Tax grab on us whilst working overseas


J

JimBob

True to form, with yesterday's PBR, Brown and Darling have achieved
several other sneaky tax grabs.

One I've spotted is the removal of an individual's personal tax
allowance when UK citizens are non-resident eg working on contract in
another country. See in http://www.hmrc.gov.uk/pbr2007/notes-pdf.htm

Previously, if you went overseas to work and you chose to let out your
house rather than leave it unoccupied, you could offset some of your
rent against your personal tax allowance. No longer.

Meanwhile if you are a Buy to Let speculator you can still offset all
your rental income against your cost of borrowing. Weird isn't it?

If they stopped the rental income against borrowing costs on BTLs then
the over -inflated house market would deflate overnight and ordinary
working folk could afford to buy their homes.

Labour just doesnt think it through. They are so preoccupied with
fleecing middle England that they miss the plot on the big picture.
 
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M

mogga

True to form, with yesterday's PBR, Brown and Darling have achieved
several other sneaky tax grabs.

One I've spotted is the removal of an individual's personal tax
allowance when UK citizens are non-resident eg working on contract in
another country. See in http://www.hmrc.gov.uk/pbr2007/notes-pdf.htm

Previously, if you went overseas to work and you chose to let out your
house rather than leave it unoccupied, you could offset some of your
rent against your personal tax allowance. No longer.

Meanwhile if you are a Buy to Let speculator you can still offset all
your rental income against your cost of borrowing. Weird isn't it?

If they stopped the rental income against borrowing costs on BTLs then
the over -inflated house market would deflate overnight and ordinary
working folk could afford to buy their homes.

But they don't want that to happen.

www.housepricecrash.co.uk
 
T

Terry D

mogga said:
But they don't want that to happen.

www.housepricecrash.co.uk
As a houseowner, I don't want to see a price crash as I want to leave a
substantial inheritance to my children. Conversely, a price crash might
enable them to get on the property market. It's a Catch-22 situation.
Needless to say, I won't be voting for Labour in the next election (as I
never have done), although I really don't trust any of the b*****s. The
whole political scenario is just a sick joke these days. I am totally
disillusioned with the whole mess.

Terry D.
 
W

whitely525

True to form, with yesterday's PBR, Brown and Darling have achieved
several other sneaky tax grabs.

One I've spotted is the removal of an individual's personal tax
allowance when UK citizens are non-resident eg working on contract in
another country. See inhttp://www.hmrc.gov.uk/pbr2007/notes-pdf.htm

Previously, if you went overseas to work and you chose to let out your
house rather than leave it unoccupied, you could offset some of your
rent against your personal tax allowance. No longer.

Meanwhile if you are a Buy to Let speculator you can still offset all
your rental income against your cost of borrowing. Weird isn't it?
Yes, but for how long....?

I can sense an oncoming "headline-grabbing initiative closely
associated with Tony Blair" (sorry, Gordon Brown)
If they stopped the rental income against borrowing costs on BTLs then
the over -inflated house market would deflate overnight and ordinary
working folk could afford to buy their homes.
Erm, no. BTL is only a small proportion of the market. I don't see
how anyone could argue it is not a legitimate expense you cannot
offset. There is nothing stopping FTBs going into BTL (so to
speak).

The reason for high house prices is because we simply did not build
enough houses to meet demand. We certainly built a lot more, but
nowhere near what is needed.
 
C

Clifford Frisby

JimBob wrote:
If they stopped the rental income against borrowing costs on BTLs then
the over -inflated house market would deflate overnight and ordinary
working folk could afford to buy their homes.
<snip>

For every rental property forced into owner-occupation (by the tax
distortion that you appear to advocate), surely there would also be a
tenant household simultaneously forced into owner-occupation.

There would be no change in the supply/demand ratio would there? In which
case there would be no 'overnight deflation'.

Alternatively, why do prospective owner-occupiers think that they are being
'priced out' by BTL landlords, but that they wouldn't be similarly 'priced
out' by the tenants who are currently paying rent to those landlords?
 
H

Hungerdunger

Terry D said:
It's a Catch-22 situation.
No it isn't. Catch 22 runs as follows (quoting Heller who can explain it
much better than I can:

There was only one catch and that was Catch-22, which specified that a
concern for one's safety in the face of dangers that were real and immediate
was the process of a rational mind. Orr was crazy and could be grounded. All
he had to do was ask; and as soon as he did, he would no longer be crazy and
would have to fly more missions. Orr would be crazy to fly more missions and
sane if he didn't, but if he was sane he had to fly them. If he flew them he
was crazy and didn't have to; but if he didn't want to he was sane and had
to. Yossarian was moved very deeply by the absolute simplicity of this
clause of Catch-22 and let out a respectful whistle.
"That's some catch, that Catch-22," [Yossarian] observed.
"It's the best there is," Doc Daneeka agreed.
 
