Finance Bill

Written Evidence submitted by Irene McDonald (FB 53)

My husband and I have been private landlords for several years, providing reasonably priced, attractive and well managed properties for let in our local area. We are providing a valuable service to our community and also providing for our own future. The changes to tax relief proposed in the Finance Bill will have a detrimental effect on our business as ultimately we will be required to pay tax on income which does not exist.

My submission to the Committee is to oppose the amendments tabled.

I assert that the proposed change is unfair. Letting properties is a business which requires active involvement and is not a passive investment. Landlords already bear financial burdens which homeowners do not.

1. The Chancellor states that he wishes to level the playing field between homeowners and private landlords, by reducing tax relief landlords can claim on mortgage payments. Buy to let mortgages have different terms and conditions from a homeowners mortgage and are not really comparable Homeowners do not receive any tax relief at all on mortgages, but they do receive other tax relief and allowances which landlords do not eg

a) Homeowners do not pay capital gains tax on the sale of their property - landlords do

b) Homeowners can receive up to £7000 per annum in rent tax free from a lodger - no such allowance for landlords

c) Homeowners are allowed up to £1m of IHT on their property - doesn’t apply to landlords.

2. As Landlords are running a business they have legal responsibilities which homeowners do not, eg:

A) Landlords have to obtain annual gas safety certificates and carry out safety inspections. (Soon the requirement will be extended to electrical equipment too) Hard wired smoke alarms and carbon monoxide alarms are required. Homeowners can choose whether or not to take these precautions.

b) Landlords are required to risk assess their properties for Legionnaires’ disease. Homeowners do not.

c) Landlords have to enter a long, expensive legal process to evict tenants. Homeowners only have to give "reasonable "notice to their lodgers

d) Landlords have to obtain a licence for Houses of Multiple Occupation and make alterations to the property accordingly. A homeowner can have as many people living in his home as he wishes without applying for a licence.

e) Landlords have to check that their tenants are legally entitled to live in this country. Homeowners do not have to make such checks on their guests.

f) Landlords are required to protect their tenants’ deposits. Homeowners do not have to comply with this requirement for lodgers.

3. I totally oppose the suggested restriction of tax relief and propose that this measure be abandoned. If it is not, the consequences for landlords will be that their businesses will not be viable. The worst scenario will be that properties will be repossessed and tenants evicted.

4. If the government’s intention is to restrict and reduce the number of privately rented properties, then I would propose that the tax restriction only applies to new finance, and not to existing arrangements which have been made on a well-established business model.

SUMMARY

Letting property is a business and tax relief on finance should apply as it does to other businesses.

Homeowners have tax advantages which landlords do not and the proposed change will penalise landlords further.

Landlords have other legal obligations which incur costs . These do not apply to homeowners.

The proposed tax is unfair and should be abandoned or its application altered substantially.

September 2015

Prepared 14th October 2015