateur investor market. HPI goes double figure -ve and all papers talk of crash or 'expected adjustment.

Last quarter: Tony Blair ousted, GB does not get the job and some other Labour person gets in, perhaps a real leftie as the party lashes out against years of sliding away from their core values. Run on the pound followed by 10% interest rates as MPC momentarily out of government control as members know new chancellor will sack them.

I wouldn't have believed that we would be without SIPPs a week ago, the above predictions might seem a bit over the top, but I believe next year is going to be a year none of us will forget who have an interest in house prices declining. Unfortunately the wider fallout could affect us too.

Excellent predictions - exactly what I expect - including the timeframes. (apart from the GB bit PM 3rdQtr)

Oh and that's the 1000 and during SIPP week too!

Edited December 10, 2005 by Culpability Brown

[Guest Riser]

I was so worked up that I looked at the human rights legislation to see if there was any scope for an appeal

Oops, if that little piece of legislation is hope of last recourse (from a tax lawyer) then there really is a stuffing in the wind.

Someone once mentioned on here that retrospective taxation such as IR660 was against the human rights convention so there may be a case to test. It should also be possible to argue that Brown failed in his duty of care when he allowed a whole financial services sector to develop and ensnare savers without confirming his position on SIPPS. I don't know if ministers are exempt but they should be accountable for publishing irresponsible or misleading information on future taxation issues.

Perhaps the most significant fallout from Mondays announcement will be a resounding message to BTL Landlords that they have served their purpose inflaiting the market and Brown has now turned his back on them. He will now turn the screws with new legislation which will draw every last penny of profit they made over the past few years back into the treasury and leave them to face bankrupcy alone, at least he has made that easier for them

Edited December 10, 2005 by Riser

[geranium]

However, some may still wish to keep the property. Mark Harris, managing director of Savills Private Finance, another mortgage broker, says: “The Government’s U-turn does not change the fact that buying an off-plan property for the purposes of buy-to-let can still be a good long-term investment.”

Long term? Maybe. Next 5 years? Forget it!

Silliest VI quote I've read for a while.

[large]

Excellent predictions - exactly what I expect - including the timeframes. (apart from the GB bit PM 3rdQtr)

That last bit was pure fantasy, but I suspect that a housing crash would remove any lingering belief that the middle classes have in this government and would cause a lurch to the left in the long term as the middle ground flock to Cameron. The moaning cocktail party types who are most hurt by this U-turn would never have voted Labour anyway, so the more I think about this the more I believe this may have been a deliberate tax-trap, and if it is you can bet the treasury has never released anything that these SIPPs people could use in a court of law to sue the government. I reckon GB realises he will never be PM, and that he's been shafted by TB, so now he doesn't give a damn what he does to the middle classes, especially the greedy BTL types like his boss and wife who have been responsible for putting housing beyond the reach of most. Whether there was any intent or not in his actions, the effect will be the same...carnage at the bottom of the market...which is precisely where all these executive flats with paper-thin walls will end up.

[Sledgehead]

Sipp U-turn makes us see red

Anne Ashworth, Personal Finance Editor

......“I was so worked up that I looked at the human rights legislation to see if there was any scope for an appeal,” said one tax lawyer.

..Another commented: “Why be surprised if Gordon Brown treats savers with contempt? The man’s got form — let’s never forget the removal of the dividend tax credit in 1997. That’s been a £5 billion a year hit on pensions ever since.”

Wonder who wasted money on all these highly paid advisors. They should have come here instead.

"You have to ask why Gordon Brown, in the light of these examples AND his impeccable left wing roots, would willingly give money to the rich"

Maybe that is the difference between loophole exploiters and speculators. Loophole exploiters look at the words and rely on them being set in stone to work their own wheezes. Speculators know the game is always subject to change and get used to reading between the lines.

The treasury's stance on non-avoidance puts the emphasis on understanding the motivation for tax changes, rather than the changes per se.

Edited December 10, 2005 by Sledgehead

[theChuz]

You lot seem to forget .....

They are in it for the long term negative yields and massive CapEx mean nothing when you are in it for the long term. They might end up paying double what its worth but in 25 years time.... ooops ive just bored myself again.

What can i say other than what many of us have said for some time .. nuBTL'rs to the wall.

[BayAreaBear]

This is a fantastic example of how government "planning" is capricious and merely serves to frustrate peoples attempts to plan for themselves. It results in choas and terrible, terrible waste.

Now many people have a strong incentive to make sure that their partially built homes will NOT be completed. When people have a strong incentive for something to happen - it usually happens.

The prediction of the BayAreaBear:- soon the land will be filled with almost complete but not habitable property that are supposedly part of the peoples savings for when they are old. If this is not chaos and waste - what is it?

Governments function is to GET OUT OF THE WAY!!!

BAB