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gruffydd

Buy-to-let Downturn Hits Home - Ft

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http://www.ft.com/cms/s/0/cc4e1708-7351-11...00779fd2ac.html

Lee Grandin, managing director for Landlord Mortgages, says there has been a slowdown in new business across the industry.

Landlord Mortgages carried out an internal audit this week, and its figures show a 25 per cent reduction in business from the firm’s existing client base over the past 12 months. Overall, Grandin adds, business has been flat as Landlord Mortgages has taken clients from other lenders following a cut in fees.

There was more potentially bad news for the sector this week after the Institute of Directors urged the government to close a tax loophole on buy-to-let properties. The tax rules currently allow investors to deduct interest costs from rental income.

Edited by gruffydd

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Landlord Mortgages carried out an internal audit this week,

as in, the bloke interviewed asked his one employee and the office cat if anything had happened while he was in the loo

There was more potentially bad news for the sector this week after the Institute of Directors urged the government to close a tax loophole on buy-to-let properties. The tax rules currently allow investors to deduct interest costs from rental income.

at last they are catching on - if I keep going on about this loophole long enough surely our tax grabbing government will pick up on it - in fact, if either the Labour or Tory party were to promise to do this in their manifesto, I would vote for them

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If you regard being a LL as equivalent to running a business, then interest payments (debt servicing) should be deductable from the profits. If Crest Nicholsen builds a new shopping center with 100 shops in it, it would normally borrow the money from investors. While the shop owners pay rent, Crest Nicholsen has to service the interest repayments. The investment will probably only come into profit after several years of losses. Those interest repayments are losses as Crest Nicholsen has to pay the money out.

So how is owning a BTL portfolio any different? The interest portion of the payments is a loss to the portfolio. Rent is an income. Maintenance is an expense. It's a business that too many people have started, but it's still a business. And the interest payment is not part of a tax break because the banks have to pay tax on that as it's part of their profit.

The daylight robbery is not allowing Owner Occupiers to deduct interest payments from their pre-tax income. The whole tax system screws the poor by not allowing them to treat their lives (the only business they'll ever own) as a going concern. But if you go down the route of making special rules for the BTL business, then you're into commercial property BTL and shopping mall BTL and central London office block BTL. You may discover that the rubbish pension funds you're invested in actually own a fair amount of commercial BTL and get "tax breaks" on the interest payments.

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The issue of tax releive on the business mortgage costs is largely irrelevant to the house price conundrum

The landlord pays tax on any excess money (profit) generated by the business.

he does not get tax relief from the interest itself= if he did, this would imply that the mortgage was cheaper due to tax releif and that therfore, the BTL landlord could always outbid a ftb (or anyone else) because his mortgage costs are lower.

In reality, the mortgage interest is the same whether you are pvt or LL. It is paid regardless of the tax position.

The business itself then is taxed on the gross rent, less costs. If the income is less than outgoing, then no tax is paid, and the reverse is true also.

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...off setting their IP against rental income received is an advantage too far for unregulated individuals who are not even registered...and their mortgages are not covered by the FSA..these people have been a major cause of HPI and will be in the future if not culled...who knows how many of them avoid tax completely ...?....and do they all declare capital appreciation...?.....have some of them even heard of the word....?..... :ph34r::ph34r::ph34r:

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whether registered or not, they are in business and they can get their costs deducted only by filling in a tax return. If they fiddle it any other way, then if (when) an enquiry is done on them then they are in deep DOODOO.

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"Business has been FLAT" has it?! Oh ha haha ha. Surely "business has been luxury apartment"

Spaciously deceptive but not delightfully appointed.

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Guest An Bearin Bui
If you regard being a LL as equivalent to running a business, then interest payments (debt servicing) should be deductable from the profits. If Crest Nicholsen builds a new shopping center with 100 shops in it, it would normally borrow the money from investors. While the shop owners pay rent, Crest Nicholsen has to service the interest repayments. The investment will probably only come into profit after several years of losses. Those interest repayments are losses as Crest Nicholsen has to pay the money out.

So how is owning a BTL portfolio any different? The interest portion of the payments is a loss to the portfolio. Rent is an income. Maintenance is an expense. It's a business that too many people have started, but it's still a business. And the interest payment is not part of a tax break because the banks have to pay tax on that as it's part of their profit.

The daylight robbery is not allowing Owner Occupiers to deduct interest payments from their pre-tax income. The whole tax system screws the poor by not allowing them to treat their lives (the only business they'll ever own) as a going concern. But if you go down the route of making special rules for the BTL business, then you're into commercial property BTL and shopping mall BTL and central London office block BTL. You may discover that the rubbish pension funds you're invested in actually own a fair amount of commercial BTL and get "tax breaks" on the interest payments.

That's a good explanation of the tax justification for the interest payment relief - it certainly makes sense for a person who runs a business e.g. Landlord Ltd with 200 residential properties to be able to write down their interest payments as losses just as any commercial property investor would do. The problem I have with BTL is that it has become a cottage industry where the likes of Rosie Millard leverage the value of their family home to buy 2 or 3 BTL properties almost as a hobby rather than a legitmate business. Amateur LLs like this don't always run their operations like a business, don't necessarily declare everything for tax and often are unprofessional towards their tenants e.g. not having a BTL mortgage so tenants have no rights if the property is repossesed. I think anyone who owns more than one property to let out should be obliged to form a company around their property interests and run it like a professional landlord. The way things are now, BTL just attracts amateurs who don't know the law or their tax obligations and is also a haven for criminals who want to launder money and avoid the taxman. It's pretty easy for a drug dealer to buy a few properties for cash with his drugs money and let them out for cash only, thus keeping his investments in the black economy. It just rips off the asset poor for the benefit of criminals e.g. drug dealers and also stupid homeowners in their 40s who know so little about investment that they can only conceive of making money through owning more houses.

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