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Ignoring the rights or wrongs of S24 is it retrospective taxation and would it have been fair for the Chancellor to have introduced it only for new borrowings.
I don't think it is retrospective taxation but I can understand how it has impacted on mortgages that are already in place, equally I expect a lot of new landlords would be complaining very loudly if it had been introduced just for new borrowings - why are existing landlords being treated more favourably?
If it only affects tax paid going forward why are some landlords saying it is retrospective taxation, also is this contributing to landlords' concerns not being taken seriously?
Well "retrospective taxation" typicaly means that you are taxed on activities you have done in the past.So S24 is not "retrospective taxation" as was announced and the change was in the future and the effects are still being phased in now.
Though what Landlords are certainly annoyed about is that they went into property investment with there eyes open, they did the maths and made an investment.Now the government has turned up and changed the equasion so the maths no longer add up!
I do think thats wrong but you know it happends in ever budget. Someone gets screwed.
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Which creates evictions,rent rises,and an increasing amount of councils screaming out for help,from a declining number of Private Landlords.
New landlords could not complain as they'd be able to do the new calculation to assess viability before investing. For a government policy to turn profit making tax paying businesses in to loss makers is wrong. Especially in an industry when a portfolio landlord can not just say I'm packing in next week.
Indeed if not retrospective taxation then it certainly is a retrospective taxation regulation.
We all know taxation changes; but usually decisions based on previous taxation regulations are left alone which is why our tax code is so big.
Any new investors would invariably invest via corporate status which would somewhat defeat the Govt's intention to force LL to sell up or tax them on their debt interest!
S24 whilst still unfair should have been for new purchases only not renewed borrowings on an existing property
So unencumbered properties would be S24 exempt if LL remortgaged on any.
As has been intimated for any LL purchasing new properties they would do so under the new S24 regime.
So they would so in the full knowledge that S24 exists.
They can then determine their own investment decisions in light of this S24 regulation.
That would be fair.
It is simply impossible to make investment decisions if Govt can on a whim undo all previous regulation and apply regulations to old transactions
New transactions fair enough.
LL cannot undo the past easily.
If Govt hadn't wanted to hurt LL and play fair it could have advised for all LL to become corporates with no CGT or SDLT payable for a limited period with lenders advised to offer the same terms to now corporate LL.
They could have given LL 4 years to convert to corporate status before S24 kicked in.
But it didn't and wouldn't do this as it would have meant most of the sole traders escaping S24.
Govt couldn't have that!
Which is why they have unfairly applied a new taxation decision to apply to old transactions made under different tax regulations.
S24 as a new taxation decision wouldn't have been liked but at least it would only be for new business
Now that would be fair.
Treating customers fairly
Isn't that what Govt requires of institutions?
Clearly it doesn't believe it applies to them!
As you previously agreed the government's estimate that 80% of landlords would not be affected seems accurate.
The government is not taxing people on their debt interest, only on their rental income. Under S24 the larger your interest payments the less tax you pay as you get more relief.
The technique of repeatedly remortgaging to extract money from property tax free was an obvious target that HMRC were bound to go for sooner or later. Taking years to close a tax loophole seems pretty fair. Maybe they could have made it easier to transform your business, by for example relaxing the incorporation relief rules temporarily.
The government has always been able to undo previous regulation. They have done so in the past. S24 does not apply to old transactions. When made law it didn't even apply to current transactions, only future payments of rent.
Cameron pledged in 2015 he would not raise income tax before 2020
S24 will raise my income tax bill 5 fold by 2020
However its dressed up - I have been comprehensively misled
Jonathan Clarke. http://www.buytoletmk.com
He also said he would remain as prime minister if the UK voted for Brexit.
The law that income tax rates can not be raised before 2020 is in effect.
Section 24 not a retrospective tax, to think so would naive.But be careful what you wish for.