News from the Residential Property Investor, the bi-monthly magazine for RLA members other artilces from the June / July 2002 issue RPI news archive

Shelter group calls for landlord tax breaks - June / July 2002

Private landlords should be taxed on the same basis as small businesses when it comes to treatment of management expenses, rollover relief from capital gains tax, and investment in their properties.

The call has come from the unlikely source of the Private Rented Sector Commission brought together by Shelter and the Joseph Rowntree Foundation. Its report, Private renting: a new settlement, reached conclusions which echoed many of the policies of the Residential Landlords Association.

Noting that despite the recent upsurge of 'buy to let' investments, the private rented sector has declined from 53 per cent of the housing market in 1951 to 10 per cent today. One factor in this is 'a perception of the sector as one where tenants and landlords are in conflict'. Another is a tax system which favours owner occupiers.

Although the private rented sector houses 800,000 single people, 500,000 childless couples, and 490,000 single parents or couples with children, it has a 'cottage industry' image. This is reinforced by a tax system that treats rental receipts as investment income 'rather than business income and by denying landlords other encouragements offered to small businesses elsewhere in the economy'.

In fact three quarters of the private rented sector housing stock of 2.1m properties is owned by individuals, or whom half own fewer than eight properties. 'Substantial investment from institutions is essential if the sector is to maintain, let alone increase, its share of the market', concludes the report.

Other 'solutions or recommendations' are for:

• consideration of direct subsidy of tax credits to encourage institutional investment;
• a review of stamp duty rates that discriminate against the sale of blocks of properties;
• recognition that private landlords and tenants are key stakeholders in the regeneration of local communities;
• greater priority for local authority work with private sector landlords;
• paying housing benefit in advance;
• removing the rent restriction on housing benefit so it better reflects market trends;
• making it a requirement that anybody managing property is a 'fit and proper person'; and
• use of voluntary landlord accreditation schemes.

* Outdated property letting tax laws are part of the reason the country's housing stock is in a poor state and ill suited to the modern need to house more single people and single parent families. So concludes the Residential Landlords Association's own report on The taxation of landlords in the private rented sector ­ see later in this issue.

'Many landlords hold portfolios of older properties which they cannot sell because of the latent capital gains, and they cannot defray the cost of repairs by carrying out improvements because tax relief for all of the expenditure has been withdrawn. They cannot claim rollover relief as property holdings are upgraded', it said. The report calls for rollover relief on sales of residential properties held for letting, capital allowances on defined qualifying improvement expenditure, redefining letting properties as business assets for the purposes of capital gains tax taper relief, and inclusion of residential property business assets among those capable of qualifying for 100 per cent business property relief for inheritance tax purposes.
 

other artilces from the June / July 2002 issue

• Accredited to thrive
• Shelter group calls for landlord tax breaks
• Rat landlord fined
• Lancaster survey excludes landlord involvement
• Tax fiddle landlords jailed
• 'Liar' landlord condemned
• 'Flood of properties' hits rental values
• HMO failure brings fine
• In brief