One Rule for Overseas Investors, One Rule for Buy to Let Landlords

One Rule for Overseas Investors One Rule for Buy to Let Landlords

 

David Lawrenson of www.LettingFocus.com highlights the double standards that apply in housing which encourage rich foreign buyers and big corporations whilst hurting the small buy to let landlords.

It seems there is one rule for overseas investors and big players but different rules for buy to let investors.

Did you know that the Queen Elizabeth Park in Newham, which consists of flats built and managed by big institutional “build to rent” operators was excluded from that borough’s all-borough landlord licensing scheme?

Why? What exactly was the justification for this?

As I have mentioned before at previous posts, it seems that there is one rule for the big players in the private rented sector and one rule for the small buy to let landlords.

Funny that, because this is rather the opposite of most other sectors of business, where it is the small, independent guy who tends to be admired by the general public and helped by government.

We can see this “rule duality” most clearly if we look at the increases in taxes targeted at small landlords in recent years, wherein the corporate players in their company structures get to pay much less tax.

The most glaring example of this is the way that for landlords who are not within a company structure, there is now a much harsher treatment in the way that interest on loans to buy property is accounted for. Effectively buy to let landlords are taxed on rent/turnover, not profit, which actually makes them a unique tax species. No one else in the whole UK is treated in such a way. (They also pay a specially high rate of capital gains tax too).

One Rule for Big Investors, One Rule for Buy to Let Landlords

Back to Newham though. Why is it that landlords who have been long-term members of professional associations like the NLA, cannot also be exempted from having to pay this local tax, sorry, license fee? After all, they have joined a professional association and are professionals too.

But wait.

Looking into it a bit more, it seems that it was actually the Secretary of State who applied the exemption for the QE Park, not Newham Council, who, bless ‘em, wanted the license to apply to all properties in their borough.

And so, as this is apparently a central government decision, I am asking my own MP, James Brokenshire, who also happens to have some responsibility for housing, if he can shed any light on this.

Hopefully, James will remember our little chat just before Christmas at our local Sidcup Waitrose about the increasingly unfair treatment of buy to let landlords. (I was not interrupting his shopping, I’m not that bad. He had a stand set up there to meet constituents and answer their questions! He seems a nice friendly chap and was sporting a lovely  Christmas jumper).

One Rule for Overseas Investors  – The Case of Different Stamp Duty Rates

But this favouring of the big guys is quite widespread in  housing.

“The Times” newspaper of 5th January reported how overseas buyers were taking “advantage of the Brexit Discount” and gobbling up new build flats.

The article was called, “Buyers take advantage of Brexit discount on flats” and can be seen here. (“The Times” Paywall applies):

https://www.thetimes.co.uk/edition/money/property-buyers-take-advantage-of-brexit-discount-zkrksxvwr

In the piece they report that Israeli billionaire developer, Yakir Gabay, had spent £500 million in cash on 1,200 discounted mid-range apartments in London in the last 6 months to let through his company Grand City Properties. Nice one, Mr. Gabay!

Meanwhile, housing development monitoring firm, Molior London, reported that 40 per cent of London new-build sales in the second quarter of 2018 were going to bulk buyers. Buyers are mainly coming from the Middle East and China. India, Pakistan, Israel and Turkey also make up large numbers of the buyers too. No dodgy ill-gotten money there, I’m sure.

But no wonder those lucky foreign buyers are smiling and that there are so many of them taking advantage of sterling weakness and the daft builders who built far too many flats in places like Nine Elms in London!

Oh no. There is another reason for their smiles.

Did you also know that unlike buy to let investors who must pay an additional 3 per cent surcharge on every property they buy, these lucky investors from overseas are being lured by the prospect of saving stamp duty? As the article said….

“A little known loophole means anyone buying six or more properties in one transaction has their purchases classed as “non-residential” for stamp duty purposes. This means lower rates apply.”

So, once again, different rules for bulk buying (mostly foreign investors), who it seems are not, after all even contributing much to the Treasury’s stamp duty coffers to pay for the schools and hospitals we badly need.

Nope, these wise guys operate to a different set of tax rules to the ones the mainly home-based buy to let landlords (who usually buy single units) must comply with.

Any comment, Mr Brokenshire?

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