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S

Steve

Meanwhile if you are a Buy to Let speculator you can still offset all
your rental income against your cost of borrowing. Weird isn't it?
Weird? Not when you see the register of members interests, and notice all
the cabinet members making money from BTL.

Turkeys...Xmas..etc

Steve
 
R

Ronald Raygun

Steve said:
Weird? Not when you see the register of members interests, and notice all
the cabinet members making money from BTL.

Turkeys...Xmas..etc
What nonsensical emotive terms. In every other business, the cost of
borrowing (but only the interest and related charges, not of course the
cost of the capital itself) is a legitimate expense deductible from
income in the calculation of taxable profit. A BTL venture, irrespective
of whether it is "speculative" (and any speculative success will fall
under the CGT regime), is a business just like any other, and there is
no reason whatsoever why its cost of borrowing should be treated any
differently. There is nothing weird about it.
 
A

Andy Pandy

Terry D said:
As a houseowner, I don't want to see a price crash as I want to leave a
substantial inheritance to my children. Conversely, a price crash might
enable them to get on the property market. It's a Catch-22
situation.

That's not "Catch-22", it's simply that house prices have a neutral
effect on you, if you're going to leave your house to your kids and
the're going to use the money to buy property. Like with me - my house
has tripled in value over the last 8 years but I need a house this
size, therefore the effect is neutral. Except that the cost of
transacting (eg selling your house/your kids buying, or me moving)
would be much greater with high property prices, due to stamp duty
etc.

There seems to be a warped way of thinking about house prices in the
UK - "aren't houses great, they go up in value *and* you can live in
them!", when it should be "houses have risen massively in price *but*
the cost of providing yourself with somewhere to live has gone up at
the same rate".
 
G

google

What nonsensical emotive terms. In every other business, the cost of
borrowing (but only the interest and related charges, not of course the
cost of the capital itself) is a legitimate expense deductible from
income in the calculation of taxable profit. A BTL venture, irrespective
of whether it is "speculative" (and any speculative success will fall
under the CGT regime), is a business just like any other, and there is
no reason whatsoever why its cost of borrowing should be treated any
differently. There is nothing weird about it.
I don't really understand residential lettings relief though. I assume
the problem it is trying to solve is where someone owns a house and
then moves into rented accomodation (or moves out of the country) due
to job moves and lets their house in the intervening time but has
every intention of moving back.

Assuming that is the case, it would seem fairer to me to be able to
nominate an "only or main residence" even if you never live in it.

Not complaining but it does seem perverse that I get an extra 40K CGT
allowance for a house that I have no intention of moving back into
(circumstances can change but it would have to be a strange event that
would have me moving back in rather than selling up)

Tim.
 
R

Ronald Raygun

I don't really understand residential lettings relief though. I assume
the problem it is trying to solve is where someone owns a house and
then moves into rented accomodation (or moves out of the country) due
to job moves and lets their house in the intervening time but has
every intention of moving back.
Yes, I think so too. There is also a problem of moving *not* out of the
country, and buying a house there, before selling it and moving back.
Assuming that is the case, it would seem fairer to me to be able to
nominate an "only or main residence" even if you never live in it.
Would you think it fair, if you *did* intend to move back into house 1,
if you had to lose residence relief on one of the two houses in my
above example?
Not complaining but it does seem perverse that I get an extra 40K CGT
allowance for a house that I have no intention of moving back into
(circumstances can change but it would have to be a strange event that
would have me moving back in rather than selling up)
I don't know, but there must beequitability considerations which lead to
the equally perverse (at first sight) requirement to give the relief even
for properties which wer not occupied as one's PPR prior to renting, but
only afterwards.
 
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G

google

Yes, I think so too. There is also a problem of moving *not* out of the
country, and buying a house there, before selling it and moving back.
I'm not completely sure what you are saying here.
Would you think it fair, if you *did* intend to move back into house 1,
if you had to lose residence relief on one of the two houses in my
above example?
I would think it fair to be able to claim one year of PPR each year
you own a property and to be able to use up those years when you sell.

So if you live in house A for 5 years, then move into rented
accomodation for 5 years, then buy house B and live in it for 5 years
and then move back into house A for 5 years before selling A and B
you'd have 20 years of PPR, house A owned for 20 years and house B
owned for 10 years.

When selling up you could either use those 20 years for house A and
pay CGT on all the gain of B, or use 10 for A and 10 for B and pay CGT
on half the gain of A or some other proportion.

I don't know how the "last three years" bit would work - I'll leave
that as an exercise for the interested reader ;-)

I also think that if you're going to have a separate CGT allowance
then you ought to be able to "use" it each year against unrealized
gains - you can elect to add any unused CGT to the original purchase
price of an asset (maybe subject to the limitation that if you then
sell at a "loss" you can't carry that loss forwards or use it to
offset other gains)

Tim.
 
