Landlords warned about risk of ltd companies

[SarahBell]

https://www.landlordtoday.co.uk/breaking-news/2016/9/landlords-warned-about-risk-of-using-limited-companies-for-buy-to-let

 

Buy-to-let landlords face the risk of double taxation if they choose to put their property investments into a limited company to avoid paying higher rates of income tax, a leading tax advisor has warned.

[mikthe20]

I've said it on here before, but it should be compulsory that if you rent out a property you have to do it through a limited company. It is a business after all, and will stop huge amounts of tax evasion by not declaring rental income or the nonsense of the landlord "moving into" a previously rented property for a while to avoid capital gains tax.

Very simple to implement too.

Edited September 28, 2016 by mikthe20

[thevaliant]

12 minutes ago, mikthe20 said:

I've said it on here before, but it should be compulsory that if you rent out a property you have to do it through a limited company. It is a business after all, and will stop huge amounts of tax evasion by not declaring rental income or the nonsense of the landlord "moving into" a previously rented property for a while to avoid capital gains tax.

Very simple to implement too.

Except that this is completely unfair. There are many reasons (and many good small businesses) not to incorporate but to operate as a sole trader or partnership. Are you suggesting ALL businesses should be via limited companies? And if not, what is the difference between someone who does have a few properties who runs it as a business and (say) a hairdresser? Why should the first be forced to incorporate and the latter not?

And what about LLP's? Are they allowed? Or not?

[Snugglybear]

Alright, if you rent out a property you have to register it as a business - sole trader, partnership, limited company, whatever.

It's perfectly possible to be employed and also have a registered business, for all those teachers and doctors out there.

All HMRC needs is for England to catch up with Northern Ireland, Scotland and Wales, where there is mandatory registration for landlords, and it would be much more difficult for LLs to dodge taxes.

[Confusion of VIs]

12 minutes ago, Snugglybear said:

Alright, if you rent out a property you have to register it as a business - sole trader, partnership, limited company, whatever.

It's perfectly possible to be employed and also have a registered business, for all those teachers and doctors out there.

All HMRC needs is for England to catch up with Northern Ireland, Scotland and Wales, where there is mandatory registration for landlords, and it would be much more difficult for LLs to dodge taxes.

Are there any figures for the % of landlords who are dodging taxes. I would have thought with all of the information available to the HMRC,   it must be a very high risk tactic - yes you might get away for a few years but eventually you will come to notice and pick up your tax bill plus a large penalty.

[Greg Bowman]

41 minutes ago, thevaliant said:

Except that this is completely unfair. There are many reasons (and many good small businesses) not to incorporate but to operate as a sole trader or partnership. Are you suggesting ALL businesses should be via limited companies? And if not, what is the difference between someone who does have a few properties who runs it as a business and (say) a hairdresser? Why should the first be forced to incorporate and the latter not?

And what about LLP's? Are they allowed? Or not?

Because looking at a whole raft of businesses, BTL has patently skewed the market and is open to and has been abused. A hairdresser conceivably employs people, advertises, buys services and products and is a business, an accidental landlord with a few properties isn't.

And even the article is B***** you can't have it both ways, every company owner has to work out how to extract earnings in the most tax efficient way.

Leaching landlords are not a business but perversely treating them like one will be good for the country

[TheCountOfNowhere]

6 hours ago, thevaliant said:

Except that this is completely unfair. There are many reasons (and many good small businesses) not to incorporate but to operate as a sole trader or partnership. Are you suggesting ALL businesses should be via limited companies? And if not, what is the difference between someone who does have a few properties who runs it as a business and (say) a hairdresser? Why should the first be forced to incorporate and the latter not?

And what about LLP's? Are they allowed? Or not?

Life is unfair.

[tomandlu]

7 hours ago, thevaliant said:

Except that this is completely unfair.

Unlike hairdressing, it's both essential and not easy for the consumer to forego or change provider. Would you want the average BTLer in charge of your electricity or water supply? I'd say asking landlords to demonstrate that they take their role seriously is pretty damn fair.

[CunningPlan]

MEWing is very difficult in the Ltd Co situation. Would blow most of the spiv's plans out of the water. 

[mikthe20]

7 hours ago, thevaliant said:

Except that this is completely unfair. There are many reasons (and many good small businesses) not to incorporate but to operate as a sole trader or partnership. Are you suggesting ALL businesses should be via limited companies? And if not, what is the difference between someone who does have a few properties who runs it as a business and (say) a hairdresser? Why should the first be forced to incorporate and the latter not?

And what about LLP's? Are they allowed? Or not?

I think the posts above have given you a decent response to my suggestion, but the housing market is unfair and favours landlords, who always claim to be entrepreneurs and run a business, so this would force them to behave that way. There is no doubt there is also serious tax avoidance by landlords. Running a limited company is not onerous or expensive with very little paperwork (after all a proper landlord will be doing an annual tax return anyway!) and will force people who claim to be "amateur" landlords to start behaving like professionals. We will also know exactly which houses are rented out, which we don't at the moment (amazing HMRC don't check against Land Registry but then they are genuinely understaffed. 

Edited September 28, 2016 by mikthe20

[Gribble]

If you buy a house in Germany, the Land Registry sends a copy to the Tax Authorities and you have to declare if you  will be living here. No such joined up thinking in the UK.  . 

[Snugglybear]

8 hours ago, Confusion of VIs said:

Are there any figures for the % of landlords who are dodging taxes. I would have thought with all of the information available to the HMRC,   it must be a very high risk tactic - yes you might get away for a few years but eventually you will come to notice and pick up your tax bill plus a large penalty.

In 2014 HMRC estimated that £500 million was underpaid each year.