R

Ronald Raygun

I'm not completely sure what you are saying here.
You live in house 1 in town A. You get the chance of promotion at
work, but your employer needs you to move to the office in town B.
You are due to retire in 7 years, and you want to come back to 1A
when you do. Meanwhile, you don't fancy the idea of renting in B,
so you buy house 2 there. When you retire, you sell 2B and move
back to 1A. Later you sell 1A as well, having owned it for N years.

Under present rules you'd get full PRR on house 2 and partial PRR
on house 1 (i.e. (N-7)/N of the gain is relieved) and also LR
on 7/N of the gain, capped at 40k.

You'd get exactly the same PRR on house 1, of course, if you had
rented instead of bought house 2.
I would think it fair to be able to claim one year of PPR each year
you own a property and to be able to use up those years when you sell.

So if you live in house A for 5 years, then move into rented
accomodation for 5 years, then buy house B and live in it for 5 years
and then move back into house A for 5 years before selling A and B
you'd have 20 years of PPR, house A owned for 20 years and house B
owned for 10 years.

When selling up you could either use those 20 years for house A and
pay CGT on all the gain of B, or use 10 for A and 10 for B and pay CGT
on half the gain of A or some other proportion.
And I suppose if you didn't sell them at the same time, you'd have
to decide how many to use for the first, and how many to keep or
transfer to the second.
I don't know how the "last three years" bit would work - I'll leave
that as an exercise for the interested reader ;-)
Don't you think it would be fairer to abolish the 36 year rule?
I also think that if you're going to have a separate CGT allowance
then you ought to be able to "use" it each year against unrealized
gains - you can elect to add any unused CGT to the original purchase
price of an asset (maybe subject to the limitation that if you then
sell at a "loss" you can't carry that loss forwards or use it to
offset other gains)
Why only against unrealised gains you have already made? Why not
carry forward unused allowance even if you have no appreciating assets?
 
G

google

And I suppose if you didn't sell them at the same time, you'd have
to decide how many to use for the first, and how many to keep or
transfer to the second.
Yes.


Don't you think it would be fairer to abolish the 36 year rule?
Do you mean 36 months or is this something different (that I don't
know about)?

And yes, perhaps it would be fairer to abolish this three year rule.
Why only against unrealised gains you have already made? Why not
carry forward unused allowance even if you have no appreciating assets?
Because that is symmetrical with income tax where you don't get to
carry your allowances over to later years.

And it's not really just unrealized gains because not all gains can be
quantified until you actually sell - works of art in particular are
hard to value. But even property is difficult. So simplest would just
be to allow people to assign their CGT allowance to any asset
regardless of its actual gain. I suggested not being allowed to offset
"virtual" losses as a way of preventing people buying a 50GBP work of
art and then using that to carry their CGT forwards until they could
use it.

(Although I'm not convinced there should be a separate CGT allowance
but instead there should just be just one allowance.)

Tim.
 
R

Ronald Raygun

Tim said:
What's that?
It's what you get when you mean 3 year rule and then partially
correct it to 36 month rule.

It's the sort of slip-up which people who, like me, are over 36 years
of age are apt to make from time to time.
 
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T

Terry D

Ronald Raygun said:
It's what you get when you mean 3 year rule and then partially
correct it to 36 month rule.

It's the sort of slip-up which people who, like me, are over 36 years
of age are apt to make from time to time.
Slightly off topic, but the quality of new building is abysmal. I have
personal experience of shoddy building, e.g. mortar bridging wall ties thus
transferring damp to the inner wall of my house. This happened to me
several years ago and after a complaint to the builder, they had to remove
many bricks to clear the ties. I have photographic evidence. The brickwork
was also full of mortar above the damp proof course next to electric sockets
in my hall, which they had to rectify. Additionally, the party wall in the
loft wasn't properly constructed and I could poke a rod into next door's
loft.

If I was building a new property, I would be on site daily with my hard hat
and orange jacket to ensure that all the work was correct. I did this once
when having an house extension built and found that the bricklayer had
simply ignored the ties in the cavity wall and bent them back. He was
sacked. Fortunately I now have a builder who I can trust.

The soundproofing in modern properties is also abysmal. The builders are
using light weight concrete blocks in party walls which are useless at
blocking sound transmission. Thank God I was able to move to a detached
house 25 years ago.

Terry D.
 
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T

tim.....

JimBob said:
True to form, with yesterday's PBR, Brown and Darling have achieved
several other sneaky tax grabs.

One I've spotted is the removal of an individual's personal tax
allowance when UK citizens are non-resident eg working on contract in
another country. See in http://www.hmrc.gov.uk/pbr2007/notes-pdf.htm

Previously, if you went overseas to work and you chose to let out your
house rather than leave it unoccupied, you could offset some of your
rent against your personal tax allowance. No longer.
perhaps you would like to point out exactly which document
it is that says this as I cannot find it.

tim
 

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